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Regulating networks in decline

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  • Christopher Decker

    (Research Fellow in Law and Economics, CSLS, University of Oxford)

Abstract

Demand for some services provided on traditional postal, electricity, gas and fixed telecommunications networks can be characterized as being in decline in some jurisdictions. Declining demand can give rise to difficult questions for regulators, in particular, the extent to which network operators can fully recover the costs of historic investments, and the efficiency and distributional effects of applying different rate structures. It can also raise fundamental questions about: the on-going rationale for regulation; the essential functions provided by network operators; and whether regulations should be applied symmetrically to traditional and alternative suppliers. Depending on the pace and scale of the decline, regulation may need to adapt. Proposals for adapting regulation are identified and critically examined in this paper, particularly in terms of the approach to setting the allowed level of revenues and the determination of rate structures.

Suggested Citation

  • Christopher Decker, 2016. "Regulating networks in decline," Journal of Regulatory Economics, Springer, vol. 49(3), pages 344-370, June.
    • Handle: RePEc:kap:regeco:v:49:y:2016:i:3:d:10.1007_s11149-016-9300-z
    DOI: 10.1007/s11149-016-9300-z
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    References listed on IDEAS

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    Cited by:

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    2. Paul Simshauser, 2023. "The regulation of electricity transmission in Australia's national electricity market: user charges, investment and access," Working Papers EPRG2311, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    3. Simshauser, Paul & Akimov, Alexandr, 2019. "Regulated electricity networks, investment mistakes in retrospect and stranded assets under uncertainty," Energy Economics, Elsevier, vol. 81(C), pages 117-133.
    4. Gaspari, Michele & Lorenzoni, Arturo, 2018. "The governance for distributed energy resources in the Italian electricity market: A driver for innovation?," Renewable and Sustainable Energy Reviews, Elsevier, vol. 82(P3), pages 3623-3632.
    5. Guthrie, Graeme, 2020. "Regulation, welfare, and the risk of asset stranding," The Quarterly Review of Economics and Finance, Elsevier, vol. 78(C), pages 273-287.

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    More about this item

    Keywords

    Public utility; Networks; Declining demand; Excess capacity; Economic regulation; Rate structures; Sunk cost recovery;
    All these keywords.

    JEL classification:

    • K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law
    • L5 - Industrial Organization - - Regulation and Industrial Policy
    • L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L97 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Utilities: General

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