The Political Economy of Regulating Retail Electricity Price Caps in a Rising Cost Environment

Australia's competitive energy market experienced sustained network tariff increases at multiples of the inflation rate from 2008 to 2012. This became a toxic issue for policymakers and in one region resulted in regulated tariffs in the competitive market being set below long-run costs. Doing so risks damaging competition, investment flows, and following any price correction, a subsequent media assault.