99/03751 Electricity distribution as an unsustainable natural monopoly: a potential outcome of New Zealand's regulatory regime

1999 ◽  
Vol 40 (6) ◽  
pp. 395
Keyword(s):  
Natural Monopoly ◽  
Regulatory Regime ◽  
Electricity Distribution ◽  
Potential Outcome

scholarly journals Competitive Bidding for a Long-Term Electricity Distribution Contract

2002 ◽  
Vol 1 (1) ◽  
Author(s):  
Stephen Littlechild
Keyword(s):  
Distribution Network ◽  
Natural Monopoly ◽  
Competitive Bidding ◽  
Electricity Distribution ◽  
Public Provision ◽  
Short Term ◽  
Investment Under Uncertainty ◽  
Monopoly Regulation ◽  
Competitive Contracting

Demsetz (1968) and Posner (1972) suggested competitive bidding as an alternative to natural monopoly regulation. Williamson (1976) and Goldberg (1976) argued that the problems of natural monopoly regulation are inherent in long-term investment under uncertainty. Long- and short-term franchising contracts may be more problematic than regulation. This paper reviews the literature and UK experience. It examines London Underground's recent long-term (thirty-year) contract for its electricity distribution network. This has avoided the Oakland CATV problems described by Williamson, but involves considerable resources to monitor. Competitive contracting seems feasible and advantageous versus public provision. Its merits versus utility regulation warrant further consideration.

scholarly journals Benchmarking of Electricity Distribution Licensees Operating in Sri Lanka

2016 ◽  
Vol 2016 ◽  
pp. 1-10 ◽  
Author(s):  
K. T. M. U. Hemapala ◽  
Lilantha Neelawala
Keyword(s):  
Sri Lanka ◽  
Relative Efficiency ◽  
Stochastic Frontier Analysis ◽  
Least Squares Method ◽  
Ordinary Least Squares ◽  
Electricity Sector ◽  
Regulatory Regime ◽  
Electricity Distribution ◽  
Factor X ◽  
Frontier Analysis

Electricity sector regulators are practicing benchmarking of distribution companies to regulate the allowed revenue. Mainly this is carried out based on the relative efficiency scores produced by frontier benchmarking techniques. Some of these techniques, for example, Corrected Ordinary Least Squares method and Stochastic Frontier Analysis, use econometric approach to estimate efficiency scores, while a method like Data Envelopment Analysis uses linear programming. Those relative efficiency scores are later used to calculate the efficiency factor (X-factor) which is a component of the revenue control formula. In electricity distribution industry in Sri Lanka, the allowed revenue for a particular distribution licensee is calculated according to the allowed revenue control formula as specified in the tariff methodology of Public Utilities Commission of Sri Lanka. This control formula contains the X-factor as well, but its effect has not been considered yet; it just kept it zero, since there were no relative benchmarking studies carried out by the utility regulators to decide the actual value of X-factor. This paper focuses on producing a suitable benchmarking methodology by studying prominent benchmarking techniques used in international regulatory regime and by analyzing the applicability of them to Sri Lankan context, where only five Distribution Licensees are operating at present.

Aligning Quality Incentives and Tariff Adjustments: The Case of the Brazilian Electricity Distribution Sector

2019 ◽  
Vol 18 (1) ◽  
pp. 35-62
Author(s):  
Maria Luisa Corton ◽  
Michelle Andrea Phillips ◽  
Aneliese Zimmermann
Keyword(s):  
Regulatory Regime ◽  
Electricity Distribution ◽  
High Quality ◽  
Stochastic Cost Frontier ◽  
Cost Frontier ◽  
Cost Behavior ◽  
Distribution Sector ◽  
Set Up ◽  
Improve Service Quality

Abstract This study investigates the role of aligning tariff adjustments and quality incentives in a Price cap regulatory regime. According to theory costs and quality are positively related. If additional resources are needed to improve service quality, a high cost high quality utility could be at a disadvantage when tariffs are adjusted by an X-factor that does not include quality. The regulator of the electricity distribution sector of Brazil has set up a public ranking of utilities according to quality compliance at the same time that a quality component is added to the X-factor, in 2013. We develop a stochastic cost frontier integrating all components of the X-factor to rank the utilities based on this integrated efficiency. Comparing this rank with the regulator’s public rank we argue that the resulting differences highlight the importance of using the same factors to rank and adjust tariffs in the sector. Otherwise, incentives would be misplaced with respect to factors used in cost adjustments. In addition, our findings reveal that the utilities’ cost behavior with respect to quality depends on the volume of energy delivered. We believe these results could be considered by the regulator when setting incentives and considering factors to adjust tariffs.

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