From Green Whiskers

Price caps and rate of return regulation

Posted in: Reports / Papers

By Henry Ergas
August 13, 2001

This paper considers the difference between two types of regulation as they affect the regulated firm. Using the electricity distribution industry in Victoria as a case study, we discuss the impact of the periodic resetting of regime parameters which is a standard feature of price cap regimes. We explain why such resets are necessary and how the resulting incentives differ from those generated by rate of return regulation... more. (pdf, size 102kb)