On Distributive Effects of Optimal Regulation for Power Grid Expansion

37 Pages Posted: 20 Sep 2013

See all articles by Luis Herrera

Luis Herrera

Centro de Investigacion y Docencia Economicas

Juan Rosellon

Centro de Investigacion y Docencia Economicas

Date Written: September 2013

Abstract

To date, the distributive implications of incentive regulation on electricity transmission networks have not been explicitly studied in the literature. More specifically, the parameters that a regulator might use to achieve distributive efficiency under price-cap regulation have not yet been identified. To discern these parameters is the motivation for the research presented in this paper. We study how different weight parameters affect the distributive characteristics of optimal price-cap incentive regulation for electricity transmission. We find that a regulator's use of ideal (Laspeyres) weights tends to be more beneficial for the Transco (consumers) than for consumers (the Transco).

Keywords: Electricity transmission, incentive regulation, distributive efficiency

JEL Classification: L50, L51, L94, Q40, Q42

Suggested Citation

Herrera, Luis and Rosellon, Juan, On Distributive Effects of Optimal Regulation for Power Grid Expansion (September 2013). DIW Berlin Discussion Paper No. 1327, Available at SSRN: https://ssrn.com/abstract=2328181 or http://dx.doi.org/10.2139/ssrn.2328181

Luis Herrera

Centro de Investigacion y Docencia Economicas ( email )

Carretera Mexico-Toluca 3655
Lomas de Santa Fe
Mexico City, 01210
Mexico

Juan Rosellon (Contact Author)

Centro de Investigacion y Docencia Economicas ( email )

Carretera Mexico Toluca 3655
01210 Mexico, D.F.
Mexico

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