Price Regulation in Australia: How Consistent Has it Been?

25 Pages Posted: 23 Aug 2005

See all articles by Robert V. Breunig

Robert V. Breunig

Australian National University (ANU) - Crawford School of Public Policy; Tax and Transfer Policy Institute (Crawford School of Public Policy, ANU); IZA Institute of Labor Economics

Jeremy Hornby

Charles River Associates, Incorporated

Scott Stacey

Charles River Associates, Incorporated

Flavio M. Menezes

University of Queensland - School of Economics

Date Written: August 9, 2005

Abstract

We assembled a database consisting of fifty-two regulatory decisions, spanning two hundred and fifty-four annual observations, made by seven different regulators and across five different industries. For each of these observations, we construct a variable that represents the proportion of the firms' revenue requirements that were disallowed by the regulator when determining the maximum allowable revenue. We then attempt to explain this fraction by using categorical variables representing the regulator, the industry and the time period. Our results suggest that despite the differences in the implementation of price regulation across regulated industries and across jurisdictions in Australia, outcomes are surprisingly consistent. For example, we show that it is not possible to reject the hypothesis that the regulatory outcomes in South Australia, New South Wales, the Australian Capital Territory and Victoria are similar. This is despite the different regulatory approaches undertaken in these jurisdictions. In the same vein, we observe that regulatory outcomes in transmission (electricity and gas) are similar to each other and so are the outcomes in distribution (electricity and gas). We also find that the nature of ownership of regulated firms (private vs. public) has little impact on the proportion of disallowed revenue requirement claims.

Keywords: Price regulation, energy, water, consistency

JEL Classification: L51, L94, L95

Suggested Citation

Breunig, Robert V. and Hornby, Jeremy and Stacey, Scott and Menezes, Flavio M., Price Regulation in Australia: How Consistent Has it Been? (August 9, 2005). Available at SSRN: https://ssrn.com/abstract=787024 or http://dx.doi.org/10.2139/ssrn.787024

Robert V. Breunig

Australian National University (ANU) - Crawford School of Public Policy ( email )

7 Liversidge Street
Lennox Crossing
Canberra, ACT 0200
Australia
61261252148 (Phone)

HOME PAGE: http://https://crawford.anu.edu.au/crawford_people/content/staff/rbreunig.php

Tax and Transfer Policy Institute (Crawford School of Public Policy, ANU) ( email )

Canberra
Australia

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Jeremy Hornby (Contact Author)

Charles River Associates, Incorporated ( email )

1201 F. St. NW
Ste. 700
Washington, DC 20004
United States

Scott Stacey

Charles River Associates, Incorporated ( email )

1201 F. St. NW
Ste. 700
Washington, DC 20004
United States

Flavio M. Menezes

University of Queensland - School of Economics ( email )

Brisbane, QLD 4072
Australia