Price Regulation in Australia: How Consistent Has it Been?
25 Pages Posted: 23 Aug 2005
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: Suggested Citation
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