Incentive Regulation, Investments and Technological Change

Based on an idiosyncratic reading of the literature I propose intermediate (rather than tight or soft) regulation for balancing investment incentives with allocative efficiency and competition objectives. Intermediate regulation is compatible with incentive regulation and helps lengthening the regulatory commitment period necessary for incentives. However, such commitment for the whole time horizon of infrastructure or innovation investments is impossible. The compatibility of incentive regulation and efficient investment is thus in doubt. Incentive regulation for regular infrastructure investments therefore needs periodic updating based on rate-of-return regulation criteria. Innovative infrastructure investments may warrant regulatory holidays, which should be conditioned on strict criteria.

Optimal Price Regulation for Natural and Legal Monopolies

Optimal price regulation for natural and legal monopolies is an impossible task. The still difficult .task of good price regulation can be systematized by considering separately price level and price structure of the regulated firm. Various methods of price level and price structure regulation are evaluated and then considered for the regulation of electricity transmission, both in the context of an independent transmission company and of vertical integration between transmission and most of the generation capacity. The regulatory approach suggested uses price caps defined on two-part tariffs. This way, flexibility for short-term capacity utilization can be combined with incentives for investments in new transmission capacity.

Electricity Transmission Pricing and Performance-Based Regulation

Performance-based regulation (PBR) is influenced by the Bayesian and non-Bayesian incentive mechanisms. While Bayesian incentives are impractical, the insights from their properties can be combined with practical non-Bayesian mechanisms for application to transmission pricing. This combination suggests an approach based on the distinction between ultra-short, short and long periods. Ultra-short periods are marked by real-time pricing of point-to-point transmission services. Pricing in short periods involves fixed fees and adjustments via price-cap formulas or profit sharing. Productivity-enhancing incentives have to be tempered by long-term commitment considerations, so that profit sharing may dominate pure price caps. Investment incentives require long-term adjustments based on rate-of-return regulation with a “used and useful” criterion.

Access and Interconnection Pricing Issues in Telecommunications

Telekommunikation, Regulierung, Preis, Telecommunications, Regulation, Price

Network Utilities in the U.S. - Sector Reforms without Privatization

U.S. network industry reforms led other countries in the past, but have recently run into difficulties in specific areas. In particular, the U.S. telecommunications sector was hit by a deep crisis and electricity reforms suffered under the California disaster. Part of the explanation for these difficulties stems from past successful liberalization and deregulation experiences in other areas suggesting that competition could provide large benefits to hitherto regulated utilities in local telephony and the electricity sector. Part of the explanation lies in an underestimate of the coordination problems, resulting in bad institutional design, and in the difficulty to deal with vested consumer interests.network industries, regulation, competition, telecoms, electricity

Coal markets and hierarchies

Errata sheet inserted.In "Markets and Hierarchies" (1975) Oliver Williamson has developed a heuristic framework (Organization Failures Framework = OFF) to attack the issue of institutional borderlines between markets and firms. Below we discuss this concept and apply it to local coal markets. Differences in larger domestic and international coal markets then cast some doubts on the practical usefulness of the approach

Electricity transmission pricing and performance-based regulation

Performance-based regulation (PBR) is influenced by the Bayesian and non-Bayesian incentive mechanisms. While Bayesian incentives are impractical, the insights from their properties can be combined with practical non-Bayesian mechanisms for application to transmission pricing. This combination suggests an approach based on the distinction between ultra-short, short and long periods. Ultra-short periods are marked by real-time pricing of point-to-point transmission services. Pricing in short periods involves fixed fees and adjustments via price-cap formulas or profit sharing. Productivity-enhancing incentives have to be tempered by long-term commitment considerations, so that profit sharing may dominate pure price caps. Investment incentives require long-term adjustments based on rate-of-return regulation with a ?used and useful? criterion

Will the U.S. and EU Telecommunications Policies Converge? A Survey

Currently, U.S. and EU telecommunications policies differ in many respects. For example, wholesale access to local loops is largely deregulated in the U.S. but continues to be regulated in the EU. Or, the U.S. has an elaborate universal service policy with a set of universal service funds and specific policies for high-cost regions and low-income users, while universal service policies in the EU are much more sporadic. Will the forceful technical and market developments that are associated with IP convergence, next generation access (NGA) and mobile broadband (4G) lead to a convergence of telecommunications policies in the U.S. and EU? Based on a survey of the relevant U.S. and EU related economics literature the current paper addresses this issue for the five policy areas of interconnection, wholesale loop access, net neutrality, spectrum policy and universal service. While IP convergence and the spread of 4G are likely to enhance policy convergence, NGA could have a different effect, because the penetration of and the competitive properties of NGA depend crucially on legacy infrastructures that differ between the two continents