Fine-tuning RPI – X: the impact of changing the incentives mechanism

One advantage of RPI – X regulation is the incentive it places on companies to improve efficiency. If companies operate more efficiently than assumed when prices are set, they retain the benefits for the remainder of the review period. However, the UK experience has been to make various reforms to this ‘basic’ incentive with the aim of improving productivity. Has changing these incentive mechanisms led to increased productivity in the water industry?

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Protecting consumers: is competition policy enough?

Competition policy and consumer protection policy are both meant to serve consumers, but there are tensions between the two. Dr Helen Jenkins, Oxera Director, illustrates these tensions, discussing some of the recent market investigations carried out under the new competition policy framework in the UK (the Enterprise Act 2002). The remedies proposed in those investigations protect consumers, but perhaps do not go as far as a consumer protectionist approach would.

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Accentuating the positive: sharing financial data between banks

From 2006, all major UK banks will start sharing ‘positive’ data on their customers, such as details relating to loans and credit availability. Until now, only ‘negative’ data has been shared, such as that pertaining to arrears and bankruptcies. What is the likely impact of this new policy on the banking market? Will it help to reduce over-indebtedness? And what happens in other European countries?

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Energy market competition in the EU and G7: preliminary 2004 rankings

Since 2002, the Department of Trade and Industry has had a Public Service Agreement target to ensure that the UK ranks among the three most competitive energy markets in the EU and G7. This report provides the results of the analysis undertaken for 2004—the third year in which Oxera has applied the benchmarking methodology it developed for the DTI. During the research, Oxera collated a comprehensive dataset combining information available from the European Commission’s benchmarking reports on the electricity and gas markets, national regulators’ reports and websites, Eurostat, and individual companies’ reports. Following enlargement of the EU in May 2004, this data collection exercise now encompasses 28 countries: the 25 EU countries (including the UK) and the three G7 countries outside the EU—namely, the USA, Canada and Japan. Using this data to populate the benchmarking model, the UK was found to exhibit the most competitive electricity and gas markets within the EU and the G7 and hence to meet its PSA target. It should be noted that as some data are not yet available for 2004, the results should be treated as preliminary findings. The findings will be reviewed in 2006.

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Water Framework Directive—economic analysis of water industry costs

Oxera developed a methodology for costing measures to achieve good water status and thereby comply with the Water Framework Directive. The study concentrated on the costs to the water industry of the reduction of discharges of phosphorus and the removal (or relocation) of water abstraction licences. The project was commissioned by Ofwat and led by Arup, with close involvement from the water industry via questionnaires and workshops.

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Efficiency and competition policy: an unconventional view

Where are the inefficiencies—in production, in allocation of resources, or somewhere else? Adriaan ten Kate, Head of the Economics Directorate at Mexico’s Federal Competition Commission, addresses these questions. He explains why the greatest harm to welfare may come from ‘lost opportunities’—transactions that never materialise—and points to some important lessons for competition policy

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In sickness and in health: improving the analysis of healthcare mergers

Market-based healthcare reforms in many countries are resulting in mergers between healthcare providers such as hospitals. Assessing the competitive effects of these mergers is far from straightforward, especially in the area of geographic market definition. However, some techniques used to define the relevant geographic market are better than others. Using the most robust methods can make the difference between a merger being approved or being blocked

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Where has the innovation gone? R&D in UK utility regulation

If current trends continue, the UK economy may suffer as the effects of reduced R&D effort in key infrastructure sectors feed into lower productivity growth throughout the economy. Liberalisation, the design of the regulatory regime, and changes in utility financing may all help to explain the trend for falling R&D intensity across most utility sectors. This article examines several options for regulatory reform to address these challenges

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Margin for error? security of supply in electricity

Electricity supply security relies on sufficient and timely investment in generation and network infrastructure. Market liberalisation is placing the responsibility for ensuring security firmly on the private sector, but how can we be sure that markets are investing appropriately? A benchmark is needed against which to monitor market performance

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Public information, private profit: how should government agencies compete?

Public sector agencies are the largest producers of information in Europe. This information has been recognised as an under-exploited asset, worth around €68 billion per year. The European model is to charge companies for public sector information, whereas US government agencies typically distribute data for free. From a public policy perspective, what are the effects on competition and efficiency of trying to recover the costs of public information from the private sector?

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