Performance-Based-Ratemaking and Its application in China’s Power Transmission-Distribution Price Regulation

Abstract

In current power transmission-distribution price reform, China has established a cost plus revenue regulatory method to power transmission-distribution price, which is featured of incentive effects to some extent. By summarizing and analyzing the traditional regulation and performance-based-ratemaking regulation as well as their respective applications, this paper analyzes the characteristics and limits of price cap and revenue cap regulation models, and proposes, as specific to the actual conditions in China, PBR targets and price cap regulation or rate-of-return regulation and yardstick competition regulation combined model while introducing performance benchmarking to give incentive initiatives to efficiency varied enterprises to improve their efficiency