Contents

Preface
Abbreviation and Units

1 Introduction
1.1 Privatization in Britain
1.2 U.K. Privatization Program
1.3 Property Rights, Structure, and Efficiency
1.4 Ownership and the Boundaries of the State
Appendix: Enterprises Privatized, 1979 to 1994

2 The Problem of Regulatory Commitment
2.1 Modeling the Regulatory Compact as a Game
2.2 Playing the Game: Commitment, Credibility, and Repetition
2.3 Rate-of-Return Regulation
2.3.1 Extensions: The "Llsed and Useful" Doctrine
2.4 Price Regulation
2.5 Design of Regulatory Institutions
2.6 Role of Licenses in U.K. Utility Regulation
2.7 Privatization and Regulation in Transitional Economies ME
2.7.1 Telecommunications Privatization in the Czech Republic
2.7.2 Preparations for Electricity Privatization in Hungary
2.8 Conclusions
Appendix A: Modeling Regulation as a Dynamic Game
Appendix B: U.K. Legislative Framework for Telecoms and Electricity

3 Ownership of Network Utilities
3.1 Local Utilities and Municipal Ownership
3.2 Nationwide Network Utilities
3.2.1 Capitalism and Pragmatic Nationalization
3.2.2 Public Ownership as Tdeology or Default
3.3 Macroeconomic Performance of Public Enterprises
3.3.1 Public Enterprise Performance in the United Kingdom
3.4 Efficiency of Public and Privately Owned Network Utilities
3.5 Effects of Ownership Changes
3.5.1 Nationalization
3.5.2 Privatization
3.5.3 Case Studies of Electricity Privatization
3.5.4 Case Studies of Telecommunications Privatizations
3.5.5 Lessons from the Privatization Case Studies
Appendix: Evaluating Distributional Impacts

4 Theories of Regulation
4.1 Normative and Positive Theories of Regulation
4.1.1 Positive Theories of Regulation
4.1.2 Interest Group Theories of Regulation
4.2 Interest Group Influence on the English Electricity Industry
4.3 Dynamics of Regulatory Reform in the Beil Telephone System
4.4 Assessment of the Dynamics of Regulatory Change
4.5 Competition versus Regulation
4.5.1 Evidence from U.S. Airline Deregulation

5 Introducing Competition into Network Utilities
5.1 State Ownership and Competition
5.2 Liberalizing Entry while Retaining State Ownership
5.3 Procompetitive Reforms of State-Owned Utilities
5.4 The Case for State Ownership of the Network
5.5 Assessment of Competition and State Ownership
5.6 Vertical Separation or Liberalized Access?
5.6.1 Restructuring Options in Different Utilities
5.6.2 Restructuring Choices and the Dynamics of Llnbundling

6 Reforming the Electricity Supply Industry
6.1 Vertical Separation in Electricity: The English Example
6.2 Creating Markets for Electricity
6.3 Restructuring the CEGB and the Creation of the Electricity Pool
6.3.1 Dealing with Risk and Transition: The Role of the Contract Market
6.3.2 Progress in Introducing Competition
6.3.3 Competition in Supply
6.3.4 Competition in the Capital Market
6.3.5 Vertical Re-integration and the MMC Generator References
6.4 Was the Restructuring of the CEGB Worth It?
6.4.1 Cost—Benefit Studies of the Rest of the U.K. ESI
6.4.2 An Assessment of the Three ESI Privatizations
6.5 Creating Electricity Markets in Other Countries
6.5.1 Scandinavia
6.5.2 Latin America
6.5.3 Australia
6.5.4 New Zealand
6.5.5 United States
6.5.6 Transmission Pricing and Investment
6.6 Electricity Markets: Lessons fromthe Case Studies
6.7 Conclusions
Appendix: Modeling the Electricity Pool

7 Liberalizing the Telecommunications Industry
7.1 Pricing and Regulatory Inefficiencies
7.1.1 Pressures for Competition in International Telecoms Markets
7.1.2 Regulatory Inefficiencies
7.1.3 Cross-country Com parisons of Telecoms
7.2 Distinctive Features of the Telecoms Industry
7.3 Possibiity of Competition
7.3.1 Liberalization in the United States
7.3.2 Reforms in Britain
7.4 Lessons to Be Drawn
7.41 Restructuring at Privatization
7.4.2 Creating a More Competitive Structure
7.4.3 Restrictions on Competition and Asymmetric Regulation
7.4.4 Design of Regulation
7.4.5 Access Pricing
7.5 Conclusions
Appendix: Telecoms Costs and TELRIC

8 Deregulation and Restructuring in Gas
8.1 Similarities and Differences between Gas and Electricity
8.1.1 Technical Characteristics of Gas
8.1.2 Market Structures and Access Arrangements in Gas
8.1.3 Requirements for Liberalization
8.2 Experience of Liberalization in the United States
8.3 Restructuring British Gas
8.3.1 Restructuring and Com petition
8.3.2 Regulating Transmission and Further Unbundling
8.4 Gas Liberalization on the Continent
8.5 Conclusions

9 Conclusions
9.1 Restructuring Network Utilities
9.2 Entry
9.3 Institutional Innovations Needed for Liberalization
9.4 Dispute Resolution
9.5 Differences between the Network Utilities
9.5.1 Liberalizing Telecoms
9.5.2 Access Pricing and Vertical Integration
9.5.3 Introducing Competition into Electricity
9.5.4 Liberalizing Electricity: Pools versus the Single-Buyer Model
9.5.5 Gas Liberalization
9.6 End of Regulation?
Appendix: Excess Entry in Oligopolies

Notes
References
Index