When Does Electricity Price Cap Regulation Become Distortionary?

Paul Simshauser ()

Australian Economic Review, 2014, vol. 47, issue 3, 304-323

Abstract: type="main" xml:lang="en">

Australia has a deregulated national wholesale electricity market, a national network regulatory framework, but inconsistent state-based regulated retail price caps in workably competitive markets. This article finds that asymmetric information and the complexity of energy markets means that a regulator, no matter how wise and well resourced, could never be expected to produce reliable estimates of competitive prices. If regulation represents a policy constraint, relying on long-run concepts rather than short-run prices is least damaging to the flow of capital and non-linear pricing.

Date: 2014
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