Long-term Framework for Electricity Distribution Access Charges
AbstractIn order to achieve overall economic efficiency, incentive regulation of electricity distribution utilities must address two important and inter-related issues. First, the utilities’ allowed revenues need to be set at correct levels. Second, the access charging mechanism by which the utilities recover the allowed revenues must give the correct economic signals to generation and load connected to the network. This paper is concerned with the latter aspect of regulation. The paper discusses the main economic principles that should form the basis on which a distribution access charging model is developed. The charging model should have a number of attributes: be calibrated to each existing network; contain an asset register; be able to determine assets needed to meet new demand; find least-cost system expansion; compute network losses and handle ancillary services; estimate incremental operating and maintenance costs; be available to users; and be simple enough for external users to understand.
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Bibliographic InfoPaper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0551.
Date of creation: Nov 2005
Date of revision:
Note: EPRG, IO
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Web page: http://www.econ.cam.ac.uk/index.htm
Electricity; network regulation; access charges; distributed generation;
Find related papers by JEL classification:
- L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
- L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-11-05 (All new papers)
- NEP-COM-2005-11-05 (Industrial Competition)
- NEP-ENE-2005-11-05 (Energy Economics)
- NEP-MIC-2005-11-05 (Microeconomics)
- NEP-NET-2005-11-05 (Network Economics)
- NEP-REG-2005-11-05 (Regulation)
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