ABSTRACT
On November 17 1999, the British government announced its Utilities Regulation Bill to introduce far-reaching reforms in the regulation of gas, electricity, telecommunications and water companies. The changes followed consultations on proposals set out by the Department of Trade and Industry1 in response to mounting popular discontent with the perceived balance of utility prices, profits and executive pay. Both regulatory structures and methods were to be adjusted. For one, following the model of OFGEM, the merged electricity and gas regulator, an executive board was being considered for the telecommunication authority OFTEL. OFWAT, the economic water regulator, was asked to review its current operation, and, along with other utility authorities, was given more extensive ministerial guidance on social and environmental objectives. In all cases, the protection of consumer interest was to be made the regulator’s primary duty, further promoted by independent consumer councils and linked, via monitored service standards, to the remuneration of utility directors. Most importantly, profit-independent price-caps were to be retained as fundamental tools of incentive regulation, but regulators were reminded to correct for ‘errors’ and return ‘unearned’, in the sense of ‘undeserved’, income to customers. This way, the government expected that, ‘after years of wanting legitimacy,’ regulatory contracts would finally be accountable and fair to all parties involved. Clearly, not everyone agreed.
