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Electricity Transmission Pricing and Performance-Based Regulation

Author

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  • Ingo Vogelsang

Abstract

Performance-based regulation (PBR) is influenced by the Bayesian and non-Bayesian incentive mechanisms. While Bayesian incentives are impractical, the insights from their properties can be combined with practical non-Bayesian mechanisms for application to transmission pricing. This combination suggests an approach based on the distinction between ultra-short, short and long periods. Ultra-short periods are marked by real-time pricing of point-to-point transmission services. Pricing in short periods involves fixed fees and adjustments via price-cap formulas or profit sharing. Productivity-enhancing incentives have to be tempered by long-term commitment considerations, so that profit sharing may dominate pure price caps. Investment incentives require long-term adjustments based on rate-of-return regulation with a “used and useful” criterion.

Suggested Citation

  • Ingo Vogelsang, 2005. "Electricity Transmission Pricing and Performance-Based Regulation," CESifo Working Paper Series 1474, CESifo.
    • Handle: RePEc:ces:ceswps:_1474
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    References listed on IDEAS

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    Cited by:

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    3. Hennig, Roman J. & Ribó-Pérez, David & de Vries, Laurens J. & Tindemans, Simon H., 2022. "What is a good distribution network tariff?—Developing indicators for performance assessment," Applied Energy, Elsevier, vol. 318(C).
    4. Thomas-Olivier Léautier & Véronique Thelen, 2009. "Optimal expansion of the power transmission grid: why not?," Journal of Regulatory Economics, Springer, vol. 36(2), pages 127-153, October.
    5. Gonzales-Eiras, Martín & Niepelt, Dirk, 2004. "Sustaining Social Security," Seminar Papers 731, Stockholm University, Institute for International Economic Studies.
    6. Juan Rosellón & Ingo Vogelsang & Hannes Weigt, 2011. "Long-run Cost Functions for Electricity Transmission," The Energy Journal, , vol. 33(1), pages 131-160, January.

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