What Is a Utilization Fee?

The royalties can be understood as the form in which units in the public sector obtain their income through the sale of goods or services produced by them and exchanges for a fee. As long as goods or services can be sold, royalties can be a means for the public sector to earn income. ^[1]

In the early post-World War II period, the term was widely used in the United States, but as of now, no authoritative person abroad has made a precise definition of the term or pointed out its differences from similar terms.

Rosen (1985) defines a royalty as a price that is a standard for the charge of a commodity or service produced by a government. Some scholars seem to limit the term to paying for government-produced services.

The royalties can be understood as the form in which units in the public sector obtain their income through the sale of goods or services produced by them and exchanges for a fee. As long as goods or services can be sold, royalties can be a means for the public sector to earn income.

The characteristics of user fees are exactly the opposite of taxation. It is voluntary. Because most of the goods and services provided by government departments cannot be sold or are unsuitable for sale, the user fee is only an auxiliary means to obtain income. The role of collecting user fees is to raise some public revenue for the government. The following two points: one is to help promote the efficient use of public facilities provided by the government; the other is to help avoid the so-called "crowding" problem of public facilities. ^[1]

Just some

How much royalties should be collected and how they are collected is exactly the "public (enterprise) pricing" problem that has been studied in the western financial academia for the past two or three decades. From an economic efficiency perspective, user fees should reflect the marginal cost of services. With zero marginal costs, the problem is operation costs. This operating cost is either financed through general revenues that are usually raised in a distorted manner, or is solved through some suboptimal marginal cost pricing rules. If public pricing is used, there are two aspects involved, namely the level of pricing and the pricing system. . The level of pricing refers to how much the government provides for each unit of common supplies (charging). The pricing system refers to the structure of costs (the ratio of fixed and variable costs) and the structure of demand (domestic, corporate, and industrial), and Different types of demand such as small demand and large demand, demand of different loads such as peak load and off-peak load) Various pricing combinations considered. Such marginal cost pricing rules can be made in various ways: either by differentiating prices based on the relative elasticity of various needs (Rams pricing or average cost pricing), by differentiating prices based on relative capacity (peak load pricing), or by adopting Bipartite pricing (segmented pricing). Therefore, in the practice of various countries, public pricing methods generally include three types: average cost pricing, two-part pricing, and peak load pricing.

The average cost pricing method refers to the government adopting a pricing method that maximizes economic benefits as much as possible while maintaining the balance of corporate income and expenditure. From a theoretical perspective, marginal cost pricing is the most ideal pricing method, but it will make enterprises Incurred losses. In the long run, it is difficult for enterprises to provide enough goods to meet the social and public needs, because financial subsidies are also limited. Therefore, in the industry with decreasing costs, in order to keep the company in balance, public pricing or price control is higher than marginal cost pricing.

The two-part pricing method is a pricing system consisting of two elements: one is the "basic fee" that is paid monthly or annually regardless of the amount of use, and the other is the "specific fee" that is paid according to the amount of use. Therefore, the two-part pricing is a pricing system that combines both fixed and specific pricing, as well as a pricing system that reflects the cost structure. Because the "basic fee" in the two-part pricing method is a fixed fee charged regardless of the amount of use. Therefore, it contributes to the stability of corporate finance; due to the nature of the two-part pricing method, "maximizing economic benefits on the condition of balance of payments", almost all regulated industries (especially electricity, city gas, water, telephone, etc.) Natural monopoly industries) are generally using this pricing method.

Peak load pricing refers to setting different prices for demand at different times or periods. In the electric power, gas, self-sucking, telephone and other industries, according to the season, month, time zone peak and non-peak demand, systematically set different prices to balance the demand situation. Charges are highest when demand is at its highest peak, and lowest when it is at its lowest peak. ^[3]