Fairness, pricing, regulation: analysis of cost allocation policies in a public service electricity industry.

Summary In this work we propose an equity analysis of the tariff regulation and cost allocation policies of a multi-product electric firm (organized as a natural monopoly). The objective of this thesis is twofold. From a normative point of view, the aim is to show that the contemporary literature in the fields of public economics, industrial organization and regulation (traditionally focused on efficiency considerations) is capable of providing keys to analyze problems of moral philosophy. From a positive point of view, we try to argue that the criterion of fairness can be sufficiently operative to gauge pricing management practices in a particular industrial environment and to serve as a regulatory tool for an ethically minded supervisory authority. The work we present is organized in two parts. First, we propose an ethical and economic analysis of the concepts of equity, between allocative efficiency, productive efficiency and tariff practices of firms. We thus consider a particular conception of equity that can function in the regulation of a public service, and we evoke the ins and outs to which a theory of the equity of tariff practices can claim. In a second step, we try to contribute to an analysis of the conflicts of objectives between the regulator and the regulated firm, from a regulatory perspective of equity and cost allocation. Here, we first define an improved equity criterion from which we construct a measure. This measure becomes an instrument for the regulator. We then try to understand the issues at stake in the cost allocation and pricing policies of the firm that its use by a perfectly informed regulator facing information asymmetry problems suggests.