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Economic Affairs

Freight Rail Costing and Regulation: The Uniform Rail Costing System

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Railroad regulation in the post-Staggers Act regime compares the revenues earned to a measure of the “variable cost” of the shipment. While revenues are readily observed, the “variable cost” is calculated using the “Uniform Rail Costing System” (URCS) that was developed by the Interstate Commerce Commission. We characterize the properties of the URCS rail costing methodology and its role in rate regulation, and we assess whether it produces an economically valid estimate of the cost caused by a rail shipment. We find that the URCS methodology is an accounting cost allocation procedure that does not recover an estimate of the cost of a rail shipment that a rational railroad operator would use to make pricing or operating decisions. We then explain why in the post-Staggers Act regime, even if an economic meaningful shipment cost measure were available, this information would not come any closer to solving the problem of determining what is an unreasonable price for a railroad to charge. We conclude by arguing that the use of the URCS methodology should be abandoned in railroad rate reasonableness regulation and replaced with a price benchmarking approach.

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Journal Articles
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Review of Industrial Organization
Authors
Wesley W. Wilson
Frank Wolak
Frank Wolak
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Solar lighting and charging research receives FSI funding

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PESD's new research on "Solar Lighting and Phone Charging in East Africa: Understanding Adoption, Business Model, and Development Outcomes" was awarded funding from the Freeman Spogli Institute's Global Underdevelopment Action Fund.

1.5 billion people worldwide lack access to electricity, severely impeding economic development and income generating activities.  The electricity access problem is most severe in sub-Saharan Africa, where it affects 700 million inhabitants. 

Rapid adoption of mobile phones has created even stronger incentives for low-income households to obtain the electricity needed to charge phones.  The emergence of businesses providing solar lighting and charging solutions could help satisfy that need. 

PESD’s research will study the factors that drive adoption of these solar lighting and charging technologies, the business models that are successful in delivering them on a commercial basis, and the development outcomes that derive from their use.

 

FSI’s venture fund was launched in the Summer of 2010 to help fund new research projects addressing global underdevelopment and poverty alleviation.  To date, the Action fund has contributed a total of $701,000 to these projects.

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Energy Working Group: Supply Function Equilibrium and its Policy Implications for Wholesale Electricity Markets

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PESD visiting scholar Pär Holmberg from the Research Institute of Industrial Economics (IFN), Stockholm led this Energy Working Group talk.

Holmberg discussed (1) the multi-unit auction used in wholesale electricity markets where producers sell their electricity to retailers and large consumers, (2) a theoretical model of producers' strategic bidding behavior and (3) how bids are influenced by contracts and the market design.

The presentation was based on his paper "The Supply Function Equilibrium and its Policy Implications for Wholesale Electricity Markets", which was co-authored with David Newbery (University of Cambridge, UK).

 

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Pär Holmberg is an Associate Professor in Economics and has a PhD in Electric Power Engineering. He is working at the Research Institute of Industrial Economics (IFN), Stockholm, and is an associate of the Electricity Policy Research Group, University of Cambridge. Pär's research focuses on wholesale electricity markets, especially strategic bidding behavior in electricity auctions.

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Pär Holmberg Speaker Research Institute of Industrial Economics (IFN), Stockholm
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Use of Improved Biomass Stoves in Karnataka and Maharashtra States, India: Understanding Factors Affecting Widespread Adoption

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Burning of biomass in traditional stoves is associated with a host of ills among an estimated 2.5 billion people around the world, even though cleaner and more efficient technologies exist that could mitigate the problems. This study examines what factors affect cooking mode choice and utilization, with the objective of developing an econometric model that is useful for efforts to encourage the adoption of improved biomass stoves. The project also seeks to offer insights on poorly understood processes of technology adoption among poor populations and to understand the magnitude of health, development and environmental benefits that might be achievable.

Walter P. Falcon Lounge

Mark C. Thurber

Program on Energy and Sustainable Development
616 Jane Stanford Way
Encina Hall East, Rm E412
Stanford, CA 94305

(650) 724-9709 (650) 724-1717
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PhD

Mark C. Thurber is Associate Director of the Program on Energy and Sustainable Development (PESD) at Stanford University, where he studies and teaches about energy and environmental markets and policy. Dr. Thurber has written and edited books and articles on topics including global fossil fuel markets, climate policy, integration of renewable energy into electricity markets, and provision of energy services to low-income populations.

Dr. Thurber co-edited and contributed to Oil and Governance: State-owned Enterprises and the World Energy Supply  (Cambridge University Press, 2012) and The Global Coal Market: Supplying the Major Fuel for Emerging Economies (Cambridge University Press, 2015). He is the author of Coal (Polity Press, 2019) about why coal has thus far remained the preeminent fuel for electricity generation around the world despite its negative impacts on local air quality and the global climate.

Dr. Thurber teaches a course on energy markets and policy at Stanford, in which he runs a game-based simulation of electricity, carbon, and renewable energy markets. With Dr. Frank Wolak, he also conducts game-based workshops for policymakers and regulators. These workshops explore timely policy topics including how to ensure resource adequacy in a world with very high shares of renewable energy generation.

Dr. Thurber has previous experience working in high-tech industry. From 2003-2005, he was an engineering manager at a plant in Guadalajara, México that manufactured hard disk drive heads. He holds a Ph.D. from Stanford University and a B.S.E. from Princeton University.

Associate Director for Research at PESD
Social Science Research Scholar
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Mark C. Thurber Research scholar, FSI/Program on Energy and Sustainable Development Speaker

Frank Wolak

Stanford University
Economics Department
579 Jane Stanford Way
Stanford, CA 94305-6072

(650) 724-1712 (650) 724-1717
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Senior Fellow at the Freeman Spogli Institute for International Studies
Holbrook Working Professor of Commodity Price Studies in Economics
Senior Fellow, by courtesy, at the Stanford Institute for Economic Policy Research
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MS, PhD

Frank A. Wolak is a Professor in the Department of Economics at Stanford University. His fields of specialization are Industrial Organization and Econometric Theory. His recent work studies methods for introducing competition into infrastructure industries -- telecommunications, electricity, water delivery and postal delivery services -- and on assessing the impacts of these competition policies on consumer and producer welfare. He is the Chairman of the Market Surveillance Committee of the California Independent System Operator for electricity supply industry in California. He is a visiting scholar at University of California Energy Institute and a Research Associate of the National Bureau of Economic Research (NBER).

Professor Wolak received his Ph.D. and M.S. from Harvard University and his B.A. from Rice University.

Director of the Program on Energy and Sustainable Development
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Frank Wolak Professor of economics; FSI senior fellow Speaker
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PESD Researcher Gang He Selected as Aspen Environment Forum Scholar

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Gang He joins others at the Aspen Environment Forum 2011 May 30 - June 2, 2011, in Aspen, Colorado. The Aspen Environment Forum Scholars Program provides opportunities for diverse, accomplished leaders in the field to attend the Aspen Environment Forum. Scholars are selected on the basis of their experience, achievements, and interest in energy and the environment, as well as their commitment and contributions to the field. Gang He's research focus has been on China's energy and climate policy, energy economics and energy modeling, renewable energy, and cleaner utilization of coal.
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