Measuring the Welfare Gains from Optimal Incentive Regulation

2019 ◽  
Vol 87 (5) ◽  
pp. 2019-2048
Author(s):  
Jose Miguel Abito
Keyword(s):  
Electric Utilities ◽  
Fuel Efficiency ◽  
Incentive Regulation ◽  
Rate Of Return ◽  
Welfare Gains ◽  
Electricity Prices ◽  
Coal Consumption ◽  
Abatement Costs ◽  
Optimal Mechanism ◽  
Return Regulation

Abstract I empirically measure the welfare gains from optimal incentive regulation in the context of electric utilities facing both emissions and rate of return regulation (RORR). I provide evidence that RORR induces lower fuel efficiency, leading to greater coal consumption and higher emissions abatement costs. Replacing RORR with the optimal mechanism of Laffont and Tirole (1986) yields annual welfare gains of $686 million or a 11% reduction in electricity prices. I construct a much simpler two-contract menu that can achieve more than 65% of these welfare gains.

scholarly journals The Effects of Incentive Regulation on Retail Telephone Service Quality in the United States

2003 ◽  
Vol 2 (4) ◽  
Author(s):  
David E. M. Sappington
Keyword(s):  
United States ◽  
Service Quality ◽  
The United States ◽  
Incentive Regulation ◽  
Rate Of Return ◽  
Empirical Literature ◽  
Future Research ◽  
Telephone Service ◽  
Return Regulation

This article provides a review and critique of the empirical literature that examines the effects of incentive regulation on retail telephone service quality in the United States. The literature provides mixed findings. Some dimensions of service quality appear to improve under incentive regulation (relative to rate of return regulation) while others deteriorate. Suggestions for much-needed future research are offered.

Experiences of modern rate of return regulation in Finland

2012 ◽  
Vol 21 ◽  
pp. 32-39 ◽  
Author(s):  
Kaisa Tahvanainen ◽  
Samuli Honkapuro ◽  
Jarmo Partanen ◽  
Satu Viljainen
Keyword(s):  
Rate Of Return ◽  
Return Regulation

Examining the Impact of Rate-of-Return Regulation on Capital Project Planning

2021 ◽  
Vol 147 (8) ◽  
pp. 04021080
Author(s):  
Rachael Sherman ◽  
G. Edward Gibson Jr. ◽  
Edward Merrow ◽  
Kristen Parrish
Keyword(s):  
Project Planning ◽  
Rate Of Return ◽  
The Impact ◽  
Return Regulation

Flotation Cost Allowance in Rate of Return Regulation: A Note

1981 ◽  
Vol 36 (5) ◽  
pp. 1199-1202 ◽  
Author(s):  
ENRIQUE R. ARZAC ◽  
MATITYAHU MARCUS
Keyword(s):  
Rate Of Return ◽  
Return Regulation

The Market for Capital and the Origins of State Regulation of Electric Utilities in the United States

2002 ◽  
Vol 62 (4) ◽  
pp. 1050-1073 ◽  
Author(s):  
William J. Hausman ◽  
John L. Neufeld
Keyword(s):  
Electric Utilities ◽  
The United States ◽  
Electric Utility ◽  
State Regulation ◽  
Electric Utility Industry ◽  
Firm Level ◽  
Borrowing Costs ◽  
Utility Industry ◽  
State Rate ◽  
Return Regulation

We provide evidence that the problem of raising capital in the early days of the U.S. electric-utility industry motivated industry leaders to embrace state rate-of-return regulation in return for a secure territorial monopoly. Utility executives anticipated that this would lead to a reduction in borrowing costs. Using firm-level bond data for 1910–1919, we estimate a model and find that state regulation led to lower borrowing costs but that the magnitude of the reduction was small. We also find evidence that output of electric utilities in states with regulation was higher than output in states without regulation.

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