Chapter 2: Yardstick competition and comparative performance measures in practice
Catherine Waddams Price INTRODUCTION1 One of Colin Robinson’s prophetic roles has been in advocating privatization, especially in the energy sector, where others thought it infeasible. In 1994 Colin Robinson stated that ‘no other major country [other than Britain] seems ready to go as far in breaking down the state gas and electricity monopolies which for so long have dominated markets at the expense of consumers’ (Robinson, 1994, p. 19). One tool for controlling privatized companies with market power is to compare the performance of diﬀerent companies, either for regulators to use some form of comparative regulation between monopolies, or to provide additional information for consumers as they are oﬀered choice in previously monopolized markets. Such comparisons can therefore be seen as a tool enabling the transfer of both intrinsically monopoly companies (mainly network companies) and potentially competitive markets (especially in energy) to the private sector. However, practical experience of using comparative performance as a direct regulatory tool is surprisingly sparse. The potential for using such tools can be divided into two aspects. The ﬁrst is setting minimum standards of some kind; failure to meet these standards results in costs for the company concerned, either directly in the form of (regulator or government administered) ﬁnes, or indirectly through compulsory compensation to consumers. Such compensation is usually administered centrally, but in the US it is possible to include in this category prosecutions brought privately for compensation to consumers or other suppliers. In the UK such formal lists of service quality...
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