Generators supplying electricity markets are subject to volatile input and output prices and uncertain fuel availability. Price-risk may be hedged to a considerable extent but fuel-risk - water flows in the case of hydro and gas availability in the case of thermal plants - may not be. We show...

Cooperatives and mutual organisational forms arise for reasons which include contracting problems between parties. Economic literature suggests a variety of allocated inefficiencies implied by these forms that largely have their origins in poor investment decisions. We demonstrate that a...

The major difficulties in assessing market power in electricity wholesale spot markets mean that great weight should be placed upon assessing market outcomes against the fundamental determinants of supply demand and competition. In this spirit we study whether the New Zealand market has been a...

We present a model featuring irreversible investment uncertain future demand and capital prices and a regulator who sets the firm's output price at discrete intervals. Using this model we derive a closed-form solution for the firm's output price which ensures that whenever the regulator resets...

We show that regulators' price-setting rate base and allowed rate of return decisions are inextricably linked. Once regulators switch from traditional rate of return regulation the irreversibility of much infrastructure investment significantly alters the results of the usual approach to...

In September 2005 the New Zealand Commerce Commission (NZCC) released a document (TheWeighted Average Cost of Capital for Electricity Lines Businesses by Dr Martin Lally referred to as LINES hereafter) that estimates a weighted average cost of capital (WACC) for New Zealand electricity lines...

Professor Lewis Evans presented The Required Rate of Return with Sunk Investments at the ISCR forum, The Cost of Capital for the Regulated Firm in August 2003. Two papers associated with this presentation are available for through these links: 'Risk, Price Regulation and Irreversible Investment'...

Incentive regulation allows decentralised decision-making under regulatory settings that are based upon industry characteristics. This study considers the design of regulatory profit caps and the choice of historical or replacement cost for incentive regulation when there is uncertainty sunk...

We present a competitive storage model of commodity prices featuring frictions that introduce an element of irreversibility into storage decisions. This leads to situations in which speculators do not trade in the spot market even though total storage is positive. As a result the market value of...

In this paper we introduce a model of an electricity market and use it to explore the effect of climate change on electricity prices and output. It has multiple generation fuels uncertain fuel availability and storage options. The model is formulated in continuous time which mimics the many...