Competition and the Reform of Incentive Schemes in the Regulated Electricity Enterprise

In the incentive regulation to the transmission and distribution enterprises, the application of performance based yardstick competition introduces competition to this natural monopoly field. Due to the existence of competition regulator is able to observe some information which are related to the cost style of enterprise to a certain extend. Because those information reduce the asymmetry of information between regulator and enterprises, it make regulator to change his incentive regulation and affect the power of incentives to the enterprises. In this paper, we get some conclusion as fellow. The information´s effect to the power of incentives may be positive or negative. If the equality of information is good enough, the power of incentives to the active enterprises increases, if not, the power of incentives is ambiguous, even decreases. For the regulator, carrying out yardstick competition is one of good ways to gain useful information and then can help regulator implement reform in regulated sector.