ECO314H1 Study Guide - Final Guide: Green Energy Act 2009, Capital Asset Pricing Model, Independent Electricity System Operator
Document Summary
Command and control (e. g. safety standards on nuclear reactors) Market intervention (e. g. cap-and-trade, regulation of electricity prices) Public ownership (e. g. nationalization of oil reserves) Cost of service regulation/rate of return regulation: regulator comes in and you report your costs. Regulator adjusts your rates to be at a level you can expect to recover your costs. Regulated companies have the incentive to persuade the regulator that their costs are reasonable. There is an asymmetry of information between the company and the regulator: fair rate of return on capital capital asset pricing model (capm) Sets a cap on the price that the utility provider can charge. Limits the amount of total revenue received by a company operating. Regulator compares the performance (efficiency) of various monopoly companies and rewards/punishes those on the basis of their relative performance. Methodologies for benchmarking costs and production: cost and production function estimation.
