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The effects of average revenue regulation on electricity transmission investment and pricing

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  • Matsukawa, Isamu

Abstract

This paper investigates the long-run effects of average revenue regulation on an electricity transmission monopolist who applies a two-part tariff comprising a variable congestion price and a non-negative fixed access fee. A binding constraint on the monopolist's expected average revenue lowers the access fee, promotes transmission investment, and improves consumer surplus. In a case of any linear or log-linear electricity demand function with a positive probability that no congestion occurs, average revenue regulation is allocatively more efficient than a Coasian two-part tariff if the level of capacity under average revenue regulation is higher than that under a Coasian two-part tariff.

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Bibliographic Info

Article provided by Elsevier in its journal Energy Economics.

Volume (Year): 30 (2008)
Issue (Month): 3 (May)
Pages: 696-714

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Handle: RePEc:eee:eneeco:v:30:y:2008:i:3:p:696-714

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  2. Cowan, Simon G B, 1997. "Tight Average Revenue Regulation Can Be Worse Than No Regulation," Journal of Industrial Economics, Wiley Blackwell, vol. 45(1), pages 75-88, March.
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