Regulating Electricity Distribution Utilities

  • Maria Kopsakangas-Savolainen
  • Rauli Svento
Chapter
Part of the Green Energy and Technology book series (GREEN)

Abstract

In this chapter we compare the welfare effects of different regulation schemes of electricity distribution utilities. The compared regulation schemes are Fixed Price regulation, Cost of Service regulation, Menu of Cost-Contingent Contracts, and Simple Menu of Contracts. In our calculations we utilize the information of a firm’s potential to improve cost efficiency. The firm-specific cost information of Finnish electricity distribution utilities is obtained by using various Stochastic Frontier models presented in earlier chapters of this book. Our basic result is that welfare can be improved by changing the Cost of Service regulation scheme to the Menu of Contracts regulation. Welfare also increases in the case of Fixed Price regulation and Simple Menu of Contract regulation. There is, however, a significant difference among regulation regimes on how this improved welfare is distributed to consumers and producers.

Keywords

Monopoly 

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Copyright information

© Springer-Verlag London 2012

Authors and Affiliations

  • Maria Kopsakangas-Savolainen
    • 1
  • Rauli Svento
    • 2
  1. 1.Finnish Environment Institute and Thule Institute, University of OuluMartinniemiFinland
  2. 2.Department of EconomicsMartti Ahtisaari Institute of Global Business and Economics, University of OuluOuluFinland

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