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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The Systems Regulation Model

February 12, 2019

Regulation Publication

There is widespread dissatisfaction with many of the privatised utilities. In the rail sector, despite gaining from much higher revenues from a doubling of demand and significantly higher real prices, performance has been subject to repeated criticisms...

Publications

  • Publication Communications Price setting in regulated utilities and the potential application to the BBC
    January 19, 2016

    The determination of the BBC’s licence fee is the outcome of an opaque and non-transparent process, which contrasts dramatically with that which applies in the case of the regulated utilities. 2. In all the main privatisations from 1984 onwards, the utili
  • Publication Transport What to do about the railways?
    September 22, 2015

    Despite the sharp rise in demand and therefore revenue, it is widely agreed that the railways are in a mess. A significant proportion of the electorate think that renationalisation is the answer, and indeed Network Rail itself has been renationalised. Alt
  • 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
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