Aneconomistandenergyregulation.pptVIP

An economist and energy regulation Pippo Ranci Professor of economic policy, Università Cattolica, Milano Director, Florence School of Regulation Course on Public Regulation and Competition CEDIPRE, Universidade de Coimbra 28 October 2005 An economist and energy regulation a few personal notes a professor of economic policy 1996-2003: chaired the Italian regulatory authority for electricity and gas a period of intense change in utilities: liberalisation and privatisation, new regulation description of developments, analysis of reasons, and a report from experience An economist and energy regulation Three fundamental changes, three chapters of my story: Incentive-oriented regulation of monopoly From monopoly to competition: liberalisation and the role of the regulator A different public administration Incentive-oriented regulation of monopoly: the origin Historically, public utilities had no incentive to be efficient, to increase productivity Innovation in the UK, 1983 the Littlechild report on telecoms The recipe for efficiency: Competition wherever possible Incentive oriented regulation of monopoly, where inevitable Adopted universally in the 1990s Incentive-oriented regulation of monopoly:price caps regulation of prices tariffs A “price cap” set for a number of years Decreasing at a predetermined rate If the company reduces costs it makes profits If costs stay constant, the company faces losses Incentive-oriented regulation of monopoly:how price caps work Incentive-oriented regulation of monopoly:problems in tariff setting Tariff setting requires many hard choices: Measuring running costs Evaluating assets Setting a recognised rate of return on assets Setting a rate of productivity increase Determining the period of regulation Incentive-oriented regulation of monopoly:quality regulation regulation of quality Quality standards time of connection, change of contract, repairs, response to complaints, meter reading, frequency of billing, treat