HM Treasury commissioned Oxera and WS Atkins for this study. This efficiency review examined the four utility regulators in Great Britain—the Office of Gas and Electricity Markets (Ofgem), the Office of the Rail Regulator (ORR), the Office of Telecommunications (Oftel) and the Office of Water Services (Ofwat). The review focused on inputs (procedures, processes and resources) rather than outputs (regulatory effectiveness), with three specific objectives:
to examine the way in which the regulators define, plan, and prioritise proposed areas of work from which programmes and projects are developed;
to evaluate the management of programmes and projects from inception to closure;
to assess their overall cost efficiency and that of support functions, such as corporate overheads, human resources, finance, information technology/ information services, library facilities, procurement/use of consultancies and press-office functions.
The study involved process benchmarking, in terms of the management, planning and monitoring of the regulators’ work, and metric benchmarking, in terms of the costs of common support function. In addition to obtaining data for analysis from information requests of the regulators, Oxera obtained views from the regulators’ various stakeholders (eg, regulated companies, consumer representative bodies, environmental lobby groups, and the City) and to rate the regulators against a set of 29 criteria. To provide external benchmarks, information was collected and comparisons undertaken of the costs, staffing, and management of support functions in comparator organisations, including other UK and overseas regulators.
Following this review, recommendations were given aimed at improving the performance of the regulators where it was identified as being lacking.