Employing Gain-Sharing Regulation to Promote Forward Contracting in the Electricity Sector

David Brown and David Sappington

No 2022-10, Working Papers from University of Alberta, Department of Economics

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)
Pages: 39 pages
Date: 2022-10-19
New Economics Papers: this item is included in nep-ene and nep-reg
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Journal Article: Employing gain-sharing regulation to promote forward contracting in the electricity sector (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:ris:albaec:2022_010

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