Table of contents for Fundamentals of energy regulation / Jonathan Lesser, Leonardo R. Giacchino.

Bibliographic record and links to related information available from the Library of Congress catalog.

Note: Contents data are machine generated based on pre-publication provided by the publisher. Contents may have variations from the printed book or be incomplete or contain other coding.


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Table of Contents
Preface	xi
Part I: Principles	1
Chapter 1: A Brief History	3
1.1	Introduction	3
Chapter 2: Economic Concepts of Regulation	15
2.1	Introduction	15
2.2	The Fundamental Economic Goal of Regulation	16
2.3	The Competitive Ideal	18
2.4	Factors that Preclude a Competitive Outcome	21
2.5	Profit Maximization Under Monopoly	26
2.6	The Contestability of Markets	28
2.7	The Regulator?s Pricing Challenge 	30
2.8	Other Complicating Factors	33
2.9	How Deregulation Can Lead to More Regulation	37
2.10	Chapter Summary	39
Chapter 3: The Role of the Revenue Requirement	41
3.1	Introduction	41
3.2	Meeting the Regulatory Challenge	42
3.3	Key Regulatory Principles	43
3.4	Why Revenue Requirements Underlie All Regulatory Structures	46
3.5	Revenue Requirement Components	53
3.6	Other Issues 	60
3.7	Chapter Summary	63
Chapter 4: Alternative Regulatory Structures	65
4.1	Introduction	65
4.2	Common Aspects of Regulatory Structures	66
4.3	Cost Differences and Operating Environments	68
4.4	Cost of Service	68
4.5	Performance-Based Regulation 	71
4.6	Yardstick Competition	75
4.7	Comparing Different Regulatory Regimes to Set Tariffs	76
4.8	Chapter Summary	78
Chapter 5: Cost Measurement	79
5.1	Introduction	79
5.2	Why Regulators Measure Costs	79
5.3	Estimating and Regulating Operating Costs	86
5.4	Estimating and Regulating the Rate Base	102
5.5	Estimating the Regulated Rate of Return	112
5.6	Deferred Costs and Regulatory Assets	126
5.7	Chapter Summary	127
5.8	APPENDIX: Depreciation Mechanics	128
Chapter 6: Cost Allocation	139
6.1	Introduction	139
6.2	Cost Functionalization	140
6.3	Cost Classification 	144
6.4	Cost Allocation	146
6.5	Chapter Summary	153
Chapter 7: Rate Setting Principles and Procedures	155
7.1	Introduction	155
7.2	Billing Determinants	157
7.3	Tariff Design	165
7.4	Alternative Design Structures	167
7.5	Tariff-Setting Methods 	173
7.6. 	Pricing and Social Policy	185
7.7	Electric Restructuring and Default Service	187
7.8	Chapter Summary	189
Chapter 8: Rate and Tariff Adjustment Mechanisms	191
8.1	Introduction	191
8.2	Pass-Through Mechanisms	191
8.3	Inflation Adjustments	193
8.4	An Alphabet Soup of Adjustment Factors	194
8.5	Shared-Savings and Off-Ramps	201
8.6	Chapter Summary	202
Chapter 9: Market Power in the Electric and Gas Industries	203
9.1	Introduction	203
9.2	Defining Market Power	205
9.3	Dominant Firms 	207
9.4	Horizontal and Vertical Market Power	208
9.5	Remedies for Market Power	216
9.6	The Essential Facilities Doctrine	219
9.7	Chapter Summary 	220
Part II: Extensions and Applications	223
Chapter 10: Dealing With Uncertainty	225
10.1	Introduction	225
10.2	Key Issues	225
10.3	Making Investment Decisions Under Uncertainty	228
10.4	Measuring Price Volatility 	242
10.5	Nonmarket Uncertainties	245
10.6	Chapter Summary	248
Chapter 11: Environmental Regulation of the Energy Industry	251
11.1	Introduction	251
11.2	Environmental Costs and Environmental Externalities	253
11.3	Regulatory Responses	255
11.4	Measuring Environmental Costs and Benefits	263
11.5	Environmental Costs and Energy Prices	266
11.6	Externality Adders 	267
11.7	Current Regulatory Policies: Renewable Energy and Global Climate Change	269
11.8	Chapter Summary	274
Chapter 12: Regulating Electric System Reliability	277
12.1	Introduction	277
12.2	Direct Current Circuits	278
12.3	Alternating Current Circuits	282
12.4	Defining Reliability	283
12.5	Reliability and Installed Capacity Markets 	286
12.6	International Capacity Markets	292
12.7	Chapter Summary	293
Chapter 13: Regulation and Reform in International Markets	295
13.1	Introduction	295
13.2	Transition Mechanisms	296
13.3	Alternative Privatization Arrangements	297
13.4	Establishing the Regulatory Framework	299
13.5	Renegotiation and Change	300
13.6	International Arbitration	301
13.7	Chapter Summary	302
Chapter :14 The Future of Economic Regulation in the Electric and Natural Gas Industries	305
14.1	Introduction	305
14.2	The Regulatory Clash of Politics and Economics	306
14.3	The Future of U.S. Regulation	308
14.4	Concluding Thoughts	311
Select Bibliography	313
Index	323
List of Figures
Figure 2-1: Individual and Industry Equilibrium?Perfect Competition	18
Figure 2-2: Consumer?s and Producer?s Surplus	20
Figure 2-3: Natural Monopoly	24
Figure 2-4: The Monopolist?s Output Decision	27
Figure 2-5: The Regulatory Challenge	30
Figure 2-6: One Regulatory Solution: Average Cost Pricing	31
Figure 2-7: Pricing When Average Costs are Increasing	33
Figure 2-8: Regulation When AC is Uncertain	35
Figure 2-9: Effect of Regulatory Policies on a Firm?s Cost Structure 	36
Figure 4-1: Three Sets of Rules to Determine Regulated Rates	66
Figure 5-1: The Framework for Developing Regulated Services and Prices	80
Figure 5-2: The Five-Step Procedure to Calculate Regulated Prices 	81
Figure 5-3: The Three Sets of Books	85
Figure 5-4: Data Envelope Analysis	90
Figure 5-5: OLS and COLS	92
Figure 5-6: Stochastic Frontier Analysis	94
Figure 5-7: Effect of Depreciation Rate on Revenue Requirements	101
Figure A.5-1: Percentage Equipment Surviving Over Time	129
Figure A.5-2: Stub Survivor Curve	130
Figure A.5-3: Derived Stub Survivor Curve	135
Figure A.5-4: Iowa ?L3? Survivor Curve and its Derivative Curves	137
Figure 6-1: Cost Functionalization	141
Figure 6-2: Cost Classification	145
Figure 6-3: Cost Allocation	148
Figure 7-1: Determining Prices	156
Figure 7-2: Observed Temperature Distribution	163
Figure 7-3: The Pricing Dilemma	166
Figure 7-4: Two-Part Tariff Pricing	168
Figure 7-5: Block Rate Design	169
Figure 7-6: Block Rate Design Under Increasing Marginal Costs	170
Figure 7-7: Selected International POLR Experience	188
Figure 9-1: Diagram of Market Power in the Electric Industry	211
Figure 9-2: Optimal Supply Curve Under Imperfect Competition	218
Figure 10-1: The Future Price of Electricity	231
Figure 10-2. Value of Option to Invest	233
Figure 10-3: Increased Price Uncertainty	233
Figure 10-4: A Decision Tree and Outcomes	236
Figure 10-5: Extended Decision Tree with Additional Information	237
Figure 10-6: Coal Plant Decision Tree 	240
Figure 10-7: Henry Hub Daily Average Closing Gas Prices (2005)	243
Figure 10-8: Comparing Multiple Projects	248
Figure 11-1: Inefficiency in Private Production	256
Figure 11-2: Effects of an Output Tax	259
Figure 11-3: Determination of the Optimal Emissions Tax	261
Figure 12-1: A Simple Electric System	279
Figure 12-2: Impact of Higher Voltage	281
Figure 12-3: Load Duration Curve and Generating Resources	287
Figure 12-4: NYISO Locational Capacity Demand Curves	291
List of Tables
Table A.5-1: Surviving Equipment Over Time?Original Group Method	128
Table A.5-2: Summary of Plant Account Activity by Year	132
Table A.5-3: Annual Exposures and Retirements	133
Table A.5-4: Observed Life Table	134
Table 6-1: Typical Accounts for an Electric Utility	143
Table 6-2: Sample Gas Distribution System Plant and Expense Accounts	144
Table 6-3: Natural Gas Distribution Company?Estimation of Customer and Energy Allocators (2006 Test Year)	151
Table 6-4: Electric Distribution Company?Estimation of Demand Allocators (2006 Test Year)	153
Table 8-1: X Factors in Values and Methods in Selected Countries	198
Table 9-1: Delivered Price Test	214
Table 10-1: Distribution Planning Costs	229
Table 10-2: Expected Costs of Alternative Investment Strategies	229
Table 10-3: Decision Matrix	235
Table 10-4: Critical Event Matrix	247
Table 11-1: Types of Environmental Policy Instruments	257
Table 13-1: Increase in Average Maximum Tariffs for Mexican Natural Gas Distributors	299

Library of Congress Subject Headings for this publication:

Energy industries -- Government policy -- United States.