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Econometric TFP Targets, Incentive Regulation and the Ontario Gas Distribution Industry

Author

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  • Lowry Mark N.

    (Pacific Economics Group Research)

  • Getachew Lullit

    (Pacific Economics Group Research)

Abstract

We present a price cap mechanism, which features an external standard, constructed to elicit efficient utility performance. We focus on a method for setting the external standard, which is usually based on industry total factor productivity (TFP), when 'peer' data are not readily available. The procedure is based on an econometric cost model and externalizes the performance target or TFP by using a combination of industry and individual utility data. To highlight the importance of the method, we profile the approach that was considered and partly adopted in the current incentive regulation plan of Ontario's gas distribution industry.

Suggested Citation

  • Lowry Mark N. & Getachew Lullit, 2009. "Econometric TFP Targets, Incentive Regulation and the Ontario Gas Distribution Industry," Review of Network Economics, De Gruyter, vol. 8(4), pages 1-21, December.
    • Handle: RePEc:bpj:rneart:v:8:y:2009:i:4:n:3
    DOI: 10.2202/1446-9022.1183
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    Cited by:

    1. Ajayi, V. & Pollitt, M., 2022. "Changing times: Incentive regulation, corporate reorganisations, and productivity in the Great Britain’s gas networks," Cambridge Working Papers in Economics 2254, Faculty of Economics, University of Cambridge.
    2. Gugler, Klaus & Liebensteiner, Mario, 2019. "Productivity growth and incentive regulation in Austria's gas distribution," Energy Policy, Elsevier, vol. 134(C).
    3. Ajayi, Victor & Anaya, Karim & Pollitt, Michael, 2022. "Incentive regulation, productivity growth and environmental effects: the case of electricity networks in Great Britain," Energy Economics, Elsevier, vol. 115(C).
    4. Ariel Casarin, 2014. "Productivity throughout regulatory cycles in gas utilities," Journal of Regulatory Economics, Springer, vol. 45(2), pages 115-137, April.

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