regime, opportunities for pricing regulation in the first ex post reviewing of capital place? expenditures, and in some The real redundant asset, in limited circumstances, the case where workable stranding of capital competitive forces are investments made during of evident, would appear to be the previous regulatory the original regulatory and period that are in excess of institutional regime. original allowances, are It is unclear whether this is already tools being trialled in the circumstance the upcoming decisions. community now, but Practical Alternatives – emerging competition and which is the better increasing pricing constraints approach? seem to be, if anything, good If regulatory write-downs reasons for evolution to a are not the answer, the leaner and more flexible question remains: how regulatory regime; rather than should network regulators one that features scope for and policy makers think ad hoc confiscation. about some of the drivers In particular, emergence of that lead to this issue being competition should direct raised? attention to adaptable Economically speaking, the frameworks, and calibrated logical question to ask is: if forms of price control to any networks prices are residual areas of ‘bottleneck’ established to be power. Also, the results of commercially constrained by ENA’s quantitative competing technologies, analysis show the should the community strong consumer benefit in continue to expend significant capacity to efficiently finance resources applying costly long-lived capital investments. Focus must
regime, opportunities for ex post reviewing of capital expenditures, and in some limited circumstances, stranding of capital investments made during of the previous regulatory period that are in excess of original allowances, are already tools being trialled in upcoming decisions. Practical Alternatives – which is the better approach? If regulatory write-downs are not the answer, the question remains: how should network regulators and policy makers think about some of the drivers that lead to this issue being raised? Economically speaking, the logical question to ask is: if networks prices are established to be commercially constrained by competing technologies, should the community continue to expend significant resources applying costly pricing regulation in the first place? The real redundant asset, in the case where workable competitive forces are evident, would appear to be the original regulatory and institutional regime. It is unclear whether this is the circumstance the community now, but emerging competition and increasing pricing constraints seem to be, if anything, good reasons for evolution to a leaner and more flexible regulatory regime; rather than one that features scope for ad hoc confiscation. In particular, emergence of competition should direct attention to adaptable frameworks, and calibrated forms of price control to any residual areas of ‘bottleneck’ power. Also, the results of ENA’s quantitative analysis show the strong consumer benefit in capacity to efficiently finance long-lived capital investments. Focus must
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