Methods and Trends of Performance Benchmarking in UK Utility Regulation

Dassler, T., Parker, D. and Saal, D. 2006. Methods and Trends of Performance Benchmarking in UK Utility Regulation. Utilities Policy. 14 (3), pp. 166-174. doi:10.1016/j.jup.2006.04.001

TitleMethods and Trends of Performance Benchmarking in UK Utility Regulation
AuthorsDassler, T., Parker, D. and Saal, D.
Abstract

Regulation is subject to information asymmetries that can lead to allocative and productive inefficiencies. One solution, suggested by Shleifer in 1985 and now adopted by many regulatory bodies round the world, is ‘benchmarking’, which is sometimes called ‘yardstick competition’. In this paper we consider Shleifer's original approach to benchmarking and contrast this with the actual use of benchmarking by UK regulatory bodies in telecommunications, water and the energy sector since the privatizations of the 1980s and early 1990s. We find that benchmarking plays only one part and sometimes a small part in the setting of regulatory price caps in the UK. We also find that in practice benchmarking has been subject to a number of difficulties, which mean that it is never likely to be more than one tool in the regulator's armoury. The UK's experience provides lessons for regulation internationally.

KeywordsBenchmarking; Yardstick competition; Utility regulation; UK
JournalUtilities Policy
Journal citation14 (3), pp. 166-174
ISSN0957-1787
Year2006
PublisherElsevier
Digital Object Identifier (DOI)doi:10.1016/j.jup.2006.04.001
Web address (URL)http://www.sciencedirect.com/science/article/pii/S0957178706000294
Publication dates
Published30 May 2006

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