• myGriffith
    • Staff portal
    • Contact Us⌄
      • Future student enquiries 1800 677 728
      • Current student enquiries 1800 154 055
      • International enquiries +61 7 3735 6425
      • General enquiries 07 3735 7111
      • Online enquiries
      • Staff phonebook
    View Item 
    •   Home
    • Griffith Research Online
    • Journal articles
    • View Item
    • Home
    • Griffith Research Online
    • Journal articles
    • View Item
    JavaScript is disabled for your browser. Some features of this site may not work without it.

    Browse

  • All of Griffith Research Online
    • Communities & Collections
    • Authors
    • By Issue Date
    • Titles
  • This Collection
    • Authors
    • By Issue Date
    • Titles
  • Statistics

  • Most Popular Items
  • Statistics by Country
  • Most Popular Authors
  • Support

  • Contact us
  • FAQs
  • Admin login

  • Login
  • Monopoly regulation, discontinuity & stranded assets

    Author(s)
    Simshauser, Paul
    Griffith University Author(s)
    Simshauser, Paul E.
    Year published
    2017
    Metadata
    Show full item record
    Abstract
    For regulated electricity utilities, if trend-load growth enters a state of terminal decline through disruptive competition and costs are unable to contract at a similar rate, the regulatory outcomes that follow produce strikingly different results to an equivalent episode in a competitive market, where profits fall and assets are written-off. Under economic regulation, prices rise to offset volumetric losses and in the presence of disruptive competition, a destructive price spiral can ensue. In these circumstances, some component of the regulated utility's assets meet the definition of ‘stranded’. Failure to deal with ...
    View more >
    For regulated electricity utilities, if trend-load growth enters a state of terminal decline through disruptive competition and costs are unable to contract at a similar rate, the regulatory outcomes that follow produce strikingly different results to an equivalent episode in a competitive market, where profits fall and assets are written-off. Under economic regulation, prices rise to offset volumetric losses and in the presence of disruptive competition, a destructive price spiral can ensue. In these circumstances, some component of the regulated utility's assets meet the definition of ‘stranded’. Failure to deal with stranded assets will eventually, and needlessly, damage shareholders, consumers and welfare. However, the ‘regulatory compact’ makes this an especially complex area of economics. Zero recovery of stranded monopoly assets is not credible policy. A normative analysis of economics and law suggests full recovery is not credible either. In this article, asset stranding experience from the US is reviewed and a series of policy principles are established; viz. asset stranding is a case-by-case proposition involving recovery via non-bypassable pricing mechanisms, quantified and packaged as a partial Return of Capital, possibly financed by Transition Bonds on a time-limited basis. Financial risk tolerances of the utility and the stability of post-stranding consumer tariffs are important parameters that should guide the policy approach to asset stranding. But ultimately, asset stranding is a policy choice, not an analytical determination.
    View less >
    Journal Title
    Energy Economics
    Volume
    66
    DOI
    https://doi.org/10.1016/j.eneco.2017.06.029
    Subject
    Mechanical engineering
    Applied economics
    Applied economics not elsewhere classified
    Publication URI
    http://hdl.handle.net/10072/348518
    Collection
    • Journal articles

    Footer

    Disclaimer

    • Privacy policy
    • Copyright matters
    • CRICOS Provider - 00233E
    • TEQSA: PRV12076

    Tagline

    • Gold Coast
    • Logan
    • Brisbane - Queensland, Australia
    First Peoples of Australia
    • Aboriginal
    • Torres Strait Islander