Models of Regulation as Tool for Risk Elimination in Network Industry Markets in Slovakia

University of Economics Bratislava, Department of Business Economics, Dolnozemská cesta 1/b, 852 35 Bratislava, Slovakia

^* Corresponding author: eleonora.fendekova@euba.sk
^† Under network industries in terms of Slovak Republic in accordance with Act No. 276/2001 Coll. on Regulation in Network Industries we understand the following industries 1. generation, transmission, distribution and supply of electricity and the related services 2. production, transport, distribution, storage and supply of gas and the services related to these activities 3. production and distribution of heat 4. water management and mass conduct of sewage by a public sewage system

Abstract

In Slovakia in the recent period of time we have seen an intensive discussion concerning the effectiveness of the price regulation methods in Network Industries and the objectivity and the labour social effectiveness of The Regulatory Office for Network Industries, as well. It is understandable as network industries in fact ensure the production and distribution of energy sources which play a key role in an effective operation of the developed economies. The discussions are usually focused on the question of a reasonable profit of the network industries companies and on the other hand on the question of prices which are determined by the reasonable and generally acceptable costs of their production. In relation with objectification and increases in nationwide operation effectiveness of natural monopolies in network industries^† on the market the role of regulation mechanisms is increasing. Its aim is the closest approximation of proportions between price and level of network industry products supply to the situation which would occur in the conditions of market competition. In the paper we will analyze analytical scheme for monopoly price regulation – rate of return regulation.