ABSTRACT
This article examines the experience in the United Kingdom with the regulation of privatized monopolies. Its conclusions are (1) that there are significant differences between RPI—X (or price-cap) and US rate-of-return regulation, which provides greater scope for bargaining in the former system: (2) that UK regulators have taken seriously their duty to promote competition, but that the existing economic literature is of limited help in this task: (3) that price regulation is likely to be more effective where technology is changing slowly and/or where there are many firms in an industry, whereas the promotion of competition is indicated where technology is changing rapidly; and (4) that the case for RPI—X price-cap, rather than rate-of-return regulation, is strongest in telecommunications, gas supply and electricity supply and least strong in gas and electricity transmission grids.
