Fundamentals of Energy Regulations, 2nd Edition

  • ID: 3101450
  • Book
  • Region: Global
  • 475 Pages
  • Public Utilities Reports, Inc.
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Fundamentals of Energy Regulation is a complete introduction to the world of energy regulation. Designed to meet the needs of a broad range of practitioners, Fundamentals of Energy Regulation introduces important new regulatory topics, and features explanations of key economic and regulatory concepts, along with clear examples and case studies.

The book also discusses the practical aspects of several newer regulatory structures such as estimating productivity and inflation factors for price and revenue cap regulation.

Topics covered include:

- Coverage of emerging economic issues associated with restructured electric energy and capacity markets
- Discussions of recent U.S and international case law affecting the natural gas and electric industries
- Examination of cost recovery in a competitive environment, and the prudent investment standard
- Managing the transition to market competition
- Expanded coverage of electric system reliability issues, including RTO/ISO operations, day-ahead and real-time electric markets, FERC Order 2000, and transmission congestion
- Expanded coverage of international energy regulatory issues and government takings, including the importance of regulatory asset accounting
- Expanded discussion of natural gas pipeline rate setting methods, market-based rate “discounting,” pipe-on-pipe competition and the growing importance of shale gas
- Updated discussion of renewable energy and environmental issues
- Discussion of DoJ’s and FERC’s new horizontal merger guidelines.
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Preface to the Second Edition

Part I: Principles xi

Chapter 1: A Brief History of Electric and Natural Gas Regulation
1.1 Introduction

Chapter 2: Economic Concepts of Regulation
2.1 Introduction
2.2 The Fundamental Economic Goal of Regulation
2.3 The Competitive Ideal
2.4 Factors that Preclude a Competitive Outcome
2.5 Profit Maximization Under Monopoly
2.6 The Contestability of Markets
2.7 The Regulator’s Pricing Challenge
2.8 Other Complicating Factors
2.9 How Deregulation Can Lead to More Regulation
2.10 Chapter Summary

Chapter 3: The Role of the Revenue Requirement
3.1 Introduction
3.2 Meeting the Regulatory Challenge
3.3 Key Regulatory Principles
3.4 Why Revenue Requirements Underlie All Regulatory Structures
3.5 Revenue Requirement Components
3.6 Other Issues
3.7 Chapter Summary

Chapter 4: Alternative Regulatory Structures
4.1 Introduction
4.2 Common Aspects of Regulatory Structures
4.3 Cost Differences and Operating Environments
4.4 Cost of Service
4.5 Performance-Based Regulation
4.6 Yardstick Competition
4.7 Comparing Different Regulatory Regimes to Set Tariffs
4.8 Chapter Summary

APPENDIX: Model Company Analysis

Chapter 5: Cost Measurements
5.1 Introduction
5.2 Why Regulators Measure Costs
5.3 Estimating and Regulating Operating Costs
5.4 Estimating and Regulating the Rate Base
5.5 Estimating the Regulated Rate of Return
5.6 Deferred Costs and Regulatory Assets
5.7 Chapter Summary

APPENDIX 5-1: Depreciation Mechanics

APPENDIX 5-2: Country Risk Methodologies

Chapter 6: Cost Allocation
6.1 Introduction
6.2 Cost Functionalization
6.3 Cost Classification
6.4 Cost Allocation
6.5 Regulatory Accounting Standards
6.6 Separating Regulated and Unregulated Activities
6.7 Allocation Practices
6.8 Chapter Summary

Chapter 7: Rate-Setting Principles and Procedures
7.1 Introduction
7.2 Billing Determinants
7.3 Tariff Design
7.4 Alternative Design Structures
7.5 Tariff-Setting Methods
7.6 Incremental and Rolled-In Methods
7.7 Pricing and Social Policy
7.8 Electric Restructuring and Default Service
7.9 Chapter Summary

Appendix 7-1: Estimation Issues in Forecasting Energy Demand

Appendix 7-2: Ramsey Pricing Formula

Appendix 7-3: Incremental or Rolled-In: Which Pricing Regime is Preferred from a Purely Economic View

Chapter 8: Rate and Tariff Adjustment Mechanisms
8.1 Introduction
8.2 Pass-Through Mechanisms
8.3 Inflation Adjustments
8.4 An Alphabet Soup of Adjustment Factors
8.5 Decoupling
8.6 Shared-Savings and Off-Ramps
8.7 Chapter Summary

Appendix 8-1: The Inflation Adjustment Formula

Appendix 8-2: Level Based Methods: DEA Approach to Measure Efficiency

Appendix 8-3: TFP Derivation

Appendix 8-4: TFP Calculation Methodologies

Chapter 9: Market Power in the Electric and Natural Gas Industries
9.1 Introduction
9.2 Defining Market Power
9.3 Dominant Firms
9.4 Horizontal and Vertical Market Power
9.5 Remedies for Market Power
9.6 The Essential Facilities Doctrine
9.7 Chapter Summary

APPENDIX: Short- and Long-Run Impacts of Government Subsidized Entry on Capacity Markets

Chapter 10: Dealing With Uncertainty
10.1 Introduction
10.2 Key Issues
10.3 Making Investment Decisions Under Uncertainty
10.4 Measuring Price Volatility
10.5 Nonmarket Uncertainties
10.6 Chapter Summary

Chapter 11: Environmental Regulation of the Energy Industry
11.1 Introduction
11.2 Environmental Costs and Environmental Externalities
11.3 Regulatory Responses
11.4 Measuring Environmental Costs and Benefits
11.5 Environmental Costs and Energy Prices
11.6 Externality Adders
11.7 Current Regulatory Policies: Renewable Energy and Global Climate Change
11.8 Chapter Summary

Chapter 12: Energy Markets and Electric System Reliability
12.1 Introduction
12.2 Direct Current Circuits
12.3 Alternating Current Circuits
12.4 Defining Reliability
12.5 Reliability and Installed Capacity Markets
12.6 Capacity Markets Across the World
12.7 Chapter Summary

Chapter 13: Regulation and Reform in International Markets
13.1 Introduction
13.2 Transition Mechanisms
13.3 Alternative Privatization Arrangements
13.4 Establishing the Regulatory Framework
13.5 Renegotiation and Change
13.6 Eminent Domain, Expropriation, and Regulatory Takings
13.7 International Arbitration
13.8 Use of Regulatory Assets Accounting in Response to Regulatory Takings
13.9 Chapter Summary

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Jonathan A. Lesser, Ph.D. and Leonardo R. Giacchino, Ph.D.
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