In the post-war period, the electricity industry in Japan has been regulated by governmental law, and there has been a dominant monopolized system in this field. In 1990's, various types of companies is entering the energy market, which is realizing more competitive energy market. However, as energy market is still monopolized strongly, the introduction of cost-effective incentive in this field is becoming more important.
The aim of this study is to discuss what type of regulation method will be effective for price regulation. Some incentive-regulation systems are examined in this paper, which has clarified that deregulation is more effective compared with any types of incentive regulations. Although the deregulation is expected to bring cost reduction, we should consider a stable supply of energy as well. As a conclusion, the deregulation is the most important approach as a cost-effective incentive. As an example, the introduction of the PBR system is an important trial to correct the ROR system.
The further extension of this study is to examine the effectiveness of both market regulation and incentive regulation approaches.