Electricity transmission pricing and transmission grid expansion have received increasing regulatory and analytical attention in recent years. Since electricity transmission is a very special service with unusual characteristics, such as loop flows, the approaches have been largely tailor-made...

The informationally simple approach to incentive regulation applies mechanisms that translate the regulator's objective function into the firm's profit-maximizing objective. These mechanisms come in two forms, one based on subsidies/taxes, the other based on constraints/price caps. In spite of a...