This document discusses key concepts related to costs and pricing in telecommunications markets. It distinguishes telecom as a true "network industry" due to network effects, where adding new customers benefits both those customers and existing customers. This influences policies like universal service and interconnection requirements. Regulatory policy must account for network effects and competition. Telecom costs are largely fixed, with minimal variable costs for usage. Efficient pricing would be a simple flat monthly fee, but demand factors require alternative pricing structures. The document also discusses concepts like standalone costs, traffic-sensitive vs. non-traffic-sensitive costs, and how price discrimination can be used to improve industry performance without extensive price regulation.
The document summarizes the deregulation and privatization of the UK electricity market in the 1990s. It discusses how the industry was separated into generation, transmission, distribution, and supply segments. It also describes how the electricity pool pricing mechanism works, with generators submitting hourly bids and the market clearing price being set where supply meets demand. There is discussion of whether prices are too high due to potential market power of generators and price volatility. The Competition Commission was tasked with reviewing the market and determining if generators refusing a "Market Abuse Licence Condition" was against the public interest.
This chapter examines the economic impact of transmission networks on their users. It discusses how transmission networks can affect system operation costs through losses and constraints. Losses occur as some power is lost as heat during transmission, requiring more generation. Constraints may require more costly generation if cheaper options violate transmission limits. The chapter also notes the importance of location - both in determining the impact of individual users on losses and constraints, and in allocating network costs to users based on their contributing locations.
Final Interconnection & Termination Rates ProgrammeYunShi
Learn how to manage the implementation of lower termination rates
and how to develop effective interconnect costing
models for Next Generation Networks
Electricity Markets Regulation - Lesson 7 - Quality Of Supply RegulationLeonardo ENERGY
Quality of supply regulation is becoming more and more important as cost-decreasing incentives may have a mid- and long-term effect on the quality provided. This session explains how quality of supply is defined, measured and regulated.
* Quality definition: Reliability / Commercial quality / Technical quality
* Quality measurement
* Relevance of quality regulation
* Regulatory quality control
* Indirect controls
* Minimum standards
* Incentive schemes
* Design of incentive schemes for quality
* Parameters / Controllability / Incentive function (shape, dead bands, cap and floors)
* Outage cost.
Electricity Markets Regulation - Lesson 2 - Market DesignLeonardo ENERGY
This section explains the main properties of different types of electricity markets exhibiting different level of competition and different forms of organisation.
• General market models : vertically integrated companies / single buyer / wholesale competition / retail competition
• Power pools : Price based / Cost based
• Markets with bilateral trade
• Balancing markets
• Power exchanges
This document reviews transmission pricing methods in restructured electricity markets. It discusses two main approaches: 1) pricing fixed and variable transmission costs simultaneously using locational marginal pricing, as seen in centralized US markets, and 2) calculating fixed and variable costs separately using point of connection tariffs, as seen in decentralized European and Indian markets. The paper focuses on embedded transmission pricing methods for calculating the allocated cost of existing transmission infrastructure to transmission users. It tests various embedded cost calculation methods on sample power systems.
The document discusses transfer pricing within multinational enterprises (MNEs). It provides background on transfer pricing guidelines from organizations like the OECD. One study found that penalties for deviating from proper transfer pricing lowered the valuations of Japanese MNEs in the US. MNEs spend significant effort setting transfer prices and defending their positions during audits. The document also discusses the increasing offshoring of business services and challenges around setting appropriate transfer prices for services between affiliates.
The document summarizes the deregulation and privatization of the UK electricity market in the 1990s. It discusses how the industry was separated into generation, transmission, distribution, and supply segments. It also describes how the electricity pool pricing mechanism works, with generators submitting hourly bids and the market clearing price being set where supply meets demand. There is discussion of whether prices are too high due to potential market power of generators and price volatility. The Competition Commission was tasked with reviewing the market and determining if generators refusing a "Market Abuse Licence Condition" was against the public interest.
This chapter examines the economic impact of transmission networks on their users. It discusses how transmission networks can affect system operation costs through losses and constraints. Losses occur as some power is lost as heat during transmission, requiring more generation. Constraints may require more costly generation if cheaper options violate transmission limits. The chapter also notes the importance of location - both in determining the impact of individual users on losses and constraints, and in allocating network costs to users based on their contributing locations.
Final Interconnection & Termination Rates ProgrammeYunShi
Learn how to manage the implementation of lower termination rates
and how to develop effective interconnect costing
models for Next Generation Networks
Electricity Markets Regulation - Lesson 7 - Quality Of Supply RegulationLeonardo ENERGY
Quality of supply regulation is becoming more and more important as cost-decreasing incentives may have a mid- and long-term effect on the quality provided. This session explains how quality of supply is defined, measured and regulated.
* Quality definition: Reliability / Commercial quality / Technical quality
* Quality measurement
* Relevance of quality regulation
* Regulatory quality control
* Indirect controls
* Minimum standards
* Incentive schemes
* Design of incentive schemes for quality
* Parameters / Controllability / Incentive function (shape, dead bands, cap and floors)
* Outage cost.
Electricity Markets Regulation - Lesson 2 - Market DesignLeonardo ENERGY
This section explains the main properties of different types of electricity markets exhibiting different level of competition and different forms of organisation.
• General market models : vertically integrated companies / single buyer / wholesale competition / retail competition
• Power pools : Price based / Cost based
• Markets with bilateral trade
• Balancing markets
• Power exchanges
This document reviews transmission pricing methods in restructured electricity markets. It discusses two main approaches: 1) pricing fixed and variable transmission costs simultaneously using locational marginal pricing, as seen in centralized US markets, and 2) calculating fixed and variable costs separately using point of connection tariffs, as seen in decentralized European and Indian markets. The paper focuses on embedded transmission pricing methods for calculating the allocated cost of existing transmission infrastructure to transmission users. It tests various embedded cost calculation methods on sample power systems.
The document discusses transfer pricing within multinational enterprises (MNEs). It provides background on transfer pricing guidelines from organizations like the OECD. One study found that penalties for deviating from proper transfer pricing lowered the valuations of Japanese MNEs in the US. MNEs spend significant effort setting transfer prices and defending their positions during audits. The document also discusses the increasing offshoring of business services and challenges around setting appropriate transfer prices for services between affiliates.
The utility landscape is dynamic. Some pundits claim that traditional utility regulation is becoming obsolete. Others are calling for a complete overhaul of utility ratemaking as we know it; distributed energy resources, technology advancements and societal trends are changing the way utilities function. In such turbulent times, how can utilities manage their financials through rate structures? How can utilities bridge the span between the rate and regulatory frameworks of yesterday and tomorrow? One way to do so is to revisit the design of rate offerings available to all utility customers and to residential customers in particular.
[CrunchEnergy] PA Electricity Deregulation: How to Save $ with Electric ChoiceAimee Kessler Evans
Pennsylvania faces what may be a very rocky road in the wake of deregulation. Instead of creating competition and lower rates for consumers and businesses, deregulation has been nothing but costly for business owners in many states.
But deregulation doesn’t have to be a nightmare. It can be an opportunity for smart businesses to save money on their electricity bills. Decision makers who prepare, learn their options, and ask the right questions can reap the benefits of Electric Choice.
Are you ready to make the right decisions for your business as deregulation approaches? Should you stay with your current provider, or should you switch to a new one? And how will you choose?
This document summarizes a webinar on Pennsylvania's electricity deregulation and how customers can save money through electric choice. The webinar covered the regional electric grid system, average retail electric prices in different states, Pennsylvania's rules for deregulation, the energy procurement process for choosing alternative electricity suppliers, factors to consider when using energy brokers, and examples of potential savings through competitive bidding. The presenter had decades of experience in the energy industry and outlined the key considerations and steps involved in navigating Pennsylvania's deregulated electricity market.
This document analyzes outcomes, forgone benefits, and reform options for universal telecommunications service programs in Texas. It finds that:
1) Lifeline programs are more effective than high-cost programs at increasing subscription rates, likely due to higher demand elasticity among low-income households.
2) Universal service programs have significant forgone benefits in the form of deadweight losses from higher prices reducing consumption.
3) Proposed reforms like increasing revenue benchmarks, targeting subsidies to low-income subscribers, and adjusting subsidies in response to cost reductions could reduce costs while maintaining subscription rates.
Incentives to Improve Energy Efficiency in EU GridsLeonardo ENERGY
Highlights:
* Investigates the energy efficiency aspects of network design and operation based on the Energy Efficiency Directive and its provisions for network tariffs and regulation.
* Suggests that both equipment replacement and operational improvements can lead to greater efficiency.
* Assesses whether regulatory mechanisms for network tariffs in Germany, UK and Spain provide an incentive for energy efficiency in the grid.
* Evaluates several policy options for improving technical efficiency in grids.
* Presents four main steps for implementation in practice.
This document discusses line-by-line embedded transmission pricing methodologies. It introduces concepts of deregulating the electric power industry and defines wheeling as transmitting electricity from a seller to buyer through a third party transmission network. It discusses different wheeling cost computation methodologies, including embedded and incremental cost approaches. It focuses on explaining the "line-by-line" embedded methodology in detail and how it can be used to calculate wheeling costs by allocating all existing and new transmission system costs to wheeling customers.
This document summarizes research on approaches to managing congestion in deregulated electricity markets. It reviews various congestion management methods that have been proposed, including nodal pricing, price area congestion management, available transfer capability based approaches, using thyristor controlled phase shifting transformers, and flexible AC transmission systems devices. It also discusses optimization techniques that have been applied to congestion management problems, such as genetic algorithms and particle swarm optimization. The document provides examples of research on applying these different congestion management methods and optimization techniques to address transmission network congestion issues in deregulated power systems.
This document provides an agenda for a telecom pricing workshop taking place from April 11-12, 2011 in London. The workshop will focus on strategies for developing successful pricing models for fixed, mobile, and data services. Topics will include segmentation strategies, tiered pricing, leveraging pricing to increase profits from data, and case studies from operators that have implemented innovative pricing approaches. Presenters will discuss pricing strategies at Orange, T-Mobile, KPN, and Makedonski Telekom.
Unified Energy provides energy procurement and management services including commodity procurement, demand response, and data management. It has over 150 years of combined experience in energy markets. Unified Energy was acquired by Tullett Prebon, the #1 ranked interdealer broker of commodities. Tullett Prebon's acquisition of Unified Energy provides access to its international capabilities and over $1 billion in annual revenue. Unified Energy offers customers services like full bill auditing, benchmarking, automated data reporting and tracking of energy budgets to help lower costs.
Universal service obligation and loyalty effectsMichal
In network industries, a Universal Service Obligation (USO) is often seen as a burden
on an incumbent, which requires compensation for the net cost of such service
provision. This paper estimates the effects of consumer loyalty as an intangible
benefit of USO in the postal sector. In doing so, the agent-based modelling (ABM)
approach is applied, which makes it possible to model the behaviour of boundedly
rational consumers and is thus particularly appropriate for taking into account
intangibles considerations. The analysis shows that loyalty is crucial to whether
the USO uniform pricing constraint results in loss-making or profitability. Under
certain conditions and in the presence of a loyalty parameter, uniform pricing gives
a USO provider an advantage, when the size of the rural area is sufficiently big
and a disadvantage, if its size is too small. This finding is counterintuitive as USO
providers in countries with sparsely populated areas are typically expected to incur
a significant net cost of USO.
Tony lavender - Plum Consulting - incorporating social value into spectrum al...techUK
Incorporating Social Value into Spectrum Allocation Decisions
Presentation to UK Spectrum Policy Forum - Cluster 3: Economic and Social Value of Spectrum
29 March 2018
Tony Lavender
More information on the UK Spectrum Policy Forum can be found here: https://www.techuk.org/about/uk-spectrum-policy-forum
Virgin Mobile is considering entering the cellular industry by targeting 14-24 year olds. This is an underserved segment that is dissatisfied with major carriers' pricing structures involving contracts, hidden fees, and pricing buckets. Virgin's approach would eliminate these issues in favor of prepaid plans with transparent per-minute pricing and value-added services. While appealing to customers, this risks increased churn and costs. However, Virgin could offset these through lower acquisition costs, a simplified pricing structure, and developing a differentiated value proposition to attract and retain customers despite the lack of contracts. Financial projections show Virgin could achieve profitability with a per-minute price of 6.4 cents or higher.
Broadband providers in Harold's Cross, Dublin include Eircom, UPC, Imagine, and Digiweb. Eircom offers the Eircom Business Starter package for €40/month, with speeds up to 8Mb download, 1.1Mb upload, unlimited data, and free WiFi access. UPC offers basic packages for small/medium businesses from €49/month, with speeds up to 10Mb download and 1Mb upload. Imagine offers the Breeze package for €45.27/month with unlimited data and speeds up to 4Mb. Digiweb offers metro broadband from €35.95/month with speeds up to 4Mb download and 1Mb upload. The document analyzes
Philip bates - Analysys Mason - spectrum policy forum 29 march 2018techUK
Overview of Analysys Mason 2012 study on the value of spectrum to the UK economy
Presentation to UK Spectrum Policy Forum - Cluster 3: Economic and Social Value of Spectrum
29 March 2018
Philip Bates
More information on the UK Spectrum Policy Forum can be found here: https://www.techuk.org/about/uk-spectrum-policy-forum
This document provides an overview of Asset Management Services (AMS) at Network Rail. AMS sets asset policies, provides assurance services, and supports customers to optimize rail infrastructure performance. It consists of several functions that provide services like route support, engineering advice, and energy/telecoms networks. AMS aims to improve efficiency through its transformation program. It outlines the visions and purposes of the different AMS functions and describes plans to reduce costs while maintaining service quality through the control period.
Ericsson White Paper - Minimizing carbon intensity in telecom networks using TCO techniques
A methodology for optimizing energy efficiency in networks based on the total cost of ownership approach.
This presentation by Frank WOLAK, Professor of Economics at Stanford University and Director of the Program on Energy and Sustainable Development was made during the discussion “Radical innovation in the electricity sector” held at the 63rd meeting of the OECD Working Party No. 2 on Competition and Regulation on 19 June 2017. More papers and presentations on the topic can be found out at oe.cd/1ZW.
This presentation by the Netherlands Consumers and Markets Authority was made during the “Radical innovation in the electricity sector” held at the 63rd meeting of the OECD Working Party No. 2 on Competition and Regulation on 19 June 2017. More papers and presentations on the topic can be found out at oe.cd/1ZW.
Electricity Markets Regulation - Lesson 8 - PricingLeonardo ENERGY
Once the revenue requirements are established they should be converted into tariff systems. This session explains the major economic principles of electricity pricing and the general pricing models using average and marginal costs. Moreover the session explores the major pricing models for the electricity activities including: generation, transmission, distribution and retail activities.
* Pricing principles : economic efficiency - cost recovery
* General pricing models : average cost pricing - marginal cost pricing
* Cost allocation issue
* Pricing for different activities in the electricity industry : generation pricing - transmission pricing - distribution pricing - retail supply pricing
The utility landscape is dynamic. Some pundits claim that traditional utility regulation is becoming obsolete. Others are calling for a complete overhaul of utility ratemaking as we know it; distributed energy resources, technology advancements and societal trends are changing the way utilities function. In such turbulent times, how can utilities manage their financials through rate structures? How can utilities bridge the span between the rate and regulatory frameworks of yesterday and tomorrow? One way to do so is to revisit the design of rate offerings available to all utility customers and to residential customers in particular.
[CrunchEnergy] PA Electricity Deregulation: How to Save $ with Electric ChoiceAimee Kessler Evans
Pennsylvania faces what may be a very rocky road in the wake of deregulation. Instead of creating competition and lower rates for consumers and businesses, deregulation has been nothing but costly for business owners in many states.
But deregulation doesn’t have to be a nightmare. It can be an opportunity for smart businesses to save money on their electricity bills. Decision makers who prepare, learn their options, and ask the right questions can reap the benefits of Electric Choice.
Are you ready to make the right decisions for your business as deregulation approaches? Should you stay with your current provider, or should you switch to a new one? And how will you choose?
This document summarizes a webinar on Pennsylvania's electricity deregulation and how customers can save money through electric choice. The webinar covered the regional electric grid system, average retail electric prices in different states, Pennsylvania's rules for deregulation, the energy procurement process for choosing alternative electricity suppliers, factors to consider when using energy brokers, and examples of potential savings through competitive bidding. The presenter had decades of experience in the energy industry and outlined the key considerations and steps involved in navigating Pennsylvania's deregulated electricity market.
This document analyzes outcomes, forgone benefits, and reform options for universal telecommunications service programs in Texas. It finds that:
1) Lifeline programs are more effective than high-cost programs at increasing subscription rates, likely due to higher demand elasticity among low-income households.
2) Universal service programs have significant forgone benefits in the form of deadweight losses from higher prices reducing consumption.
3) Proposed reforms like increasing revenue benchmarks, targeting subsidies to low-income subscribers, and adjusting subsidies in response to cost reductions could reduce costs while maintaining subscription rates.
Incentives to Improve Energy Efficiency in EU GridsLeonardo ENERGY
Highlights:
* Investigates the energy efficiency aspects of network design and operation based on the Energy Efficiency Directive and its provisions for network tariffs and regulation.
* Suggests that both equipment replacement and operational improvements can lead to greater efficiency.
* Assesses whether regulatory mechanisms for network tariffs in Germany, UK and Spain provide an incentive for energy efficiency in the grid.
* Evaluates several policy options for improving technical efficiency in grids.
* Presents four main steps for implementation in practice.
This document discusses line-by-line embedded transmission pricing methodologies. It introduces concepts of deregulating the electric power industry and defines wheeling as transmitting electricity from a seller to buyer through a third party transmission network. It discusses different wheeling cost computation methodologies, including embedded and incremental cost approaches. It focuses on explaining the "line-by-line" embedded methodology in detail and how it can be used to calculate wheeling costs by allocating all existing and new transmission system costs to wheeling customers.
This document summarizes research on approaches to managing congestion in deregulated electricity markets. It reviews various congestion management methods that have been proposed, including nodal pricing, price area congestion management, available transfer capability based approaches, using thyristor controlled phase shifting transformers, and flexible AC transmission systems devices. It also discusses optimization techniques that have been applied to congestion management problems, such as genetic algorithms and particle swarm optimization. The document provides examples of research on applying these different congestion management methods and optimization techniques to address transmission network congestion issues in deregulated power systems.
This document provides an agenda for a telecom pricing workshop taking place from April 11-12, 2011 in London. The workshop will focus on strategies for developing successful pricing models for fixed, mobile, and data services. Topics will include segmentation strategies, tiered pricing, leveraging pricing to increase profits from data, and case studies from operators that have implemented innovative pricing approaches. Presenters will discuss pricing strategies at Orange, T-Mobile, KPN, and Makedonski Telekom.
Unified Energy provides energy procurement and management services including commodity procurement, demand response, and data management. It has over 150 years of combined experience in energy markets. Unified Energy was acquired by Tullett Prebon, the #1 ranked interdealer broker of commodities. Tullett Prebon's acquisition of Unified Energy provides access to its international capabilities and over $1 billion in annual revenue. Unified Energy offers customers services like full bill auditing, benchmarking, automated data reporting and tracking of energy budgets to help lower costs.
Universal service obligation and loyalty effectsMichal
In network industries, a Universal Service Obligation (USO) is often seen as a burden
on an incumbent, which requires compensation for the net cost of such service
provision. This paper estimates the effects of consumer loyalty as an intangible
benefit of USO in the postal sector. In doing so, the agent-based modelling (ABM)
approach is applied, which makes it possible to model the behaviour of boundedly
rational consumers and is thus particularly appropriate for taking into account
intangibles considerations. The analysis shows that loyalty is crucial to whether
the USO uniform pricing constraint results in loss-making or profitability. Under
certain conditions and in the presence of a loyalty parameter, uniform pricing gives
a USO provider an advantage, when the size of the rural area is sufficiently big
and a disadvantage, if its size is too small. This finding is counterintuitive as USO
providers in countries with sparsely populated areas are typically expected to incur
a significant net cost of USO.
Tony lavender - Plum Consulting - incorporating social value into spectrum al...techUK
Incorporating Social Value into Spectrum Allocation Decisions
Presentation to UK Spectrum Policy Forum - Cluster 3: Economic and Social Value of Spectrum
29 March 2018
Tony Lavender
More information on the UK Spectrum Policy Forum can be found here: https://www.techuk.org/about/uk-spectrum-policy-forum
Virgin Mobile is considering entering the cellular industry by targeting 14-24 year olds. This is an underserved segment that is dissatisfied with major carriers' pricing structures involving contracts, hidden fees, and pricing buckets. Virgin's approach would eliminate these issues in favor of prepaid plans with transparent per-minute pricing and value-added services. While appealing to customers, this risks increased churn and costs. However, Virgin could offset these through lower acquisition costs, a simplified pricing structure, and developing a differentiated value proposition to attract and retain customers despite the lack of contracts. Financial projections show Virgin could achieve profitability with a per-minute price of 6.4 cents or higher.
Broadband providers in Harold's Cross, Dublin include Eircom, UPC, Imagine, and Digiweb. Eircom offers the Eircom Business Starter package for €40/month, with speeds up to 8Mb download, 1.1Mb upload, unlimited data, and free WiFi access. UPC offers basic packages for small/medium businesses from €49/month, with speeds up to 10Mb download and 1Mb upload. Imagine offers the Breeze package for €45.27/month with unlimited data and speeds up to 4Mb. Digiweb offers metro broadband from €35.95/month with speeds up to 4Mb download and 1Mb upload. The document analyzes
Philip bates - Analysys Mason - spectrum policy forum 29 march 2018techUK
Overview of Analysys Mason 2012 study on the value of spectrum to the UK economy
Presentation to UK Spectrum Policy Forum - Cluster 3: Economic and Social Value of Spectrum
29 March 2018
Philip Bates
More information on the UK Spectrum Policy Forum can be found here: https://www.techuk.org/about/uk-spectrum-policy-forum
This document provides an overview of Asset Management Services (AMS) at Network Rail. AMS sets asset policies, provides assurance services, and supports customers to optimize rail infrastructure performance. It consists of several functions that provide services like route support, engineering advice, and energy/telecoms networks. AMS aims to improve efficiency through its transformation program. It outlines the visions and purposes of the different AMS functions and describes plans to reduce costs while maintaining service quality through the control period.
Ericsson White Paper - Minimizing carbon intensity in telecom networks using TCO techniques
A methodology for optimizing energy efficiency in networks based on the total cost of ownership approach.
This presentation by Frank WOLAK, Professor of Economics at Stanford University and Director of the Program on Energy and Sustainable Development was made during the discussion “Radical innovation in the electricity sector” held at the 63rd meeting of the OECD Working Party No. 2 on Competition and Regulation on 19 June 2017. More papers and presentations on the topic can be found out at oe.cd/1ZW.
This presentation by the Netherlands Consumers and Markets Authority was made during the “Radical innovation in the electricity sector” held at the 63rd meeting of the OECD Working Party No. 2 on Competition and Regulation on 19 June 2017. More papers and presentations on the topic can be found out at oe.cd/1ZW.
Electricity Markets Regulation - Lesson 8 - PricingLeonardo ENERGY
Once the revenue requirements are established they should be converted into tariff systems. This session explains the major economic principles of electricity pricing and the general pricing models using average and marginal costs. Moreover the session explores the major pricing models for the electricity activities including: generation, transmission, distribution and retail activities.
* Pricing principles : economic efficiency - cost recovery
* General pricing models : average cost pricing - marginal cost pricing
* Cost allocation issue
* Pricing for different activities in the electricity industry : generation pricing - transmission pricing - distribution pricing - retail supply pricing
The document discusses the economic impact of over-the-top (OTT) services. It provides definitions of OTT services as online services that compete with traditional telecommunications or broadcasting services. The draft report studies the opportunities and impacts of OTT services, including benefits to consumers but also challenges like potential lost revenues for service providers. It also examines the policy challenges raised by OTT services and different policy approaches taken by countries around the world.
Peak-load pricing involves charging lower prices for goods and services during off-peak times when demand is lower, in order to encourage consumers to shift some consumption to those off-peak times. This makes more efficient use of production capacity and reduces costs for producers. Examples include phone companies charging less for calls at night and on weekends, and airlines charging higher fares during popular travel seasons. The strategy shifts some demand away from peak times and leads to more efficient capacity utilization.
Natural monopolies arise due to high startup costs and significant economies of scale that allow only one efficient firm. They are often regulated to protect consumers. Examples include utilities, internet providers, and railroads. A natural monopoly exists naturally due to market forces, unlike regular monopolies formed by eliminating competition. Natural monopolies have high fixed costs and barriers to entry that prevent competition. They maximize profits by pricing in the elastic portion of demand rather than the inelastic portion where price changes have little effect on revenue.
The document discusses electric utility rate structures and how customers can identify potential ways to reduce energy costs. It provides background on utility costs and how rates are determined based on three main cost components: customer costs, energy/commodity costs, and demand costs. The summary then describes the basic rate structure most utilities follow, including customer charges, energy charges, and demand charges. It also discusses some common rate variations utilities use like seasonal pricing, block pricing, riders, and discounts.
The document discusses challenges in determining electricity distribution tariffs in India as the electricity system transitions to incorporate more distributed and renewable resources. It outlines two main tasks for regulators: 1) determining how much revenue utilities can earn, and 2) designing customer rate structures. Key challenges include estimating future distribution costs given uncertainty over distributed energy adoption and ensuring tariffs accurately reflect costs while incentivizing efficiency. The document argues for establishing comprehensive, cost-reflective electricity prices and charges as the system's "nervous system" to efficiently integrate centralized and distributed resources.
This document summarizes the views of a utility manager on integrating renewable energy resources like wind and solar power. The manager expresses concerns that (1) adding more intermittent renewables could exacerbate technical grid issues before they are fully resolved, (2) the high costs of renewables may not create enough permanent jobs to justify the rate increases borne by customers, and (3) public policy priorities should not ignore technical grid constraints or total cost impacts to customers.
This presentation by New Zealand Electricity Authority was made during the “Radical innovation in the electricity sector” held at the 63rd meeting of the OECD Working Party No. 2 on Competition and Regulation on 19 June 2017. More papers and presentations on the topic can be found out at oe.cd/1ZW.
Overview of rate setting & their role in smart gridbobprocter
This document discusses rate setting and the role of rates in the smart grid from an 80,000 foot view. It provides an overview of economic regulation of utilities, the goal of ensuring fair rates that approximate competitive results. It outlines the 5 steps of rate setting: determining prudent costs, revenue requirements, cost allocation, rate design, and setting rates. Rate design options including time-based rates are discussed, and why rate design is considered an element of the smart grid to better link costs and rates to manage costs and reduce peak usage.
Navigating the Internet Protocol Transition
National Association of Telecommunications Officers and Advisors (NATOA) Annual Conference
What are the implications of the IP transition for local franchising, fees, universal service, consumer protection and related areas.
The document discusses principles for tariff design in India, focusing on time-of-day (ToD) tariffs. It outlines key tariff principles like economic efficiency, protection of consumers, and sustainability. It also discusses the evolution of tariff regulation in India and the multi-year tariff framework. The document provides details on categorizing costs as controllable and uncontrollable in tariff setting. It explains the methodology for determining ToD tariffs, including identifying peak/off-peak hours and assessing the costs and benefits of shifting demand between time periods.
Setting prices for services can be complicated due to factors like higher fixed costs, variability in inputs and outputs, and difficulty evaluating intangible services. Effective pricing requires understanding customer value, costs, and competition. Revenue management techniques allow companies to optimize prices based on demand forecasts and capacity constraints by setting different price levels (buckets) segmented by product features and customer characteristics. Rate fences help restrict lower prices to customers who accept certain use restrictions. Understanding customer price elasticity also helps determine optimal pricing strategies. The goal is to maximize profits through capturing customer value while efficiently allocating capacity.
This document discusses the development of local electricity markets to encourage distributed energy resources and active participation of local energy producers and consumers (prosumers). It outlines the EMPOWER project's approach to designing a local market place that uses innovative business models and operational methods. The market aims to maximize local energy production and consumption over time, while exploiting flexibility options to balance supply and demand locally when mismatches occur. It discusses key considerations like being user-centric, competitive, and economically sustainable. Early field results from one pilot site show increased local energy capacity and DER sales.
"Next Gen Grid Tech Commercialization" for Duke University Energy Initiative ...Josh Gould
Guest lecture on "Next Gen Grid Tech Commercialization" for Duke University Energy Initiative graduate level course entitled: “Emerging Energy Technologies – From Lab to Market.” (790-01)
Linking wholesale and retail market – through smart gridFingrid Oyj
The document discusses linking wholesale and retail electricity markets through a smart grid to harness consumer flexibility. It notes that consumer participation is needed to support grid security but their role is unclear and infrastructure like smart meters is not suitable for real-time market needs. A "Controlhub" is proposed as a centralized system for real-time data exchange between distributed flexibility operators, markets, grid operators, and consumers to facilitate consumer participation and development of new real-time businesses. Stakeholders including grid operators, suppliers, regulators, and government need to clarify roles and cooperate to develop the necessary market signals, data infrastructure, and legislation to transition consumers to active participants in the energy system through a smart grid.
Garments ERP Software in Bangladesh _ Pridesys IT Ltd.pdfPridesys IT Ltd.
Pridesys Garments ERP is one of the leading ERP solution provider, especially for Garments industries which is integrated with
different modules that cover all the aspects of your Garments Business. This solution supports multi-currency and multi-location
based operations. It aims at keeping track of all the activities including receiving an order from buyer, costing of order, resource
planning, procurement of raw materials, production management, inventory management, import-export process, order
reconciliation process etc. It’s also integrated with other modules of Pridesys ERP including finance, accounts, HR, supply-chain etc.
With this automated solution you can easily track your business activities and entire operations of your garments manufacturing
proces
Digital Marketing with a Focus on Sustainabilitysssourabhsharma
Digital Marketing best practices including influencer marketing, content creators, and omnichannel marketing for Sustainable Brands at the Sustainable Cosmetics Summit 2024 in New York
Best practices for project execution and deliveryCLIVE MINCHIN
A select set of project management best practices to keep your project on-track, on-cost and aligned to scope. Many firms have don't have the necessary skills, diligence, methods and oversight of their projects; this leads to slippage, higher costs and longer timeframes. Often firms have a history of projects that simply failed to move the needle. These best practices will help your firm avoid these pitfalls but they require fortitude to apply.
Unveiling the Dynamic Personalities, Key Dates, and Horoscope Insights: Gemin...my Pandit
Explore the fascinating world of the Gemini Zodiac Sign. Discover the unique personality traits, key dates, and horoscope insights of Gemini individuals. Learn how their sociable, communicative nature and boundless curiosity make them the dynamic explorers of the zodiac. Dive into the duality of the Gemini sign and understand their intellectual and adventurous spirit.
Part 2 Deep Dive: Navigating the 2024 Slowdownjeffkluth1
Introduction
The global retail industry has weathered numerous storms, with the financial crisis of 2008 serving as a poignant reminder of the sector's resilience and adaptability. However, as we navigate the complex landscape of 2024, retailers face a unique set of challenges that demand innovative strategies and a fundamental shift in mindset. This white paper contrasts the impact of the 2008 recession on the retail sector with the current headwinds retailers are grappling with, while offering a comprehensive roadmap for success in this new paradigm.
The Most Inspiring Entrepreneurs to Follow in 2024.pdfthesiliconleaders
In a world where the potential of youth innovation remains vastly untouched, there emerges a guiding light in the form of Norm Goldstein, the Founder and CEO of EduNetwork Partners. His dedication to this cause has earned him recognition as a Congressional Leadership Award recipient.
Cover Story - China's Investment Leader - Dr. Alyce SUmsthrill
In World Expo 2010 Shanghai – the most visited Expo in the World History
https://www.britannica.com/event/Expo-Shanghai-2010
China’s official organizer of the Expo, CCPIT (China Council for the Promotion of International Trade https://en.ccpit.org/) has chosen Dr. Alyce Su as the Cover Person with Cover Story, in the Expo’s official magazine distributed throughout the Expo, showcasing China’s New Generation of Leaders to the World.
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1. Costs and Prices in a Modern
Telecommunications Market
D. Mark Kennet, Ph.D.
for
Public Services Regulatory Commission of Armenia
2. Network Industries
• Distinguish between industries that contain network
infrastructure and economic networks
• All public service industries have network
infrastructure
– Electricity
– Water
– Gas
– Telecom
• But of these, only telecom is a true network industry
3. What is a network industry?
• An economic network is an industry in which the
addition of a client brings both private (to the client)
and public (to the other clients) benefits
• Thus, demand for the service provided by the
network depends on the number of other clients as
well as the intrinsic value of the service
• A telephone network of one client is useless; the
value of the network increases to existing clients
whenever a new client joins
4. The presence of these network effects
influences public policy
• Two major policy implications:
– Universal service
– Interconnection requirement
• Universal service is justified by the public benefit of
increasing the client base
• Interconnection is essentially the same argument –
interconnecting networks provide their respective
clients a much larger network than they had without
interconnecting
5. Regulatory policy must take network
effects into account
• Traditional regulation attempts to assign costs to
services and then set tariffs to costs, which include a
“reasonable” return
• This approach may or may not be appropriate in the
presence of network effects together with
competition, potential or real
• The structure of prices may be as important as the
level; that is, a wider variety of pricing plans may
prove necessary than a simple two-part tariff (rental
plus usage)
6. Relevant characteristics of telecom
network costs
• High proportion of fixed costs
– In fact, the network is essentially 100% fixed costs relative
to usage
• Assignment of costs to subscriber lines and usage is
essentially arbitrary and depends on accounting rules
• An economically ‘efficient’ tariff would be a simple
flat monthly fee
• Demand considerations generally make the efficient
tariff unsuitable, at least as a single-price option
8. Total cost, fixed cost, variable cost
• Total cost is simply the total cost of the
telephone network capable of providing the
services of interest
• Fixed cost is that cost that does not vary with
the amount of service
• Variable cost is that part of cost that varies
with output
• Mathematically: TC = FC + VC
9. Average cost, marginal cost,
incremental cost
• Average cost (AC) is just total cost divided by output
– Not particularly helpful in the case of telecom, since telecoms produce
multiple products
– May serve as a reference point for some analyses
• Marginal cost (MC) is the cost of producing an additional unit
of output (e.g., the cost of an additional minute of
use, line, etc.)
– Many telecom situations where MC = 0
• Incremental cost (IC) is very similar to MC, except that it is
often used to describe a change in the number of services
offered, as in Total Service Long Run Incremental Cost
(TSLRIC):
TSLRIC(i) = (TC(I,i) – TC(I,0)/i
10. Standalone cost
• Standalone cost is that cost which would be incurred
if only the product (or group of products) of interest
were being produced (without the others)
• This concept is mostly used as a reference point: If a
price charged for a service is greater than its
standalone cost, then entry into that market is likely
• Example: international long distance services, which
is why most countries have liberalized this market
11. Evaluating cost concepts in
telecommunications
• Fixed costs: A very high percentage of total
costs are fixed in telecom
• Variable costs: There is no variable cost for
usage (outside the peak hour), and only a
small variable cost for a new access line
• Marginal costs: Similar to variable costs
• Incremental costs: Significant, but still very
small relative to total costs
12. Aside on traffic-sensitive (TS) and non-
traffic-sensitive (NTS) costs
• An approximation to measuring long-run incremental cost of
traffic is to separate costs into TS and NTS
• TS costs could be correctly defined as those costs that change
as peak busy-hour volume changes (capacity costs)
• NTS costs could be correctly defined as anything else
• Unfortunately, standard practice does not accord with this
common-sense approach:
– NTS costs are defined as those costs that can be directly attributed to
a subscriber line
– TS costs are anything else
– This approach represents an effort to load all costs to usage, which
may be politically popular but does not accord with economic
efficiency
13. Comparing telecom costs to those of
other infrastructure industries
• All infrastructure (“network”) industries have
high fixed costs
• But only telecom has zero variable costs for
many of its outputs
• Other infrastructure industries have significant
costs that vary with usage – e.g., electricity,
gas, water, railroads
14. Tariffs and prices
• Economics teaches us that in a competitive market, price of a
good or service will be driven to marginal (or incremental)
cost
• The opposite of pure competition is pure monopoly. In this
case, price is determined by the demand for the good or
service, and output is determined at the profit maximizing
point for the monopolist
• Monopoly prices are always higher, and outputs always lower,
than the competitive outcome
• This result, for many people, justifies the regulation of
monopoly: Make prices lower, and output higher
15. Problems with this approach
• Regulation is costly
• The efficient price is when price is set to MC,
but in telecom, MC is ALWAYS less than AC, so
firm will not make money
• There is no theory that tells us the best way to
make up the difference between MC and AC
• In telecom, the notion that there is even a
monopoly is doubtful
16. Is telecom a monopoly?
• If we consider only fixed voice services, the answer is
yes
• However, studies in some countries suggest that in
some populations, wireless service is substituting for
fixed service, which eliminates the notion of fixed as
a monopoly
• The monopoly power that does exist is limited and is
a result of interconnection policies and control of
telephone numbers
17. Interconnection prices and monopoly
power
• Every telephone company is a monopoly for
terminating traffic
• Each company can use interconnection prices
to partially control the market by making it
more costly for rivals to complete calls
• Thus, interconnection policy is key in any
regulation scheme
18. Number portability
• Once a client – especially a commercial client
– has chosen a number, he does not want to
change it
• That gives the company that controls that
number some monopoly power over that user
• Number portability is a regulation that
attempts to reduce that power
19. Improving telecom performance
without regulating prices
• Because regulation is costly, it may be
desirable to at least consider how to mitigate
monopolistic tendencies without it
• There are several schemes that reduce the
amount of price regulation
• All of them depend on the use of price
discrimination
20. Uniform vs. nonuniform prices
• Models we have considered till now have all involved
one price
• However, firms can also engage in nonuniform
pricing
• Nonuniform prices can arise in either competitive or
noncompetitive market
– Competitive example: quantity discounts – it costs less to
sell large quantity
– Noncompetitive example: two-part tariffs for wireless
operators
21. Discriminatory prices
• Vary with customer and/or with quantity
purchased
• Not cost-based
• Firm must have some market power, or prices
will be driven to cost
• Is market power sufficient? I.e., can any
monopoly price discriminate?
22. Market power and price
discrimination
• Market power is not sufficient
• Suppose monopoly tries to price discriminate. Then
– It will try to sell to each individual customer on demand
curve, but
– Customers on low end of demand curve will attempt to
resell to customers on high end, reducing monopoly profit
• Firm must be able to eliminate resale in order to
price discriminate
23. Resale
• Resale won’t occur when the costs exceed the
benefits
• Some goods can’t be resold – e.g., a filling in my
tooth
• In other cases transaction costs may be too high –
e.g., perishable goods, extra taxes, extra shipping
costs
• A firm wishing to price discriminate will try to find
ways to raise the cost of resale
25. Bundling
• Basic idea: goods that can be resold easily are
bundled with goods that cannot
• Examples
– Warranties/product support bundled with product
– Restaurants bundle atmosphere with food service
26. Adulteration
• Basic idea: Render commodity unfit for resale
• Examples
– Additive to rubbing alcohol makes it undrinkable
– No.2 heating oil is less filtered than diesel fuel, so it can’t
be used as transport fuel
– Telco uses same facility to deliver both high-value data
services and low-value emergency services, rendering
high-value services not resellable for other purposes
27. Vertical integration
• Basic idea: Control downstream suppliers as
well as current market
• Example
– Telco has local monopoly on wireline access
– It wants to sell at low price to LD and analog
wireless supplier, but at high price to digital
wireless
– Solution: Buy all three downstream firms
28. How price discrimination raises
profit
• Price discrimination enables producer to earn
some or all of consumer surplus
• Firm is able to charge high prices to high-
demand customers, low prices to low-demand
customers
30. Types of price discrimination
• First degree: Perfect price discrimination; firm
captures all consumer surplus
• Second degree: Average price paid varies with
quantity purchased
• Third degree: Price varies by customer type
31. First degree price discrimination
• Example: goods sold at auction
• Another example: housing market
• An interesting note: Markets under perfect
price discrimination have the same welfare
properties as pure competition and the
allocation of resources is Pareto optimal
32. Second degree price discrimination
• Example: quantity discounts, declining block
rates
• Virtually all markets have second degree price
discrimination to some extent
33. Third degree price discrimination
• Example: airline tickets
• Another example: wireless plans
• A firm must find a way to allow customers to sort
themselves out into sub-markets in order for this to
work
– Airlines accomplish this by requiring advance purchase for
cheap tickets
– Wireless customers self-select based on expected usage
34. Nonlinear pricing
• Basically, this is a form of second degree pd
• Generally takes the form of a two-part tariff
• Other approaches include multi-part tariff,
declining block rate
35. Nonlinear pricing, graphically
expenditure
Total expenditure
(slope = marginal
Expenditure)
Average expenditure
quantity
36. Contrasting 2nd and 3rd degree pd
• For successful 3rd degree pd, the producer must
– Be able to identify different demands
– Have information on those demands
– Prevent resale
• For successful 2nd degree pd, the producer must
– Prevent resale
– Keep down the number of small purchasers
– But doesn’t have to identify different groups
37. Tie-ins as pd
• A form of bundling where two separable
commodities sold together
– E.g., radio with batteries
– Or shoes with shoelaces
• Minimum price for goods sold separately
constrained by minimum demand, but by
summed minimum demand when sold
together
38. Tie-in example
Consumer 1 Consumer 2
Value of A $8 $9
Value of B $3 $2
39. Tie-in example, continued
• If firm sold products separately, and wanted to
max profits, it would charge $8 for A and $2
for B, for a total profit of $20
• If firm bundles the products, it can charge $11
for the A-B bundle, and still sell to both
customers for total profit of $22
40. Caveats
• Note that if both customers valued B at $3, there is
no difference between the tie-in profit max and the
separated sale profit max
• In general, customers must be heterogeneous in
taste over all products for tie-ins to work
• In general, there must be monopoly power in both
markets for tie-ins to work
41. Simplest approach
• Accept that while competition in the industry
may not be perfect, it does exist between
wireless and wireline operators
• Regulation is thus unnecessary; operators will
offer a variety of pricing plans in order to
attract clients
• These plans will lead to a desirable outcome
because of price discrimination
42. Caveats for simple approach
• Approach may not work if one operator has
already taken both fixed and wireless
operations
• In general, very strong competition policy at
the very least would be required to have any
hope of making this work
• This approach would still require a careful
regulation of interconnection
43. A less simple – but still light-handed –
approach
• In this approach, the regulated firm is free to
set prices, but subject to a cap placed on the
pricing of a bundle of services
• The cap is adjusted downward according to a
formula that depends on productivity
• The approach is designed to elicit “optimal”
price discrimination since the firm can adjust
prices to reflect varying demand elasticities
44. Conclusion
• Telecom regulation is complex
• Telecom shares some characteristics of other
infrastructure industries, but there are
important differences
• Regulators should strive to interfere as little as
possible but work toward improving industry
performance