Revenue Cap Regulation

DEFINITION of 'Revenue Cap Regulation'

A form of economic regulation generally applied to utility companies. Revenue cap regulation seeks to limit the amount of total revenue received by a company operating which holds monopoly status in the industry. Like price cap regulation, revenue cap regulation is determined according to inflation, the Consumer Price Index (CPI) and the efficiency savings factor.

BREAKING DOWN 'Revenue Cap Regulation'

Revenue cap regulation stands in contrast to price cap regulation, which seeks to control the prices set by produces. It also differs from rate of return regulation, which seeks to control the rate of return earned by companies. Revenue cap regulation is designed to incentify regulated companies to increase their efficiency.