A Study on the Electricity Regulation: A View of Multi-principals

Electricity regulation is such a complicated task that several regulators are usually involved in it. In the process of electricity regulation, as a rule, the decisions of one regulator can usually bring externality on another regulator, ultimately influence the overall regulatory outcome. This paper studies the interaction between two regulators, i.e. economic regulator and environmental regulator, based on the theory of multi-principals. Three outcomes of game equilibrium are analyzed when two regulators are non-cooperative. And they are compared to the outcome of game equilibrium when two regulators are cooperative. The research result shows that the regulatory outcome in non-cooperative scenario is inferior to that in cooperative scenario. Besides, the decision sequence of different regulators influences the overall outcome of electricity regulation. Considering the fact that regulators will not cooperate voluntarily in electricity regulation, the author suggests that a new organization should be established to coordinate several regulators, in order to improve the overall outcome of electricity regulation.