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Regulation of an Electric Power Transmission Company

Abstract:
Designing regulatory contracts for the operators of power transmission networks has become a critical policy issue in the United States. In this paper, a regulatory contract is proposed that induces network operators to optimally expand the grid, which is crucial for the emergence of efficient wholesale power markets, while also satisfying the other traditional regulatory objectives. The proposed mechanism is readily implementable, since it builds on a contract currently in place in England and Wales.

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Energy Specializations: Electricity – Transmission and Network Management; Electricity – Policy and Regulation

JEL Codes: Q41: Energy: Demand and Supply; Prices, L98: Industry Studies: Utilities and Transportation: Government Policy, Q42: Alternative Energy Sources, D24: Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity, L51: Economics of Regulation

Keywords: Smart Grid Regulation, investments, electric power, electricity transmission

DOI: 10.5547/ISSN0195-6574-EJ-Vol21-No4-3


Published in Volume21, Number 4 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.