194. The system installed
for the regulation of the energy industries in the UK following
their privatisation was unprecedented anywhere in the world, so
it is perhaps not surprising that mistakes were made; in particular,
the figures for X in RPI-X regulation were set too low. This
discrepancy is increasingly being adjusted as regulators become
more experienced. It is also the case that RPI-X methodology
has played only a modest part in price reductions and it can be
argued that even those gains to consumers could be offset by the
costs to the taxpayer of job losses. We remain of the opinion
that, following the completion of the liberalisation of the gas
and electricity markets, which is scheduled to be completed in
April 1998, the Government should reconsider whether it is still
necessary or appropriate to have two energy regulators. Further
we have formed the opinion that the distribution and transmission
systems, the natural monopolies, require an alternative approach
to price setting which would overcome the problem of lack of complete
and timely information and command confidence. Other than those
two matters, together with the exception of those areas where
we have made recommendations, we commend the retention of the
RPI-X methodology as currently a superior system of regulation
to the other methods we have examined.
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