Research On The Performance-Based Price Regulation Of Electric Power

Since the early 1980's ,many countries have implemented electricity sector reforms. Many of these reforms have unbundled generation, transmission, distribution, and retail activities. They have introduced competition in generation and retail and adopted incentive regulation to promote efficiency improvement in the natural monopoly activities—transmission and distribution.The natural monopoly of distribution is the cause of regulation and the core of regulation is in the side of price. The regulation of distribution in the past is based on the cost regulation, namely cost-of-service or rate-of-return (COS/ROR) regulation. With the development of electrictity sector reforms, more countries adopt incentive regulation, namely price or revenue caps, to control the price of the service of distribution. Utility could earn higher profits by cost reductions and efficient management.In China, the restructure of power industry had unbundled the generation and network.But the transmission, distribution and detail activities are still bundled in the power grid company. It is sure that distribution will be unbundled from transmission and retail activities in future, and it is important to implement incentive regulation on distribution. So we propose to build a compatible regulation mechanism on distribution.Therefore,this paper discusses the application of incentive regulation to distribution electricity in China. Firstly, the paper begins with the elementary theories of natural monopoly and expounds its definition, economic characters. Then the paper introduces the goal and principle of price regulation to power distribution. Secondly, this paper gives an introduction of regulation, and analyses the experiences and lessons of price and revenue caps, which are applied widely in these reforms.Profits from the methods of the overseas electric power regulation,simultaneously according to the our country power distribution market actual condition ,we designed a price regulation model which is suited for future power distribution market of our country. For the accurate formulation power distribution price, this paper exhaustively instructs the method how to decide the efficiency factor in the model, and has produced the real diagnosis and calculates the example.Finally briefly introduced the conclusions and the deficiency of the paper.