Abstract
Because transmission and distribution sectors are natural monopoly and have the characteristic of subadditivity, the two sectors should be regulated. During the regulation, the regulation goal of regulator is to maximize social welfare, but the target of transmission and distribution enterprises is to maximize their profits, the two targets are incompatible. Above of all, this paper analyzed the principles of transmission and distribution price regulation mechanism under incentive compatibility constraint. Furthermore, a regulation mechanism was designed, which considered regulator as principal and considered transmission and distribution enterprises as agent. The authors proposed a principal-agent model with the risk management of transmission and distribution enterprises. The model solved the problem of price regulation under asymmetrical information, which can lead to the transmission and distribution enterprises to report true costs, inspirit them to join the mechanism on the basis of satisfying the regulation target of regulator. The model is instrumental in fulfilling Pareto improvement and promoting electricity market 'open, fair and just'. (6 pages)
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
