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Non Utility Power, Alternative Regulatory Regimes and Stranded Investment

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  • Wen, Shiow-Ying
  • Tschirhart, John

Abstract

The electric industry is experiencing increasing competition in generation encouraged by non utility generators and regulatory agencies. An electric utility's problem of satisfying stochastic demand with either power purchased from non utility generators or with its own generators is examined. The utility is subject to either rate-of-return regulation, profit sharing or price caps. The level of profit at which sharing is triggered is shown to be endogenous to the utility's problem. The paper demonstrates how the form of regulation affects purchases of non utility power and measures of stranded investment. Simulations highlight the tradeoff between allocative efficiency and recovery of stranded investment. Copyright 1997 by Kluwer Academic Publishers

Suggested Citation

  • Wen, Shiow-Ying & Tschirhart, John, 1997. "Non Utility Power, Alternative Regulatory Regimes and Stranded Investment," Journal of Regulatory Economics, Springer, vol. 12(3), pages 291-310, November.
    • Handle: RePEc:kap:regeco:v:12:y:1997:i:3:p:291-310
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    Cited by:

    1. Thomas Taylor & Peter Schwarz, 2000. "Advance notice of real-time electricity prices," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 28(4), pages 478-488, December.
    2. Simshauser, Paul & Akimov, Alexandr, 2019. "Regulated electricity networks, investment mistakes in retrospect and stranded assets under uncertainty," Energy Economics, Elsevier, vol. 81(C), pages 117-133.
    3. Sueyoshi, Toshiyuki, 1999. "Tariff structure of Japanese electric power companies: An empirical analysis using DEA," European Journal of Operational Research, Elsevier, vol. 118(2), pages 350-374, October.
    4. Simshauser, Paul, 2017. "Monopoly regulation, discontinuity & stranded assets," Energy Economics, Elsevier, vol. 66(C), pages 384-398.
    5. Tschirhart, John & Wen, Shiow-Ying, 1999. "Tradable Allowances in a Restructuring Electric Industry," Journal of Environmental Economics and Management, Elsevier, vol. 38(2), pages 195-214, September.

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