Price Regulation In Transmission And Distribution Field--Rate Of Return Regulation

It must be regulated in the transmission and distribution fields because of the typical characters of natural monopoly after the restructure in electricity industry. The Rate of Return Regulation model will be used for the document 'China's power-pricing reform' (2003) in our country. This article studies how to choose the parameters in this model and expect to overcome its shortcomings and make it perfect. First, we introduce a new method to set the rate base, that is the optimal deprival value. Then we compare the current used methods, and analysis the advantages and disadvantages, the ability of realizing the regulation aims and the risks using mathematic model. Second, this article studies the model to set the rate of return and calculates the weighted average cost of capital by using 23 firms' data in the Shanghai stock exchange. These provide a new and operational method.