The Incentive Regulation Of China’s Electricity Industry Based On Structural Right Of Residual Claim

Why does the same regulatory arrangement result in the differentperformance in different areas or periods? In another word, why do differentareas or periods need different regulatory arrangement? Traditional regulationtheory ignores the research on regional and temporal differences of regulationperformance, and prevalent theory of incentive regulation also pays littleattention to the influence of informal institutions, so both could not explain thephenomena. Withal, by taking electricity industry as a study case, the paperconnects the differences of informal institutions with regulation performance,analyzing the mutual relationship between them. As a result, the paper drawsout the economic principal of the phenomena, and tables some proposal tosolve the problems of electricity incentive regulatory accordingly.Detailedly, from the basic notion defining, the paper treats governmentregulation as a proxy-agent contract between regulator and enterprises, andthrough the extensive conception of the structural right of residual claim, it alsoestablishes an extended model of incentive distortion with informal institutionalvariable. Accordingly, it reviews the concretely mechanism of the informalinstitutions’ influence on regulatory performance.The paper proves it’s reasonable that the diverse informal institutionsrequire different allocations of residual. After distinguishing the positivity fromnegativity, it draws an optimal allocation’s principal says “the more positiveinstitutions, the more rights of residual claim” when the system comes tooptimum. Based on the theoretical principal, it also develops an “ISP” analyticframework under the structural right of residual claim. With it, the papercompares the British reform’s experience with Japanese and analysis theChina’s practice, illuminating the influence of informal institutions on the performance of regulatory arrangements in practical field.Consequently, toward some countries or regions in different areas anddeveloping phases, industry’s informal institutions endocentric determine theintensive validity of regulatory arrangement. So when establishing some plansof regulatory reform, we must focus on the industry’s informal institutions.Based on its characteristics, carrying out corresponding allocation mode of thestructural right of residual claim, break out the developing bottleneck andpromote the industry. Finally, the paper advises a “4steps” of marketingregulatory reform to advance the electricity industry’s development, which areemphasized on informal institutions.