Employing gain-sharing regulation to promote forward contracting in the electricity sector

David Brown and David Sappington

Journal of Regulatory Economics, 2023, vol. 63, issue 1, No 2, 30-56

Abstract: Abstract We examine the reductions in electricity procurement costs that can be secured when gain-sharing regulation is employed to induce a regulated load serving entity (LSE) to undertake forward contracting despite associated political risk. We identify arguably plausible conditions under which a modest degree of gain sharing can induce an LSE to undertake forward contracting that substantially reduces the LSE’s procurement costs, to the benefit of retail consumers.

Keywords: Forward contracting; Incentive regulation; Gain sharing (search for similar items in EconPapers)
JEL-codes: L51 L94 Q28 Q40 (search for similar items in EconPapers)
Date: 2023
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Working Paper: Employing Gain-Sharing Regulation to Promote Forward Contracting in the Electricity Sector (2022)
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DOI: 10.1007/s11149-022-09456-5

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