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Regulation and Contracts for Utility Services: Substitutes or Complements? Lessons from UK Railway and Electricity History

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  • Jon Stern

Abstract

It is frequently suggested that regulation by contract can effectively substitute for regulation by a specialist regulatory agency for utility service industries. We examine these arguments and consider legal aspects and the historical experience of the UK as regards railways and electricity. We conjecture that regulation and contracts are complements for network industries rather than substitutes so that a regulatory agency allows for better and simpler contracts, which are easier to monitor, enforce and revise. This is what would be expected from the theory of incomplete contracts. We demonstrate that UK historical experience is strongly consistent with this view.

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  • Jon Stern, 2003. "Regulation and Contracts for Utility Services: Substitutes or Complements? Lessons from UK Railway and Electricity History," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 6(4), pages 193-215.
    • Handle: RePEc:taf:jpolrf:v:6:y:2003:i:4:p:193-215
    DOI: 10.1080/134841280410001698978
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    References listed on IDEAS

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    1. Littlechild Stephen, 2002. "Competitive Bidding for a Long-Term Electricity Distribution Contract," Review of Network Economics, De Gruyter, vol. 1(1), pages 1-38, March.
    2. Oliver Hart, 2003. "Incomplete Contracts and Public Ownership: Remarks, and an Application to Public-Private Partnerships," Economic Journal, Royal Economic Society, vol. 113(486), pages 69-76, March.
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    Cited by:

    1. Ruiz Diaz, Gonzalo, 2017. "The contractual and administrative regulation of public-private partnership," Utilities Policy, Elsevier, vol. 48(C), pages 109-121.
    2. Lee, Changyen & Cheng, Chun-Fa & Chuang, Min-Ta & Hsu, Wei-Chieh & Chen, Yen-Hung & Cheng, Kuo-Tai, 2018. "How transparency and accountability matter in regulating the Taiwan Water Supply Corporation," Utilities Policy, Elsevier, vol. 52(C), pages 50-58.
    3. Price, Richard, 2012. "A blueprint for a better railway: how innovation, devolution and competition can help Britain's railways to serve consumers better," MPRA Paper 83604, University Library of Munich, Germany.
    4. Christopher Findlay, 2005. "Private Sector Participation in Infrastructure Investment," Agenda - A Journal of Policy Analysis and Reform, Australian National University, College of Business and Economics, School of Economics, vol. 12(1), pages 57-69.
    5. Price, Richard, 2012. "Towards a more efficient railway: The Beesley lecture," MPRA Paper 74979, University Library of Munich, Germany.
    6. Tabarquino Munoz, Raúl Andrés, 2022. "Consolidación legal y regulatoria del servicio público de las comunicaciones en Colombia 1847-2020," Revista Tendencias, Universidad de Narino, vol. 23(1), pages 395-422, January.
    7. Cubbin, John & Stern, John, 2005. "Regulatory effectiveness and the empirical impact of variations in regulatory governance - electricity industry capacity and efficiency in developing countries," Policy Research Working Paper Series 3535, The World Bank.
    8. Jensen, Olivia & Wu, Xun, 2017. "The hybrid model for economic regulation of water utilities: Mission impossible?," Utilities Policy, Elsevier, vol. 48(C), pages 122-131.
    9. Singh, Kewal & Singh, Anoop & Prakash, Puneet, 2022. "Estimating the cost of equity for the regulated energy and infrastructure sectors in India," Utilities Policy, Elsevier, vol. 74(C).

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