Measuring the price impact of price-cap regulation among Canadian electricity distribution utilities

Nick Crowley and Mark Meitzen

Utilities Policy, 2021, vol. 72, issue C

Abstract: Price-cap regulation is a form of performance-based ratemaking that offers electric distribution utilities a fundamental alternative to traditional rate-of-return regulation. Economic theory suggests that price caps, which set annual rate changes based on industry-wide productivity, should incentivize improved performance within the regulated utility. This analysis tests that theory by comparing rate outcomes among a control group of firms regulated under the traditional rate-of-return method against rate outcomes under price caps in Alberta and Ontario across time. The findings suggest a downward effect on the annual escalation of customer rates under price-cap regulation.

Keywords: Performance-based ratemaking (PBR); Price cap; Revenue cap; Rate of return (ROR) (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:juipol:v:72:y:2021:i:c:s0957178721001090

DOI: 10.1016/j.jup.2021.101275

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