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Papers by Stephen Littlechild
Legal, Political and Economic Dynamics, 2014
Telecommunications Policy - TELECOMMUN POLICY, 2006
In many countries there is widespread concern at the level of mobile termination charges. This is... more In many countries there is widespread concern at the level of mobile termination charges. This is attributable to the bottleneck monopoly created by the Calling Party Pays (CPP) principle. It has led to increasingly severe price controls on termination charges. Regulatory experience in the three foremost such countries (UK, Australia and New Zealand) suggests that price controls are of limited effectiveness in aligning termination charges with costs, that net welfare gains from controls are small and that costs of setting controls are high.The Receiving Party Pays (RPP) principle, which applies in North America and several Asian countries, avoids the bottleneck monopoly problem. After allowing for various economic and technical average revenue (price) per call is significantly lower with RPP, average minutes of usage per subscriber are significantly higher and the mobile penetration rate is not significantly different. Handset subsidies seem to be lower in the US (with RPP) than in ...
In the last two decades many major regulatory issues in Florida have been resolved by means of st... more In the last two decades many major regulatory issues in Florida have been resolved by means of stipulated settlements between the utilities and interested parties, notably the Office of Public Counsel, instead of by the traditional method of hearings and litigation before the Public Services Commission. This paper investigates the extent, nature and effects of these stipulations in the electricity sector there. They have now largely superceded the litigated process. Their purpose is not to save costs, which are orders of magnitude less than the revenues at stake. Stipulations have brought reductions in electricity revenues worth over $3 billion, mainly during the last decade. These reductions are greater than would have otherwise occurred: about three quarters might never have occurred at all. In some cases a change in the method of rate reduction favoured industrial consumers but other customers are nonetheless likely to have benefited despite this. Some benefits were outside the s...
Utilities Policy, 2006
What measures are needed to protect customers when a utility market is first opened to competitio... more What measures are needed to protect customers when a utility market is first opened to competition? In the UK, residential (domestic) customers must be able to terminate energy contracts at 28 days' notice. This rule was introduced as a transitional protection for customers and for competition. However, the regulatory justification for the rule seems to have evolved over time.
Utilities Policy, 2009
JEL classification: L51 L97 L94 L95
Utilities Policy, 2006
... In the late 1960s and early 1970s the rises in oil prices, inflation and interest rates ... A... more ... In the late 1960s and early 1970s the rises in oil prices, inflation and interest rates ... AlternativeDispute Resolution (ADR) mechanisms (sometimes including settlements) were also proposed. 7. ... and CAB), has had signal success in settling rate cases especially for gas pipelines. ...
Utilities Policy, 1992
This paper reviews some of the major developments since electricity privatization. The new arrang... more This paper reviews some of the major developments since electricity privatization. The new arrangements have proved entirely workable. There have been encouraging developments in competition in generation and supply, The over 1MW supply market is now open to competition. Where competition is not presently effective explicit measures have been taken to protect customers such as setting Guaranteed Standards of Service. There have been some areas of concern. Problems in the Pool have demonstrated the ability of the major generators to influence prices. The choice of contracts for customers in the competitive market has been unduly restricted. However further benefits for customers can be achieved in due course.
Journal of Regulatory Economics, 2009
US utility regulation is evolving. Negotiated or stipulated settlements have begun to replace or ... more US utility regulation is evolving. Negotiated or stipulated settlements have begun to replace or supplement litigation, but relatively little seems to be known about this practice. This paper presents evidence from Florida. During 1976-2002, 30% of earnings reviews were settled by stipulations involving the Office of Public Counsel but only 7% of company requests. The mean value of a rate reduction was eight times larger with a stipulation than without; the median value was more than 50 times larger. Over three quarters of the rate reductions associated with earnings reviews derived from these stipulations; excluding one exceptional case the proportion was 94%.
Journal of Regulatory Economics, 2012
Economists acknowledge the problems of regulated transmission but have different views on the lik... more Economists acknowledge the problems of regulated transmission but have different views on the likely efficiency of merchant transmission. This paper first examines the evidence on alleged market failure and regulatory failure as experienced in practice in Australia, where there have been both regulated and merchant interconnectors. Merchant transmission has generally not exhibited the standard examples of market failure but regulated transmission generally has exhibited the standard examples of regulatory failure. Imperfect information-more specifically, in the form of lack of coordination-has often been a challenge whatever the approach. Experience in Argentina suggests that transactions costs are not a barrier to negotiation and efficient investment determined by users. Policy should seek to improve the regulatory framework and to remove barriers to private initiatives. An important role for regulation is to facilitate coordination between potential providers and users of transmission lines.
This paper examines the history of the various actual and proposed interconnectors between New So... more This paper examines the history of the various actual and proposed interconnectors between New South Wales and Victoria into South Australia. It covers the period from the earliest proposal for a regulated interconnector to the recent Victoria Supreme Court review and the latest ministerial proposals. It finds, inter alia, that the Supreme Court decision is likely to have strengthened, in a beneficial way, the regulatory regime for dealing with merchant interconnectors and the obligations on incumbent transmission companies. It finds that none of the proposals for regulated interconnectors did or would have passed the regulatory tests as formulated in terms of aggregate benefits to all market participants. It finds that neither of the merchant interconnectors (into South Australia and Queensland) are likely to have been profitable. It sees a possible explanation for the construction of regulated interconnectors in terms of the benefits to customers, or in terms of bringing about a single competitive market. Above all, it illustrates the political context in which decisions on interconnectors have been made, and the need to take account of such motivations when comparing the likely effects of regulated interconnectors versus merchant interconnectors.
Entreprises et histoire, 2004
Energy Policy, 2012
Interstate gas pipelines and their customers presently settle about 90% of the rate cases set for... more Interstate gas pipelines and their customers presently settle about 90% of the rate cases set for hearing before the Federal Energy Regulatory Commission (FERC). This paper sets out the process by which this is achieved, illustrating with the 12 rate cases from 2008 and 2009. In contrast to many other jurisdictions, FERC Trial Staff play an active role in facilitating negotiation and settlement. They propose a first settlement offer 3 months after a pipeline files for a tariff rate increase. Thereafter, the regulatory aim is to bring the parties into agreement, not to impose an outcome upon them. This is a different role for the regulatory body than was previously apparent. The process has worked increasingly successfully and essentially unchanged for over 35 years. The conventional regulatory litigation process is now only an occasional means of dispute resolution. The paper also discusses and illustrates why parties prefer settlement to litigation, what difference it makes, which cases tend to settle, what might account for the increasing frequency of settlements over time, the recent phenomenon of pre-filing settlements and the settlement of section 5 (rate reduction) cases brought by FERC.
Energy Economics, 2008
Argentina's 1992 electricity reform introduced the Public Contest method, which made major expans... more Argentina's 1992 electricity reform introduced the Public Contest method, which made major expansions of the transmission system the responsibility of users rather than the transmission company or regulatory body. It was sometimes said that the incentives and penalties on distribution companies were inadequate, and that they did not support transmission expansions to improve quality of service, notably a reserve transformer in the tourist town of Bariloche. We note that, in practice, the incentives and penalties varied significantly between Federal and provincial jurisdictions. Although the penalties were scheduled to increase over time at the Federal level, the Federal regulator ENRE reduced the severity of their enforcement, thereby reducing the incentive to support expansions. In practice, however, distribution companies supported all but 2 of 14 expansions proposed by the transmission concessionaire. In both these exceptional cases the provincial regulators opposed the expansion. At Bariloche, the provincial regulators argued that there were better ways of providing the quality of service, and refused to allow the distribution companies to pass-through the costs to customers. Later, provincial regulators began to introduce improved arrangements for enabling distribution companies to pay for transmission expansions.
Energy Economics, 2008
In 1992, Argentina introduced the Public Contest method, which required transmission users to pro... more In 1992, Argentina introduced the Public Contest method, which required transmission users to propose, vote and pay for major expansions of the electricity transmission system. Economists, consultants, the regulator and others held the application of this method to be unsuccessful, mainly on the ground that "for many years" it delayed investment in a "much needed" Fourth Line to Buenos Aires. The commentators blamed externalities, free-rider problems, the Area of Influence method used to define voting rights, and transactions costs. This paper re-examines the history and economics of the Fourth Line. The delay to the Fourth Line was short (a year and a half rather than many years) and enabled a significant reduction in construction costs. Externalities, free-riding, the Area of Influence method and transactions costs were not problematic. The Fourth Line was initially rejected because it was unprofitable to key beneficiaries. Far from being much needed, the Fourth Line was not economic because the congestion it avoided was worth less than the cost of building it. It had become more economic to transport gas to generate electricity near Buenos Aires than to transmit electricity over long distances. The location of subsequent power stations reflected this. Even though the presence of a subsidy meant that the Public Contest method did not prevent the building of the Fourth Line, it nonetheless forced a much-needed reappraisal of traditional transmission investment policy.
Legal, Political and Economic Dynamics, 2014
Telecommunications Policy - TELECOMMUN POLICY, 2006
In many countries there is widespread concern at the level of mobile termination charges. This is... more In many countries there is widespread concern at the level of mobile termination charges. This is attributable to the bottleneck monopoly created by the Calling Party Pays (CPP) principle. It has led to increasingly severe price controls on termination charges. Regulatory experience in the three foremost such countries (UK, Australia and New Zealand) suggests that price controls are of limited effectiveness in aligning termination charges with costs, that net welfare gains from controls are small and that costs of setting controls are high.The Receiving Party Pays (RPP) principle, which applies in North America and several Asian countries, avoids the bottleneck monopoly problem. After allowing for various economic and technical average revenue (price) per call is significantly lower with RPP, average minutes of usage per subscriber are significantly higher and the mobile penetration rate is not significantly different. Handset subsidies seem to be lower in the US (with RPP) than in ...
In the last two decades many major regulatory issues in Florida have been resolved by means of st... more In the last two decades many major regulatory issues in Florida have been resolved by means of stipulated settlements between the utilities and interested parties, notably the Office of Public Counsel, instead of by the traditional method of hearings and litigation before the Public Services Commission. This paper investigates the extent, nature and effects of these stipulations in the electricity sector there. They have now largely superceded the litigated process. Their purpose is not to save costs, which are orders of magnitude less than the revenues at stake. Stipulations have brought reductions in electricity revenues worth over $3 billion, mainly during the last decade. These reductions are greater than would have otherwise occurred: about three quarters might never have occurred at all. In some cases a change in the method of rate reduction favoured industrial consumers but other customers are nonetheless likely to have benefited despite this. Some benefits were outside the s...
Utilities Policy, 2006
What measures are needed to protect customers when a utility market is first opened to competitio... more What measures are needed to protect customers when a utility market is first opened to competition? In the UK, residential (domestic) customers must be able to terminate energy contracts at 28 days' notice. This rule was introduced as a transitional protection for customers and for competition. However, the regulatory justification for the rule seems to have evolved over time.
Utilities Policy, 2009
JEL classification: L51 L97 L94 L95
Utilities Policy, 2006
... In the late 1960s and early 1970s the rises in oil prices, inflation and interest rates ... A... more ... In the late 1960s and early 1970s the rises in oil prices, inflation and interest rates ... AlternativeDispute Resolution (ADR) mechanisms (sometimes including settlements) were also proposed. 7. ... and CAB), has had signal success in settling rate cases especially for gas pipelines. ...
Utilities Policy, 1992
This paper reviews some of the major developments since electricity privatization. The new arrang... more This paper reviews some of the major developments since electricity privatization. The new arrangements have proved entirely workable. There have been encouraging developments in competition in generation and supply, The over 1MW supply market is now open to competition. Where competition is not presently effective explicit measures have been taken to protect customers such as setting Guaranteed Standards of Service. There have been some areas of concern. Problems in the Pool have demonstrated the ability of the major generators to influence prices. The choice of contracts for customers in the competitive market has been unduly restricted. However further benefits for customers can be achieved in due course.
Journal of Regulatory Economics, 2009
US utility regulation is evolving. Negotiated or stipulated settlements have begun to replace or ... more US utility regulation is evolving. Negotiated or stipulated settlements have begun to replace or supplement litigation, but relatively little seems to be known about this practice. This paper presents evidence from Florida. During 1976-2002, 30% of earnings reviews were settled by stipulations involving the Office of Public Counsel but only 7% of company requests. The mean value of a rate reduction was eight times larger with a stipulation than without; the median value was more than 50 times larger. Over three quarters of the rate reductions associated with earnings reviews derived from these stipulations; excluding one exceptional case the proportion was 94%.
Journal of Regulatory Economics, 2012
Economists acknowledge the problems of regulated transmission but have different views on the lik... more Economists acknowledge the problems of regulated transmission but have different views on the likely efficiency of merchant transmission. This paper first examines the evidence on alleged market failure and regulatory failure as experienced in practice in Australia, where there have been both regulated and merchant interconnectors. Merchant transmission has generally not exhibited the standard examples of market failure but regulated transmission generally has exhibited the standard examples of regulatory failure. Imperfect information-more specifically, in the form of lack of coordination-has often been a challenge whatever the approach. Experience in Argentina suggests that transactions costs are not a barrier to negotiation and efficient investment determined by users. Policy should seek to improve the regulatory framework and to remove barriers to private initiatives. An important role for regulation is to facilitate coordination between potential providers and users of transmission lines.
This paper examines the history of the various actual and proposed interconnectors between New So... more This paper examines the history of the various actual and proposed interconnectors between New South Wales and Victoria into South Australia. It covers the period from the earliest proposal for a regulated interconnector to the recent Victoria Supreme Court review and the latest ministerial proposals. It finds, inter alia, that the Supreme Court decision is likely to have strengthened, in a beneficial way, the regulatory regime for dealing with merchant interconnectors and the obligations on incumbent transmission companies. It finds that none of the proposals for regulated interconnectors did or would have passed the regulatory tests as formulated in terms of aggregate benefits to all market participants. It finds that neither of the merchant interconnectors (into South Australia and Queensland) are likely to have been profitable. It sees a possible explanation for the construction of regulated interconnectors in terms of the benefits to customers, or in terms of bringing about a single competitive market. Above all, it illustrates the political context in which decisions on interconnectors have been made, and the need to take account of such motivations when comparing the likely effects of regulated interconnectors versus merchant interconnectors.
Entreprises et histoire, 2004
Energy Policy, 2012
Interstate gas pipelines and their customers presently settle about 90% of the rate cases set for... more Interstate gas pipelines and their customers presently settle about 90% of the rate cases set for hearing before the Federal Energy Regulatory Commission (FERC). This paper sets out the process by which this is achieved, illustrating with the 12 rate cases from 2008 and 2009. In contrast to many other jurisdictions, FERC Trial Staff play an active role in facilitating negotiation and settlement. They propose a first settlement offer 3 months after a pipeline files for a tariff rate increase. Thereafter, the regulatory aim is to bring the parties into agreement, not to impose an outcome upon them. This is a different role for the regulatory body than was previously apparent. The process has worked increasingly successfully and essentially unchanged for over 35 years. The conventional regulatory litigation process is now only an occasional means of dispute resolution. The paper also discusses and illustrates why parties prefer settlement to litigation, what difference it makes, which cases tend to settle, what might account for the increasing frequency of settlements over time, the recent phenomenon of pre-filing settlements and the settlement of section 5 (rate reduction) cases brought by FERC.
Energy Economics, 2008
Argentina's 1992 electricity reform introduced the Public Contest method, which made major expans... more Argentina's 1992 electricity reform introduced the Public Contest method, which made major expansions of the transmission system the responsibility of users rather than the transmission company or regulatory body. It was sometimes said that the incentives and penalties on distribution companies were inadequate, and that they did not support transmission expansions to improve quality of service, notably a reserve transformer in the tourist town of Bariloche. We note that, in practice, the incentives and penalties varied significantly between Federal and provincial jurisdictions. Although the penalties were scheduled to increase over time at the Federal level, the Federal regulator ENRE reduced the severity of their enforcement, thereby reducing the incentive to support expansions. In practice, however, distribution companies supported all but 2 of 14 expansions proposed by the transmission concessionaire. In both these exceptional cases the provincial regulators opposed the expansion. At Bariloche, the provincial regulators argued that there were better ways of providing the quality of service, and refused to allow the distribution companies to pass-through the costs to customers. Later, provincial regulators began to introduce improved arrangements for enabling distribution companies to pay for transmission expansions.
Energy Economics, 2008
In 1992, Argentina introduced the Public Contest method, which required transmission users to pro... more In 1992, Argentina introduced the Public Contest method, which required transmission users to propose, vote and pay for major expansions of the electricity transmission system. Economists, consultants, the regulator and others held the application of this method to be unsuccessful, mainly on the ground that "for many years" it delayed investment in a "much needed" Fourth Line to Buenos Aires. The commentators blamed externalities, free-rider problems, the Area of Influence method used to define voting rights, and transactions costs. This paper re-examines the history and economics of the Fourth Line. The delay to the Fourth Line was short (a year and a half rather than many years) and enabled a significant reduction in construction costs. Externalities, free-riding, the Area of Influence method and transactions costs were not problematic. The Fourth Line was initially rejected because it was unprofitable to key beneficiaries. Far from being much needed, the Fourth Line was not economic because the congestion it avoided was worth less than the cost of building it. It had become more economic to transport gas to generate electricity near Buenos Aires than to transmit electricity over long distances. The location of subsequent power stations reflected this. Even though the presence of a subsidy meant that the Public Contest method did not prevent the building of the Fourth Line, it nonetheless forced a much-needed reappraisal of traditional transmission investment policy.