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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 monopolist's 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.

Suggested Citation

  • Isamu Matsukawa, 2005. "The Effects of Average Revenue Regulation on Electricity Transmission Investment and Pricing," Industrial Organization 0512009, University Library of Munich, Germany.
  • Handle: RePEc:wpa:wuwpio:0512009
    Note: Type of Document - pdf; pages: 55
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    References listed on IDEAS

    as
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    More about this item

    Keywords

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

    JEL classification:

    • L - Industrial Organization

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