Alleged Transmission Undersupply: Is Restructuring the Cure or the Cause?
AbstractWidespread concern over transmission capacity requires theoretical support to infer inadequacy from observed trends indicating reductions in the ratio of transmission to generation capacity over time. If integrated utilities had been regulated with allowed returns exceeding capital costs, transmission-generation ratios would have been excessive, and observed trends might be a correction. However, numerous commentators claim that post-restructuring transmission rates have been too low, with NIMBY also discouraging investment. We model the possibility that inadequate separation between generation and transmission may result in reduced investment, in order to preserve incumbent market power in generation. However, consideration of transmission price caps and coordinated generation investment support other analyses that conclude that vertical separation itself may be a culprit.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Resources For the Future in its series Discussion Papers with number dp-05-50.
Date of creation: 31 Oct 2005
Date of revision:
electricity transmission; regulation; deregulation; vertical integration;
Find related papers by JEL classification:
- L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
- L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Moss, Diana L., 2004. "Competition or Reliability in Electricity? What the Coming Policy Shift Means for Restructuring," The Electricity Journal, Elsevier, vol. 17(2), pages 11-28, March.
- Weisman, Dennis L, 1995. "Regulation and the Vertically Integrated Firm: The Case of RBOC Entry into Interlata Long Distance," Journal of Regulatory Economics, Springer, vol. 8(3), pages 249-66, November.
- Benz, Men-Andri & Bühler, Stefan & Schmutzler, Armin, 2003.
"Infrastructure Quality in Deregulated Industries: Is there an Underinvestment Problem?,"
CEPR Discussion Papers
3836, C.E.P.R. Discussion Papers.
- Buehler, Stefan & Schmutzler, Armin & Benz, Men-Andri, 2004. "Infrastructure quality in deregulated industries: is there an underinvestment problem?," International Journal of Industrial Organization, Elsevier, vol. 22(2), pages 253-267, February.
- Stefan Buehler & Armin Schmutzler & Men-Andri Benz, 2002. "Infrastructure Quality in Deregulated Industries: Is there an Underinvestment Problem?," SOI - Working Papers 0209, Socioeconomic Institute - University of Zurich.
- Hogan, William W, 1992. "Contract Networks for Electric Power Transmission," Journal of Regulatory Economics, Springer, vol. 4(3), pages 211-42, September.
- Fox-Penner, Peter, 2005. "Rethinking the Grid: Avoiding More Blackouts and Modernizing the Power Grid Will Be Harder than You Think," The Electricity Journal, Elsevier, vol. 18(2), pages 28-42, March.
- Pittman Russell, 2005. "Structural Separation to Create Competition? The Case of Freight Railways," Review of Network Economics, De Gruyter, vol. 4(3), pages 1-16, September.
- Michaels, Robert J., 2004. "Vertical Integration: The Economics that Electricity Forgot," The Electricity Journal, Elsevier, vol. 17(10), pages 11-23, December.
- Brennan, Timothy J, 1989. "Regulating by Capping Prices," Journal of Regulatory Economics, Springer, vol. 1(2), pages 133-47, June.
- Shmuel S. Oren, 1997. "Economic Inefficiency of Passive Transmission Rights in Congested Electricity Systems with Competitive Generation," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 63-83.
- Kwoka, John E., 2002. "Vertical economies in electric power: evidence on integration and its alternatives," International Journal of Industrial Organization, Elsevier, vol. 20(5), pages 653-671, May.
- Kaserman, David L & Mayo, John W, 1991. "The Measurement of Vertical Economies and the Efficient Structure of the Electric Utility Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 39(5), pages 483-502, September.
- Joskow, Paul L & Tirole, Jean, 1999. "Transmission Rights and Market Power on Electric Power Networks I: Financial Rights," CEPR Discussion Papers 2093, C.E.P.R. Discussion Papers.
- Reiffen, David, 1998. "A Regulated Firm's Incentive to Discriminate: A Reevaluation and Extension of Weisman's Result," Journal of Regulatory Economics, Springer, vol. 14(1), pages 79-86, July.
- Martzoukos, Spiros H. & Teplitz-Sembitzky, Witold, 1992. "Optimal timing of transmission line investments in the face of uncertain demand : An option valuation approach," Energy Economics, Elsevier, vol. 14(1), pages 3-9, January.
- Stagliano, Vito & Hayden, Jolly, 2004. "The Electric Transmission Paradox," The Electricity Journal, Elsevier, vol. 17(2), pages 37-46, March.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Webmaster).
If references are entirely missing, you can add them using this form.