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Impact of Regulatory Agencies on the Efficiency of Publicly-Owned Utilities

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  • Bernard, Jean-Thomas
  • Nouhi, Mohamed
  • Roland, Michel

Abstract

We compare the economic efficiency of a publicly-owned utility directly controlled by the government with a publicly-owned utility regulated by a public utility commission (PUC). Regulation by a PUC is modelled as a Nash equilibrium of a game between two principals, the government and the PUC, each of them having control over a subset of decision variables determining the utility performance. A utility manager, who has private information over a productivity parameter, is the agent. Comparisons of both regulatory regimes are made with respect to output, choice of inputs, manager's information rent and firm's profit. Reasons for which the government should prefer one regulatory regime over the other are discussed. The recent regulatory reform of electricity markets in the province of Quebec (Canada) provides an illustration of the model.

Suggested Citation

  • Bernard, Jean-Thomas & Nouhi, Mohamed & Roland, Michel, 1999. "Impact of Regulatory Agencies on the Efficiency of Publicly-Owned Utilities," Cahiers de recherche 9915, Université Laval - Département d'économique.
    • Handle: RePEc:lvl:laeccr:9915
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    References listed on IDEAS

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    1. Bernard, Jean-Thomas & Chatel, Josee, 1985. "The application of marginal cost pricing principles to a hydro-electric system : The case of hydro-Quebec," Resources and Energy, Elsevier, vol. 7(4), pages 353-375, December.
    2. Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121743, April.
    3. Pint, Ellen M., 1991. "Nationalization vs. regulation of monopolies : The effects of ownership on efficiency," Journal of Public Economics, Elsevier, vol. 44(2), pages 131-164, March.
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    More about this item

    Keywords

    Regulation; Public Enterprises;

    JEL classification:

    • L32 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Public Enterprises; Public-Private Enterprises
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • L97 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Utilities: General

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