RESEARCH PAPER
Efficiency Conditions for Price Regulation in the Electrical Power Engineering Sector
 
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Publish date: 2003-01-25
 
Gospodarka Narodowa 2003;181(1-2):12–29
ABSTRACT
The analysis is focused on incentive-based price regulation, which along with competition promotion is one of the two most significant aspects of network sectors regulation in a modern economy. Issues of basic relevance for the efficiency of the most important incentive-based regulation method, i.e. the price ceiling, in attainment of fundamental objectives of economic regulation have been addressed, mostly on the basis of British experience. They relate to the ceiling formula itself, estimation of the efficiency parameter (so-called X parameter), length of the regulation period, as well as regulatory procedures during the regulation period and during the so-called regulatory review. In the field of the ceiling formula construction three issues have been discussed. The first of them relates to the ceiling’s subject (the ceiling’s form), which is, as a matter of fact, a question about the basic factor (or factors) that determine changes in the level of revenue allowed by the formula. The second issue is involved with the extension of the formula in a way making it possible to launch additional incentives intended to improve the efficiency of a selected section of the company’s operation. Finally, the third issue is concerned with the role of the so-called correction factor.
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ISSN:0867-0005