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 seven years.

In practice regulation has gradually morphed into a detailed and permanent set of interventions for the core monopoly infrastructures. It 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 eight-year periods, whilst OFWAT sticks to five-year ones. OFGEM has indexed the cost of debt. ORR has had to accommodate a much greater role for the state, whilst OFCOM has struggled with the emerging universal service obligation (USO) for broadband. Large infrastructure projects have attracted their own unique contractual frameworks. Hence the detail matters.

Latest Publication

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Luck is not an energy policy – the cost of energy, the price cap and what to do about it

December 6, 2021

Regulation Publication

With energy prices set to rise even further, a look at how the recommendations from the 2017 Cost of Energy Review, if implemented at the time, could have prevented the current crisis.

Publications

  • 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.
  • Publication Regulation Regulatory Reform, Capture and the regulatory Burden. OXREP Vol. 22 No.2
    May 24, 2000

    It has become a conventional wisdom that regulation is at best a necessary evil and at worst an inhibition to productivity, employment, and economic growth. There are strident demands, predominantly from industrial interests, for the 'regulatory burden' t

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