The Effects of Average Revenue Regulation on Electricity Transmission Investment and Pricing

Isamu Matsukawa

Industrial Organization from EconWPA

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 monopolistfs 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.

Keywords: congestion pricing; electric power transmission; two-part tariff; average revenue regulation; Coasian two-part tariff (search for similar items in EconPapers)
JEL-codes: L (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-ene, nep-ind, nep-mic and nep-reg
Date: Written 2005-12-19
Note: Type of Document - pdf; pages: 55
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http://129.3.20.41/eps/io/papers/0512/0512009.pdf (application/pdf)

Related works:
Journal Article: The effects of average revenue regulation on electricity transmission investment and pricing (2008)
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