Regulation of an electric power transmission company

Designing regulatory contracts for the operators of power transmission netw orks has become a critical policy issue in the United States. In this paper , a regulatory contract is proposed that induces network operators to optim ally expand the grid, which is crucial for the emergence of efficient whole sale power markets, while also satisfying the other traditional regulatory objectives. The proposed mechanism is readily implementable, since it build s on a contract currently in place in England and Wales.