Regulation Collusion In China Power Industry Regulation And Its Prevention Mechanism Designing

The large-scale centralized reorganization caused by the characteristics of naturalmonopoly of electric power products brought the governments all over the world toexecute the vertical integrative regulation in electric power industry. However, due tothe government failure and regulation capture in the vertical integrative regulation, allthe governments were forced to relax regulation in the1980s. After that, globalblackouts in2003let the governments back to the role of the regulator again. Hence,how to deal with the government failure under the electric power regulation and copewith the collusion between regulatory organizations and interest groups have become ahotspot in the field of electric power regulation.As for China, which is during the period of economic transformation, it will be along-standing phenomenon that its rapid economic development is heavily reliant onelectricity resources. It will be significantly important to continue the improvement ofthe supervision system of power industry in China. Therefore, during the regulation ofthe Chinese power industry, the research in regulation collusion behavior and itsprevention mechanism is not only of obvious importance to ensure the effectiveimplementation of the government’s regulatory policy, but also of great theoretical andpractical significance to promote the development of the Chinese power industryregulation theory and the market-oriented reformation of the power industries. Overall,focusing on the several outstanding problems of regulation collusion in the Chinesepower industry, using the analytical framework of the Organization Collusion theory,and combined with the various characteristics of Chinese power industry regulation, thepaper is aimed to find out feasible approach or thoughts of preventing regulationcollusion and to design some appropriate prevention mechanisms, in order to provide atheoretical basis for further improvement of the electricity regulatory systemFirstly, this paper studies the regulation collusion of power generation companies’cost supervision in the economic regulation, the regulation collusion of powertransmission costs checking and its preventive mechanisms design. Under the Chinesepower industry traditional single indicator scheduling mode, with the collusion model ofthe power regulator and the power generation companies under P-S-A framework andsingle-attribute decision making based on the Organization Collusion Theory, the paper designed power generation output distribution contract to prevent the collusion betweenthe power generation companies and the power regulators. According to the practicalsituation of the recent energy generation scheduling of Chinese power industry, byintroducing the public information of the environmental monitoring data, this paperextends the collusion model between the power regulator and the power generationcompanies which is of the single-attribute decision making situation under the P-S-Aframework to that of the multi-attribute decision making situation under the P-S1, S2-Aframework. In this model, the paper designs the power generation output allocation ofcontracts for preventing the collusion between the power generation companies andpower regulators, which not only lays the foundation for further analysis ofanti-collusion mechanism under the multi-index scheduling mode, but also enriches theliterature of preventing the regulation collusion within the framework of multi-regulator.Using the P-S-A model under the organization collusion theory in the transmission link,the paper studies the effects of different amount of punishment (“incentive with fixedpenalty" and” incentive with variable penalty”) on the prevention of regulation collusionand the arrangements of transmission capacity, which can also enrich the literature ofpenalty strategy.Secondly, the paper investigates the prevention mechanism of collusion under theprice subsidies and the environmental regulation. According to the gradual improvementof pollution control technology in the power industry and based on the differentsituations in which the denitrification subsidies changes with the denitrification costsvaries, the paper defines stage-based pricing in three environmental subsidies, andexamines the equilibrium conditions and bribery fund required during the generation ofcollusion and the cost to prevent the collusion under the fixed pricing and phasedpricing strategy, which provides a reference for existing literature of collusion andenvironmental regulation policy options.Finally, the paper investigates collusion prevention mechanism under the costsupervision of the power generation in the dual regulation. Aiming at the problems ofdual regulation collusion in the future power market, according to the changes of thestatus of the dual regulatory system of economy and environment during different stagesin the supervision system of power industry in China, and considering the differentregulation orders during dual regulatory system, the paper extends the model of thecollusion between the two regulators and power generation companies at the same time under the framework of P-S1and S2-A to the model of the collusion under theframework of the P-S1-S2-A which when the second regulator acts first, the collusionoccurs first between the agents and the second regulator then following by the collusionbetween the agents and the first regulator and the model of the collusion under theframework of the P-S2-S1-A which when the first regulator acts first, the collusion firstoccurs between the agents and the first regulator then following by the collusionbetween the agents and the second regulator. It will lay the foundation for furtheranalysis of the effects of the collusion consequence on the information structure andcollusion resultant, and also provide valuable reference for the study of anti-collusionregulation under the framework of the existing multi-regulators collusion.