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Energy in a Competitive Market

Essays in Honour of Colin Robinson

Edited by Lester C. Hunt

This fine collection of original essays is in recognition of Colin Robinson, who has been at the forefront of thinking in energy economics for over 30 years. Energy in a Competitive Market brings together both prominent academics and practitioners to honour his outstanding and unique contribution. The authors cover a wide and fascinating selection of topics incorporating the whole spectrum of energy economics. In doing so, they examine the belief that markets are the key to the effective allocation of resources, a notion which arguably applies as much to energy as it does to any other commodity.
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Chapter 2: Yardstick competition and comparative performance measures in practice

Catherine Waddams Price


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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