The British utility regulation model: Its recent history and future prospects

British utility regulation: Consolidation, existential angst, or fiasco?

“…They represent a major 'benchmark,' regardless of the episodic politicisation of independent regulatory agencies, and is exemplified by the evolution of the original RPI-X price cap into a more general pro-competitive form of forward looking incentive regulation (see Stern, 2014). One key UK episode in the evolution of the price-cap was the re-opening in 1995 of the price review in electricity (under Stephen Littlechild as electricity regulator), after the target of a hostile takeover bid revealed information that differed considerably from the material that had been contributed to the review of the company's RPI-X formula.…”

“…Somewhat differently, but nevertheless based on the idea of consolidation, Price and Ross (2014) note how competition principles have become increasingly institutionalised as part of a crosssectoral co-ordinated approach to regulation in the UK. Stern (2014) similarly suggests that despite some countervailing dynamics (most obviously in electricity), the linkage between regulation-oriented and competition-oriented institutions has become entrenched and is generally accepted across the UK political and institutional spectrum. Elsewhere, Gassner and Pushak (2014) note how, in the less developed world, competitionoriented regulatory approaches informed by the Littlechild model have witnessed consolidation in the area of telecommunications, but arguably less so in other regulated infrastructure industries.…”

“…This is perceived by Littlechild as primarily the consequence of regulatory asset protection for regulated companies via the development of the RAB (regulatory asset base) which, while preserving forward-looking efficiency regulation, also brings in significant elements of rate of return, cost-based regulation. In this view, the technologies of incentivebased regulation have not withered away, but have become part of the regulatory process (see Stern, 2014). This implies that the view of the all-powerful, sovereign final consumer has been increasingly supplanted by a view that consumers need protection from markets (particularly in energy, water and transport).…”

“…Instead, the key emphasis was on dealing with information asymmetries by encouraging competitive markets, and emphasizing the creation of an environment that allowed for stable expectations by the regulatory industries and the withdrawal of government's annual short-term interventions (See Bolt, 2014;Stern, 2014).…”

“…Favouring certain technologies over others presents certain opportunities, but also consequences for related investment decisions, especially in terms of infrastructure capacities. As noted by Stern (2014), these policy dynamics raised two distinct issues for the 'British model' and the Littlechild legacy. One is that considerable constraints have been placed on the affected industry 'markets.'…”