Impact of Regulatory Agencies on the Efficiency of Publicly-Owned Utilities

Jean-Thomas Bernard (), Mohamed Nouhi and Michel Roland

Cahiers de recherche from Université Laval - Département d'économique

Abstract:

We compare the economic efficiency of a publicly-owned utility directly controlled by the government with a publicly-owned utility regulated by a public utility commission (PUC). Regulation by a PUC is modelled as a Nash equilibrium of a game between two principals, the government and the PUC, each of them having control over a subset of decision variables determining the utility performance. A utility manager, who has private information over a productivity parameter, is the agent. Comparisons of both regulatory regimes are made with respect to output, choice of inputs, manager's information rent and firm's profit. Reasons for which the government should prefer one regulatory regime over the other are discussed. The recent regulatory reform of electricity markets in the province of Quebec (Canada) provides an illustration of the model.

Keywords: Regulation; Public Enterprises (search for similar items in EconPapers)
JEL-codes: L32 L51 L94 L97 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eff and nep-mic
Date: 1999

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Related works:
Working Paper: Impact of Regulatory Agencies on the Efficiency of Publicly-Owned Utilities (1999)
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Persistent link: http://EconPapers.repec.org/RePEc:lvl:laeccr:9915

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