Research Update

February 2015

Tap into our research:
Regulatory Impact Analysis: PURC is helping policymakers and infrastructure executives throughout the world stay on the cutting-edge of knowledge while the regulatory landscape continues to change.

The listing below illustrates the range of topics in PURC’s working papers that assist regulatory professionals assess the impacts of their regulatory and policy decisions.


Do demand-side management programs save energy?

This paper estimates the energy savings effect of a Demand-Side Management program, specifically Gainesville Regional Utility’s (GRU) high-efficiency central Air Conditioner (AC) rebate program. In this program GRU offers financial incentives to its customers to replace their old, low-efficiency AC units with high-efficiency models. The research finds substantial annual energy savings, with impacts on the summer-peak being the most significant. There was no statistically significant rebound effect.


New Tools for Regulators in Addressing the Impact of Renewable Energy and Energy Efficiency Policy

The role of renewable energy sources and energy efficiency is changing in the global energy marketplace. Regulators and operators around the world are facing questions regarding the costs and benefits of implementing policies related to these resources in heterogeneous electricity systems. PURC is expanding the Body of Knowledge in Infrastructure Regulation with responses frequently asked questions on renewable energy and energy efficiency policy. In this paper, we explain the value of this knowledge in implementing public policy, and the evaluation of these resources from the perspective of cost, reliability of service, and energy security. We find that a clear consistent regulatory framework where the roles and responsibilities of market participants are defined offers the best chance of the success of these policies.


Are energy efficiency programs effective?

This research attempts to answer that question for Florida, which has one of the oldest energy efficiency statutes in the United States. The research finds that the policies appear to serve the public interest, but found that available data were insufficient to reach a strong conclusion. Nevertheless, the available information indicates that Florida has cost-effectively reduced energy demand, that energy efficiency programs compensate inefficient price signals to consumers, and that stakeholders were generally pleased with the Florida’s programs, although some stakeholders believed that more could be done. The results of Florida’s policies compare favorably with those of other states.


Florida’s Storm Hardening Effort: A New Paradigm for State Utility Regulators

Following several hurricanes in 2004 and 2005, the Florida Public Service Commission initiated a multiyear process that emphasized both collaboration and research and resulted in expanded requirements for utility accountability. This collaborative effort is essential to gain perspective on the broader issues surrounding changes in utility infrastructure and to mitigate the effects of information asymmetries regarding the costs and effectiveness of storm hardening.


How do regulatory policies affect the diffusion of broadband?

This research analyzes the factors that influence the diffusion of fixed and mobile broadband. For fixed broadband diffusion, it finds that local loop unbundling, income, population density, education, and price are significant factors of fixed broadband diffusion. For mobile broadband, multiple standardization policy and population density are the main factors of the initial diffusion of mobile broadband services. The results of the mobile broadband model also suggest that in many OECD countries, mobile broadband service is a complement to fixed broadband service in the initial deployment of broadband.


Evidence-Driven Utility Policy with Regard to Storm Hardening Activities: A Model for the Cost-Benefit Analysis of Underground Electric Distribution Lines

In the aftermath of any storm event, there are inevitable questions. Customers ask why damage occurred and what, if anything, could have been done to prevent it. Customers and utilities seek ways to mitigate the effects of storm events in the future. Often, the relative costs and benefits of these mitigation strategies aren’t clear, and that can prevent utilities or regulators from enacting public policies that could benefit customers and utilities. The application of evidence-based utility policy and the quantification of these benefits can be essential to improving utility service and reducing costs for the service provider and the customer alike.


Renewable Portfolio Standards and Cost-Effective Energy Efficiency Investment

Renewable portfolio standards (RPS) and mandates to invest in cost-effective energy efficiency (EE) are increasingly popular policy tools to combat climate change and dependence on fossil fuels. These supply-side and demand-side policies, however, are often uncoordinated. Using California as a case in point, this paper demonstrates that states could improve resource allocation if these two policies were coordinated by incorporating renewable energy procurement cost into the cost-effectiveness determination for EE investment. In particular, if renewable energy is relatively expensive when compared to conventional energy, increasing the RPS target raises the cost-effective level of energy efficiency investment.


Do universal service programs give customers what they want?

This paper uses new survey data to study low-income households‟ telecommunications choices in the United States and to consider the degree to which such households‟ preferences are addressed by existing universal service programs. The research shows that households that choose only one form of telecommunications increasingly are choosing a mobile phone, while those that choose to have both modes of communications are shifting their usage towards their mobile phones. These trends are less pronounced among higher-income households. One implication for universal service policy is that traditional subsidies for landline phones are increasingly ineffective in reaching low-income households such subsidies are designed to help; subsidies for acquiring and using mobile phone services might be more beneficial to low-income households than traditional subsidies for landline phones.


Would a state-owned broadband network be cost effective?

Probably not, according to this study. Examining the results of empirical studies on the differences in costs between privately owned and publically owned utilities, this research estimates what it might cost the State of Florida to build its own fiber optic network instead of purchasing service from private carriers. The problems of political interference, principal-agent problems and opportunism for a government-owned network tend to drive up costs.


Wind generation can reduce wholesale electricity market prices by displacing conventional generation, but how large is the effect in an electricity market dominated by hydroelectric generation?

This research examines wholesale electricity prices in the Pacific Northwest region of the United States and finds that increased wind generation reduces wholesale market prices by a small, but statistically-significant, amount. While a hydro-rich system can integrate wind generation at a lower cost than a thermal-dominated region, the direct economic benefits to end-users from greater investment in wind power may be negligible.


Modeling Electric Congestion Charges in a Composed Error Framework

Congestion charges, the opportunity cost of transmission in a regional electric market, present a unique modeling challenge. Their properties render many popular methods used to model energy prices ineffective. In this paper, we present a model utilizing the composed error framework to capture many of the unique properties of congestion charges. We then demonstrate how this model can be used to assess the risk associated with a financial instrument derived from congestion charges and compare our approach with an assessment that utilizes the bootstrap method.


Sensitivity Analysis of Efficiency Rankings to Distributional Assumptions: Applications to Japanese Water Utilities

This technical paper examines the robustness of efficiency score rankings across four distributional assumptions for trans-log stochastic production-frontier models, using data from 1,221 Japanese water utilities (for 2004 and 2005). It explains how to address some statistical modeling issues: Standard assumptions about the distribution of error terms yield relatively consistent performance rankings across utilities. However, when a more general model is estimated, efficiency rankings are quite sensitive to heteroscedasticity correction schemes.


For more information on our regulatory impact analysis related research or trainings, please contact us via email (purcinfo at warrington.ufl.edu).

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