Select Committee on Trade and Industry First Report


CONCLUSION

  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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Prepared 18 March 1997