A New Regulatory Model For Electricity Price Cap And A Proposed Environmental Value Schedule For Generation

After the deregulation of electric power industry, a new Regulation System, adapting to the competitive electricity market, must be established to ensure the market efficiently functioning, which is an international experience. China electric power reform has been started-up, the regulatory issue need be studied and solved urgently so as to make the reform further proceed smoothly.This paper firstly introduces the background of electricity market regulation, demonstrates the Economics fundamental of regulation, and summarizes the characteristic and principle of modern electric regulation. On the basis of theoretic preparation, the paper then focuses on two basic regulatory issues, Price Cap and Environmental Cost.Price cap is a simple product of competitive electricity market. The paper integrates price limit with dynamic profit-adjusting mechanism for the first time, and proposes a new price ceiling method, Profit Capping. Furthermore, on appraising two popular regulation models (ROR and RPI-X), the paper suggests a new regulation model, Profit Capping Model (PCM), which offers a package solution to electricity price regulation.Environmental Cost is one of the most important reasons how to result in market failures. Another task of this paper is answering the request of National Electric Industry Reform Plan, evaluating the Environmental Value Schedule (EVS) for electricity generation, and analyzing the external effects of electricity market.