Regulatory Regime and Finance: Electricity Distribution in Thailand

Abstract

This paper aims to explore the choice of regulatory regime and form for electricity distribution characterised by natural monopoloy in Thailand. Taking the specificities of developing countries, the level of development concerning regulation and characteristics of the industry into consideration, revenue cap regulation is recommended. This paper further demonstrates that to determine revenue cap, the adoption of regulatory finance from developed countries requires some modifications to fit with Thailand. As one of developing countries, Thailand is characterised by poor accounting and auditing systems and weakly functioning capital and equity markets. The problem of a lack of data and asymmetric information faced by the regulator in Thailand is more severe. The resulting revenue cap suggests that to improve efficiency in the next regulatory period, the regulator will have to reduce the allowable capital base or operating costs.