Natural Monopoly Industry Standard Cost Ratification Based Yardstick Competition

Regulation on natural monopoly industry cost is the core of government pricing departments, ratification of the natural monopoly industry standard cost will help regulators are not constrained by the cost of information when formulating policy or regulatory oversight monopoly industry behavior, and it’s effectiveness can’t play without true, complete and reasonable cost information. This article is mainly based on the theory of the natural monopoly, asymmetric information, yardstick competition as the theoretical foundation, starting from understand the concept of standard costs, defining the natural monopoly industry standard cost connotations. Analysis the natural monopoly industry cost’s characteristics and current situation. Take transmission and distribution companies for example in specific studies approved standard cost of natural monopoly industry.Main innovations as follows:1. Based on the monopoly of traditional cost categories, analysis different industry cost comparability, when specific studies approved standard cost of transmission and distribution companies,the cost is divided into comparable and non-comparable cost, transmission and distribution operating costs (including material costs, staff salaries, repairs and other expenses, etc.) can be classified as comparable costs,transmission and distribution construction costs, depreciation, operation and maintenance costs commission, transmission fees can be classified as non-comparable costs.2. Use cluster analysis based on factor analysis on the transmission and distribution companies classified, considering the factors of the standard cost of natural monopolies, take the sample firms which the cost data are similar as a class to analysis. This article will divided 31 provinces transmission and distribution companies into five categories for analysis, using Yardstick competition which based on data envelopment analysis approved standard cost of the fifth classification transmission and distribution companies (transmission and distribution companies of Hubei Province).