U.K. Utilities Privatization

Paper Summary:

This paper explains that competition among utilities is believed desirable because it promotes the interests of consumers and enables the competing companies to benefit fully from cost reduction and innovation. The author points out that public administration, especially of public utilities, functions as a business; therefore, the climate of competition in the U.K. utilities, which was ushered in by privatization, is tempered by sector-specific regulation. The paper relates that, for 15 years or more, almost all of the major utilities in the U.K. have been under private control and subject to these sector-specific regulations and to concurrent competition powers; however, the degree of competition varies by market.

Table of Contents:
Introduction
Competition Theory and Practice
Privatization of UK Utilities
Competition Act 1998
Privatization of Telecommunications
Electricity
Gas
Water and Sewerage
Railways
Airport Services
Change of Rules
Price Cap Policy
Conclusion and Perspectives

From the Paper:

"When the government privatized British Gas in 1986, the program did not follow the US model on both gas and telecommunication liberalization. The reason is that BG was a vertically integrated state-owned monopoly that was unique in UK. BG was first persuaded to detach its natural monopoly network from its affiliated services that could stand competition, such that the company was divided into the monopoly and competitive parts. At first, the relationship between BG and the assigned industry regulator was turbulent because of an oversight on the government's part."

Sample of Sources Used:

• Allen, F. (1965). "The Big Change." New York: Bantam Classic.
• Altman, D. (2001). "Competition Law Constraints on Access Charges in theEngland and Wales Water Industry." Economic Journal.
• Armstrong, M., Cowan, S. & Vickers, J. (1994). "Regulatory Reform -Economic Analysis of British Experience." Cambridge: MIT Press.
• BBC (2006). "Minutes of Monetary Policy Committee Meeting." September20, 2006, online at:http://news. bbc.co.uk/2/hi/business/479599.stm
• Bell, A. (1995). "The Telecommunication Industry 1994-95." In CRI Regulatory Review 1995, P. Vass (ed.), London: CIPFA.

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