The assessment: Introducing competition into regulated industries

The introduction of competition into utilities is currently being pursued in the many countries, including the UK. Competition can lake various forms, such as competition for outputs, inputs, franchises, and outright takeovers. Attention is currently focused on output competition, whereby customers are being given a choice of final supplier in many industries. We consider the implications of the introduction of such competition, including the effects on industrial structure and contracts, cross-subsidies and distributional concerns, and uncertainty and stranded contracts. We also analyse the transitional problems encountered as competition is introduced and suggest that the UK regulators and government have, in some key respects, failed to define a clear and consistent policy.