The Effects of Average Revenue Regulation on Electricity Transmission Investment and Pricing
AbstractThis 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 monopolistfs 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 a positive access fee under average revenue regulation is lower than that under a Coasian two-part tariff.
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Bibliographic InfoPaper provided by EconWPA in its series Industrial Organization with number 0512009.
Length: 55 pages
Date of creation: 19 Dec 2005
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congestion pricing; electric power transmission; two-part tariff; average revenue regulation; Coasian two-part tariff;
Other versions of this item:
- Matsukawa, Isamu, 2008. "The effects of average revenue regulation on electricity transmission investment and pricing," Energy Economics, Elsevier, vol. 30(3), pages 696-714, May.
- L - Industrial Organization
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-01-01 (All new papers)
- NEP-COM-2006-01-01 (Industrial Competition)
- NEP-ENE-2006-01-01 (Energy Economics)
- NEP-IND-2006-01-01 (Industrial Organization)
- NEP-MIC-2006-01-01 (Microeconomics)
- NEP-REG-2006-01-01 (Regulation)
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