th ANNIVERSARY COLLECTION TO MARK THE …

1 THE UK MODEL OF UTILITY REGULATION A 20th ANNIVERSARY COLLECTION TO MARK THE littlechild report retrospect AND PROSPECT Proceedings of a joint LBS Regulation Initiative, CRI and City University Business School Conference Chaired by Professor John Cubbin and Professor Ralph Turvey held on 9th April 2003 at The Cass Business School, City University, London Edited by Ian Bartle Desktop published by Jan Marchant CRI PROCEEDINGS 31 The University of Bath All Rights Reserved ISBN London City University Business London School THE UK MODEL OF UTILITY REGULATION Ian Alexander Stephen LittlechildIan Bartle Hans-Martin NiemeierChris Bolt Pippo RanciMartin Cave John SmithDavid Currie Jon SternAntonio Estache Lourdes TrujilloStuart Goodwin Maria VagliasindiJose-Luis Guasch

2 The University of Bath School of Management is one of the oldest established management schools in Britain. It enjoys an international reputation for the quality of its teaching and research. Its mission is to offer a balanced portfolio of undergraduate, postgraduate and post-experience programmes, research and external activities, which provide a quality of intellectual life for those involved in keeping with the best traditions of British universities. THE UK MODEL OF UTILITY REGULATION A 20th ANNIVERSARY COLLECTION TO MARK THE littlechild report retrospect AND PROSPECT Proceedings of a joint LBS Regulation Initiative, CRI and City University Business School Conference Chaired by Professor John Cubbin and Professor Ralph Turvey held on 9th April 2003 at The Cass Business School, City University.

3 London Edited by Ian Bartle Desktop published by Jan Marchant CRI PROCEEDINGS 31 The University of Bath All Rights Reserved ISBN Centre for the study of Regulated Industries (CRI) The CRI is a research centre of the University of Bath School of Management. The CRI was founded in 1991 as part of the Chartered Institute of Public Finance and Accountancy (CIPFA). It transferred to the University of Bath School of Management in 1998.

4 It is situated on the 8th floor of Wessex House (North), adjacent to West car park. The CRI is an interdisciplinary research centre investigating how regulation and competition are working in practice, both in the UK and abroad. It is independent and politically neutral. It aims to produce authoritative, practical contributions to regulatory policy and debate, which are put into the public domain. The CRI focuses on comparative analyses across the regulated industries. CRI activities and outputs include: Regulatory statistics, information and analysis Discussion papers and Occasional papers Regulatory Briefs, Reviews and International series Research Reports and Technical papers Seminars, courses and conferences Direct links with regulated industries, the regulators, the academic community and other interested parties are an important feature of the work of the CRI.

5 The CRI is non-profit making. Its activities are supported by a wide range of sponsors. BAA CIPFA Department of Trade and Industry Environment Agency National Audit Office NERA National Grid Transco Network Rail OFWAT RSM Robson Rhodes Royal Mail Thames Water United Utilities Wessex Water Further information about the work of the CRI can be obtained from:- Peter Vass, Director-CRI, School of Management, University of Bath, Bath, BA2 7AY or CRI Administrator, Jan Marchant, Tel: 01225 383197, Fax: 01225 383221, e-mail.

6 And from the CRI s web site, which includes events and the publications list. iii PREFACE We are pleased to publish the proceedings of the joint conference on The UK Model of Utility Regulation - A 20th ANNIVERSARY COLLECTION to Mark the littlechild report - retrospect and Prospect held by the London Business School Regulation Initiative, the Cass Business School of the City University, and the CRI.

7 The contents of the proceedings have been grouped in four parts, which highlight the particular themes of the conference. We wish to thank all of the contributors to this set of proceedings for their papers, but also those who spoke at the conference and participated in the debate, but who are not represented by papers in these proceedings. The Introduction provides a link between the conference itself and this set of proceedings. The programme for the conference is included as an annexe for information.

8 One background paper was submitted which complemented Jan-Peter Heida s presentation, but given its technical nature is published as a separate It is available with copies of the proceedings. We are also grateful to Professor Stephen littlechild and HMSO for their permission to reprint his 1983 report , Regulation of British Telecommunications Profitability. John Cubbin Cass Business School City University, London Jon Stern Associate Director LBS Regulation Initiative Peter Vass Director CRI July 2003 1 Mikkers M and Shestalova V (2003), Yardstick Competition and Reliability of Supply in Public Utilities, CRI Technical Paper 15, University of Bath.

9 Iv The Regulation Initiative London Business School The Regulation Initiative at the London Business School is the major UK research programme analysing the future of the regulatory framework for the utility and network sectors in the UK and Europe. The Initiative, which was launched in January 1996, and builds on the established track record of London Business School, draws together a distinguished group of researchers at LBS, elsewhere in the UK and internationally.

10 It is supported by a wide range of regulated companies, and has close links to the regulators and other interested groups. The Regulation Initiative sponsors and hosts a regular series of international conferences, seminars, workshops and other events. It is overseen by the Director, Professor Leonard Waverman, and two Associate Directors, Professor Ralph Turvey and Jon Stern. City University City University, based next to London's financial district, specialises in business and the professions.