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. This applied to BT in 1984, as 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.

Latest Publication

notes 514998 1920

Policy by lists – the Green Paper and the new industrial strategy

March 17, 2017

Regulation Publication

Regulation grows. It is never reaches a stable equilibrium. There are always more things that politicians, regulators and the multiple vested interests want to do. These include new duties and responsibilities, new incentives, and most of all new spend...

Publications

  • Publication Regulation Special administration, financing functions and utility regulation
    October 23, 2008

    Recent events have sharpened interest in the question of what happens when key businesses get into difficulty. In the banking sector, governments and regulators have had to make it up as they go along. The lack of preparation for failure has been...
  • Publication Regulation Tradeable RABs and the split cost of capital
    January 2, 2008

    Whilst regulators have resisted the concept of the split cost of capital, financial markets have been applying its logic with enthusiasm. The recent takeover of Norweb with a reported 45% premium to the regulated capital value (RCV) takes the...
  • Publication Regulation Real Interest and the Return to Normalcy
    July 25, 2007

    What drives markets in the end are fundamentals, and few variables are as important as the real interest rate—the return, after inflation, on relatively risk-less assets. It determines one part of the return on savings, and it feeds through into the relat
  • Publication Regulation OXREP Special edition on regulation
    June 1, 2006

    Oxford Review of Economic Policy, special edition on regulation, summer 2006
  • Publication Regulation Ownership Utility Regulation and Financial Structures: an Emerging Model
    January 14, 2006

    Recent corporate activity and the emergence of highly geared companies in the utility and infrastructure sectors have raised fundamental questions about risk, returns and the appropriate responses from investors and regulators. A gradual revolution has be
  • Publication Regulation The Case for Regulatory Reform
    July 31, 2005

    In D. Helm (ed.), The Future of Infrastructure Regulation, published by Oxera, July 2005, pp. 1-9. It is tempting to think that, after two decades of experience, regulation might have moved from the controversial and novel, to the tried and tested, that c
  • Publication Regulation The new regulatory agenda
    January 1, 2004

    Published by the Social Market Foundation, January 2004. Regulation in Britain has grown gradually and continuously since the privatisations of the 1980s and 1990s. Its growth has been unplanned, but has now reached a critical mass, attracting widespread
  • Publication Regulation Making Britain more cometitive: A critique of Competition and Regulatory policy
    November 1, 2001

    Royal Bank of Scotland/Scottish Economic Society Seventh Annual Lecture. Published in Scottish Journal of Political Economy, 48 (5), 471-487. This paper provides a critique of the Labour government's attempts to make Britain more competitive by reforming
  • Publication Regulation The Good Behaviour Clause Inquiry
    July 13, 2000

    Paper for the Competition Commission. The 'good behaviour' clause adds another substantive layer of sector regulation to the electricity industry, at a time when significant structural changes are taking place, when NETA is being introduced, and when the
  • Publication Regulation Comments on ' A Fair deal for consumer: Modernising the Framework for Utility regulation
    May 25, 2000

    Paper for the DTI. This brief paper focuses on the scope of the draft guidance and the impact on the cost of capital. It does not address the detailed components.

Receive monthly updates from Dieter Helm

© Dieter Helm. All rights reserved.Copyright & Terms|Contact