Regulatory Economics

Regulatory Design and Tariffs

In over 40 years of service to energy companies, NERA has made many important contributions to both the theory and the practice of regulatory economics. Electricity and gas is being sold in many competitive markets around the world; at the same time there is continued and more sophisticated regulation of the wires and pipelines that convey electricity and gas from power generators and gas producers to consumers.

Our practice has served electricity and gas sector clients across the world including clients in almost all of North America, in many countries in Central and South America, in nearly all of the countries of the European Union and other major markets including Russia. We have worked for clients in Australia and New Zealand and in many of the countries in Asia. Our staff of professional economists has practical experience for example, working in the gas and electricity industries themselves and in key regulatory agencies and government departments.

NERA's consultants have a comprehensive knowledge of the economics of gas and electricity markets, industry structures and the methods of regulation used by government and regulators. As governments and other agencies pursue liberalization of gas and electricity markets around the world, expert economic advice is essential for an understanding of the benefits and costs of different policy options, the extent to which industry restructuring is desirable and the need for and most effective forms of regulation. NERA advises regulators, governments and industry on all these issues.

NERA has extensive experience with all aspects of pricing policy including the design of prices for consumers and particularly the design of rates or tariffs for the transmission and distribution of gas and electricity. For many years NERA has been sought as a leading authority on pricing and, through seminars and training programs, we have taught thousands of industry professionals how to design tariffs.

NERA also has extensive experience with particular aspects of pricing including marginal cost pricing as applied to electricity tariffs. NERA's method for estimating marginal costs set the industry standard in the United States when it was introduced in the late 1970s. NERA's method for estimating marginal costs has been continually updated and enhanced, incorporating more rigorous techniques for capturing time-of-use and geographic differences in costs and providing a sound basis for efficient delivery tariffs as well as charges for bundled service. This experience has been applied in many countries in Europe and Australia.