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Competition as a Complement to Regulation

Richard P. Rozek

Year: 1985
Volume: Volume 6
Number: Number 3
DOI: 10.5547/ISSN0195-6574-EJ-Vol6-No3-6
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Abstract:
Competition and regulation are often perceived to be in conflict, because regulation usually evolves in response to a failure of the market system. In the case of public utilities in the United States, the familiar argument is that production scale economies make it cheaper for a single firm to provide essential products or services than for two or more firms to do so. To take advantage of the production efficiencies but avoid the resource allocation problems inherent in monopoly levels of price and output, either assets are publicly owned or a privately owned firm is regulated.' In the first case, the incentive to maximize profits is replaced by the need to maximize political support.' Thus the price charged for output is less than the monopoly price. In the second case, states have created public utility commissions (PUCs) to control both access to the market and the monopolist's price and output decisions.



Competitive Bidding In Electricity Markets: A Survey

Richard P. Rozek

Year: 1989
Volume: Volume 10
Number: Number 4
DOI: 10.5547/ISSN0195-6574-EJ-Vol10-No4-8
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Abstract:
A number of states as well as the Federal Energy Regulatory Commission have been considering whether traditional regulatory regimes in electricity and natural gas markets should be replaced with competitive bidding systems. This shift is designed to yield a more efficient allocation of energy resources within the existing legal framework The paper examines both the theoretical basis and empirical evidence on bidding processes in light of the characteristics of energy markets, especially electricity markets. It then discusses the extent to which one can draw policy conclusions about designing specific bidding processes for these markets. It concludes that given the underlying complexity of the products involved, the optimal system for procuring power should include a mix of bidding negotiation and utility construction.





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