Utility regulation in competitive markets: problems and progress

The book Utility regulation in competitive markets: problems and progress puts forth a case for competition, minimizing the role of traditional regulation and government intervention in energy, telecommunications, rail, and posts. The edited book contains chapters written by experts drawn from academics, regulatory bodies, and consulting firms. Chapters on each topic are followed by comments from regulators, competition authority chairmen, and other experts in the relevant fields. ‘Beyond regulation’ by Stephen Littlechild brings together the evidence from world over in favour of the competition in electricity generation and distribution. The paper also argues, citing evidence from Australia, that the risk of market failure embodied in ‘merchant transmission’ is much less than the regulatory risk in ‘regulated transmission investment’. The evidence to the contrary, however, could be provided by citing the experiences with regard to transmission investment in the New York Pool and other markets in the US, where there is gross underinvestment in transmission. There is a huge literature – both theoretical and empirical on the subject by Hogan on one side and Joskow and Tirole on the other – which has not been referred to. Also, what is important here is not only the mechanism by which the transmission assets are created but also how they are priced. India is an example where there has been inadequate transmission investment despite a regulated rate of return. The ‘gold plating’ argument in favour of overcapacity Book review