Some notes about Regulation

The British regulatory model is an evolving one. It started out as a reaction against both the nationalised industry controls, and the perceived failures of US rate of return regulation. In the mid 1980s, the zeitgeist was one of markets, liberalisation, competition and private ownership. RPI-X was invented as a deliberately simple and temporary way to mimic the market, but only for so long as it took for competition to do away with the need for regulation at all. This applied to BT in 1984, it was expected to wither away after 7 years.

In practice it has gradually morphed into a detailed and permanent set of interventions for the core monopoly infrastructures. Regulation now controls price and outputs, and it has developed techniques to address the asset bases, the cost of capital, the operating efficiency and capital expenditure.

Regulation, built in this piecemeal way, has become heterogeneous. Each regulator has followed a specific path. OFGEM pioneered RIIO, with 8-year periods, whilst OFWAT sticks to 5. OFGEM has indexed the cost of debt, OFWAT has not. ORR has had to accommodate a much greater role for the state, whilst OFCOM has struggled with the emerging USO for broadband. Large infrastructure projects have attracted their own unique contractual frameworks. Hence the detail matters, as is explored in each part below.

 

Regulation

Regulation
Transport

Regulation
Communications

Regulation
Infrastructure

Regulation
Regulation

Latest Publication

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RIP RPI-X Regulation - OFWAT and OFGEM nail down the coffin

April 17, 2018

Regulation Publication

RPI-X regulation has had a good run. It was a deceptively simple idea: fix the prices and leave everything else to the companies and the markets to sort out how best to maximise profits by minimising costs. That simplicity was its great strength...

Publications

  • Publication Regulation Regulatory credibility and the irresistible urge to meddle
    April 16, 2015

    When the great utilities were being privatised, one of the key objectives was to establish a regulatory regime which would be credible to investors and fair to customers. The way it worked was that the companies would be given fixed contracts ex ante, and
  • Publication Infrastructure How long can interest rates remain low?
    November 22, 2013

    We live in extraordinary times. Real interests are negative, have been negative for several years and the forward guidance from central bankers suggests that they believe they are going to stay that way for several years to come. Yet this is a very unnatu
  • Publication Infrastructure British Infrastructure and the Gradual Return of the state
    November 14, 2013

    The state of British infrastructure is the source of almost continuous study and criticism. There is now a host of new demands in water, energy, transport and communications which require a step change in investment. The Coalition government has made a se
  • Publication Transport Introduction to 'Air Transport and Infrastructure'
    November 1, 2013

    In D. Helm and D. Holt (eds.), 'Air Transport and Infrastructure: The Challenges Ahead', published November 2003 by Oxera, pp. 1-4. In committing itself to providing a 30-year framework for air transport policy, the government recognised that the existing
  • Publication Infrastructure Why is infrastructure in Britain so difficult to deliver?
    September 10, 2013

    The consequence of the ’project wish list’ approach rather than an integrated plan is not just that many things don’t get done, but that the costs tend to be much higher
  • Publication Communications The regulation of public service television
    September 1, 2013

    Paper from the BBC / Reuters Institute symposium in January 2013.
  • Publication Transport What do to about the roads?
    September 22, 2012

    Paper on the current state of our roads
  • Presentation Infrastructure Redefining the models for private sector investment in infrastructure - The RAB Model
    February 9, 2011

    Slides for the UK Infrastructure Summit: New Era, New Priorities, New Challenges
  • Publication Communications Government, the market and the future of broadcasting
    September 16, 2010

    Article in: A creative recovery: How the UK’s creative industries can regain their competitive edge, Edited by Dale Bassett, published by REFORM.
  • Presentation Infrastructure Applying the RAB approach to infrastructure
    July 13, 2010

    City and Financial ConferenceCreating an Efficient Funding Market for Infrastructure InvestmentJuly 13th 2010, London

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