Competition And Regulation In Distribution And Retail Sectors Of Electric Power Market

The topic of this dissertation is the competition and regulation in distribution and retail sectors of electric industry, which is based on conditions of power market. The dissertation mainly focuses on the problems as follows: Which domains in distribution and retail sectors should be dominated by regulation? Which domains should be dominated by regulation? How to improve methods of regulation if the domain dominated by regulation? How to introduce competition if the domain dominated by competition? Following this route, firstly, this dissertation studied the boundary between monopoly and competition. Then improvement on method of regulation and introduction of competitive mechanisms in distribution sector was studied. Competitive characteristics and domains which should be dominated by regulation in retail sector were discussed. At last, Adjustment of regulation on electric universal service obligation arise from introduction of competition in retail sector was studied.Since the problem about regulation and competition is involved with boundary between monopoly and competition, Research on the boundary was carried out in this dissertation at the beginning. The conclusion of the research is that the boundary between monopoly and competition in distribution network is fuzzy. In a certain extent, there is superposition between monopoly and competition. It's legible that retail sector is competitive. Whereas there are two kinds of likelihood in distribution sector which can be competitive or monopolistic. It changes with different region and different economy of density. In addition, demand expansion and technology improvement can enlarge the scope of competition.After the boundary between monopoly and competition was specified, it's necessary to Regulate monopolistic domains. Moreover, it's necessary to improve methods of regulation too. A new method was brought forth in this dissertation. This method incorporates regulation of price cap and yardstick competition. In addition, a data envelope analysis (DEA) technology is adopted to compute the parameter of price cap. This method can not only mitigates the rachet effect in price cap regulation, but also avoid the randomness in the process of setting efficiency factor. The price basis will become more reasonable by using this method. As a result, incentive continuously retain on distribution corporations. Ultimately, social returns will increase.One of the foregoing conclusions about boundary between monopoly and competition is that distribution sector has competitive characteristics to some extent. To measure the extent of competitive characteristics and discuss how to introduce competition, this dissertation went deep into research based on technical and economic attributes of distribution network. The feasibility and effect of different patterns that introduce direct competition which correspond to different redundancy of distribution network was studied. Comparison between social costs and social returns of direct competition was made by constructing corresponding models. The conclusion is as follows: Competition is feasible in the circumstance that distribution network needn't to expand capacity. Competition can be introduced by horizontally separating primarily monopolistic distribution network and changing property right of one network. In the circumstance that distribution network need to expand capacity by constructing another distribution network, density of power load will determine the feasibility of competition. Under certain circumstance, it would be beneficial to society to introduce competition in areas that have high density of power load. These conclusions have realistic value on avoiding blindfold practice.Regulation and Competition coexist in retail sector. Contestable market theory was used to analyze retail sector in this dissertation. The optimal configuration of resource and efficiency of economic system can be obtained by force of potential competition and realistic competition. The regulation of entry should deregulate in retail sector. On the other hand, it's necessary to strengthen the regulation on market power of retailer, quality and permission of operation. Besides deepen insight on competition in retail sector, this research can also eliminate the misapprehension that only competitive mechanism should react on retail sector.Since entrants of retail sector may take scream-skim strategy after deregulation on entry was carried out, cross subsidy will be unsustainable. Consequently, transformation on the mode of electric universal service obligation will be needed. A electric universal service obligation fund which used to afford subsidy was brought forth in this dissertation. Moreover, a transferable electric universal service institution was also brought forth in this dissertation. This institution introduces competition mechanism into frame of regulation in electric universal service obligation. It can overcome the asymmetry on regulator and provider of electric universal service as well as reduce transactional costs.Research on the direct competition in distribution network is the most important innovation in this dissertation. Preceding researches on multi-network competition of network industries either stick in general description or its model is so simple that has neglected social welfare and economy of density. As a result, their explanations are not credible. This dissertation has made a breakthrough on it.Reform of regulation and introduction of competition are two complementary sides in construction of power market. Both of regulation and competition mechanism will take effect in distribution and retail sectors in power market. Electric industry in China will be confronted with the market-orientation reform on distribution and retail sector in next stage. The efficiency of electric industry will be directly influenced by the disposition of regulation and competition. Simultaneously, improvement and distribution of social welfare will be influenced. In addition, the conclusion of this dissertation may be used in other industries which are based on network after amended according to the industrial characteristics.