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The Effects of Average Revenue Regulation on Electricity Transmission Investment and Pricing

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  • Isamu Matsukawa

    (Musashi University)

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 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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File URL: http://128.118.178.162/eps/io/papers/0512/0512009.pdf
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Bibliographic Info

Paper provided by EconWPA in its series Industrial Organization with number 0512009.

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Length: 55 pages
Date of creation: 19 Dec 2005
Date of revision:
Handle: RePEc:wpa:wuwpio:0512009

Note: Type of Document - pdf; pages: 55
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Web page: http://128.118.178.162

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Keywords: congestion pricing; electric power transmission; two-part tariff; average revenue regulation; Coasian two-part tariff;

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