Chapter 8: Commitment and control in regulation: the future of regulation in water
* Colin Mayer 1. INTRODUCTION Water has been one of the most successful UK privatizations. We started the 1990s with a water system that was antiquated, leaking and thoroughly unhealthy. We have begun this decade with one that is modern, renovated, leaking less and a little bit healthier.1 Investment is up by more than 50 per cent and all of this has occurred in an industry which many said could never or must never be privatized. Access to water was a human right that should be made publicly available by public institutions. The public relations problem that the water companies now face is to persuade the afﬂuent that taps are as chic as bottles. The government, the industry and not least the regulator should take credit for this. Since we are a nation of self-deprecators, we are reluctant to recognize success and much prefer to mock failure. But there has been success and, on the regulatory front, Ian Byatt and Philip Fletcher and their teams together with the Competition Commission should take credit for that. It could have all been very different if we had not had a regulatory system that established a sound regime for measuring the cost of capital, valuing assets and undertaking comparative efﬁciency exercises. It took sound economic judgement to create a regulatory system from almost nothing. Any subsequent analysis or criticism should therefore be considered in this context. As we will describe shortly, the way to characterize what has happened in water as in...
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