The Design Of Incentive Regulation Mechanism Of Chinese Transmission And Distribution Network

Historically, Power Industry is operated in vertical monopoly utilities that supply electricity to customers within their franchised areas of service. Since the early 1980's, many countries have implemented electricity sector reforms. Many of these reforms have unbundled generation, transmission, distribution, and retail activities of the sector and introduced competition in generation and retail. While transmission and distribution network owners in charge of grid operation, maintenance, and investment, will continue being regulation because of the natural monopoly characteristics of this type of business. In order to obtain effective competition in generation and retail access, it is necessary that regulation ensure open access to the grid connection points to generators, final customers and other market participants. Consequently, transmission and distribution network activities must be unbundled from generation and retail activities and adequately regulated. An increasing number of countries are also adopting incentive regulation to promote efficiency improvement in the natural monopoly activities——transmission and distribution.This paper is just based on the research achievement of the abroad and the domestic, and it applies industrial economics, regulation economics, and econometrics and so on to research the incentive regulation mechanism of Chinese transmission and distribution network, and it gives a empiricist analysis to the efficiency of East China, Central China and Guangdong Grid Company, which are representative.Firstly, the paper begins with the basic theories of natural monopoly and expounds its definition, economic characters and technologic characters. Then the paper analyses the economic characters and technologic characters of electric power suppliers and the electric power. Deeply analyses the reasons why government regulate the business. Secondly, this paper recollects the theory of regulation, and attaches an importance on the electricity regulation of America and England. Then, it gives an introduction to incentive regulation, and analyses the experiences and lessons of price and revenue caps, which are applied widely in these reforms. Thirdly, according to the analyses, we design a hybrid regulation scheme, which combines yardstick competition and benchmarking technique. After giving some introduction about the econometrical technique, especially introduces the method of data envelopment analyses (DEA). Fourthly, this paper gives an empiricist analysis to the efficiency of East China, Central China and Guangdong Grid Company with DEA and it draw some pieces of conclusion. At the end, this paper gives some suggestions and advice to the regulation of electricity industry in China.