Incentives to quality and investment : evidence from electricity distribution in Italy
Journal of regulatory economics, 2016, Vol. 49, No. 1, pp. 1-32
CAMBINI, Carlo, FUMAGALLI, Elena, RONDI, Laura, Incentives to quality and investment : evidence from electricity distribution in Italy, Journal of regulatory economics, 2016, Vol. 49, No. 1, pp. 1-32 - https://hdl.handle.net/1814/61508
Retrieved from Cadmus, EUI Research Repository
This paper investigates the relationship between output-based incentives for service quality and the use of capital and non-capital resources to meet regulatory targets in the electricity industry. To conduct the empirical analysis we use a dataset collected with the support of the Italian energy regulatory authority, comprising micro data on monetary incentives and physical assets for the largest electricity distribution operator in Italy (86 % of the market). Our results show that physical assets and operational expenditures do affect service quality. Moreover, when we investigate causality in the relationship between incentives to quality and the use of capital and non-capital resources, we find that incentives Granger-cause capital expenditures ( and not vice-versa). Finally, our results reveal an asymmetric effect of rewards and penalties on capital expenditures' decisions across areas with different quality levels. From these findings, we derive several policy implications.
Cadmus permanent link: https://hdl.handle.net/1814/61508
Full-text via DOI: 10.1007/s11149-015-9287-x
ISSN: 0922-680X; 1573-0468
Keyword(s): Electricity distribution Incentive regulation Investment Service quality Panel-Data Regulatory Independence Distribution Networks Specification Ownership Models Tests Cost Us
Sponsorship and Funder information:
Italian Regulatory Authority for Electricity, Gas and Water
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