1 An economist and energy regulation Pippo Ranci Professor of economic policy, Università...
-
Upload
lee-griffith -
Category
Documents
-
view
216 -
download
2
Transcript of 1 An economist and energy regulation Pippo Ranci Professor of economic policy, Università...
![Page 1: 1 An economist and energy regulation Pippo Ranci Professor of economic policy, Università Cattolica, Milano Director, Florence School of Regulation Course.](https://reader036.fdocuments.in/reader036/viewer/2022073121/56649e4a5503460f94b3e081/html5/thumbnails/1.jpg)
1
An economist and energy regulation
Pippo RanciProfessor of economic policy, Università Cattolica, Milano
Director, Florence School of Regulation Course on Public Regulation and Competition
CEDIPRE, Universidade de Coimbra 28 October 2005
![Page 2: 1 An economist and energy regulation Pippo Ranci Professor of economic policy, Università Cattolica, Milano Director, Florence School of Regulation Course.](https://reader036.fdocuments.in/reader036/viewer/2022073121/56649e4a5503460f94b3e081/html5/thumbnails/2.jpg)
2
An economist and energy regulation
a few personal notes a professor of economic policy 1996-2003: chaired the Italian regulatory
authority for electricity and gas a period of intense change in utilities:
liberalisation and privatisation, new regulation description of developments, analysis of
reasons, and a report from experience
![Page 3: 1 An economist and energy regulation Pippo Ranci Professor of economic policy, Università Cattolica, Milano Director, Florence School of Regulation Course.](https://reader036.fdocuments.in/reader036/viewer/2022073121/56649e4a5503460f94b3e081/html5/thumbnails/3.jpg)
3
An economist and energy regulation
Three fundamental changes, three chapters of my story:
1. Incentive-oriented regulation of monopoly
2. From monopoly to competition: liberalisation and the role of the regulator
3. A different public administration
![Page 4: 1 An economist and energy regulation Pippo Ranci Professor of economic policy, Università Cattolica, Milano Director, Florence School of Regulation Course.](https://reader036.fdocuments.in/reader036/viewer/2022073121/56649e4a5503460f94b3e081/html5/thumbnails/4.jpg)
4
1. Incentive-oriented regulation of monopoly: the origin
Historically, public utilities had no incentive to be efficient, to increase productivity
Innovation in the UK, 1983 (the Littlechild report on telecoms)
The recipe for efficiency: Competition wherever possible Incentive oriented regulation of monopoly,
where inevitable Adopted universally in the 1990s
![Page 5: 1 An economist and energy regulation Pippo Ranci Professor of economic policy, Università Cattolica, Milano Director, Florence School of Regulation Course.](https://reader036.fdocuments.in/reader036/viewer/2022073121/56649e4a5503460f94b3e081/html5/thumbnails/5.jpg)
5
1. Incentive-oriented regulation of monopoly:price caps
a) regulation of prices (tariffs) A “price cap” set for a number of years Decreasing at a predetermined rate If the company reduces costs it makes
profits If costs stay constant, the company faces
losses
![Page 6: 1 An economist and energy regulation Pippo Ranci Professor of economic policy, Università Cattolica, Milano Director, Florence School of Regulation Course.](https://reader036.fdocuments.in/reader036/viewer/2022073121/56649e4a5503460f94b3e081/html5/thumbnails/6.jpg)
6
1. Incentive-oriented regulation of monopoly:how price caps work
0
5
10
15
20
25
1 2 3 4 5 6 7
year
va
lue
s
tariff
costs - noincentive
costs underprice cap
![Page 7: 1 An economist and energy regulation Pippo Ranci Professor of economic policy, Università Cattolica, Milano Director, Florence School of Regulation Course.](https://reader036.fdocuments.in/reader036/viewer/2022073121/56649e4a5503460f94b3e081/html5/thumbnails/7.jpg)
7
1. Incentive-oriented regulation of monopoly:problems in tariff setting
Tariff setting requires many hard choices: Measuring running costs Evaluating assets Setting a recognised rate of return on
assets Setting a rate of productivity increase Determining the period of regulation
![Page 8: 1 An economist and energy regulation Pippo Ranci Professor of economic policy, Università Cattolica, Milano Director, Florence School of Regulation Course.](https://reader036.fdocuments.in/reader036/viewer/2022073121/56649e4a5503460f94b3e081/html5/thumbnails/8.jpg)
8
1. Incentive-oriented regulation of monopoly:quality regulation
b) regulation of quality Quality standards (time of connection,
change of contract, repairs, response to complaints, meter reading, frequency of billing, treatment of customers)
The tariff corresponds to a minimum level of quality
Lower quality implies fines or compensation of customers
![Page 9: 1 An economist and energy regulation Pippo Ranci Professor of economic policy, Università Cattolica, Milano Director, Florence School of Regulation Course.](https://reader036.fdocuments.in/reader036/viewer/2022073121/56649e4a5503460f94b3e081/html5/thumbnails/9.jpg)
9
1. Incentive-oriented regulation of monopolyRegulating technical quality of electricity: continuity of service in Italy (number and
duration of interruptions)
Gruppo Enel - Miglioramenti di continuità obbligatori
0
30
60
90
120
150
180
210
240
270
300
1998 1999 2000 2001 2002 2003 2004
Anno
Min
uti
Nord
Centro
Sud (senzaSic.Camp.Cal.)
Sud (soloSic.Camp.Cal.)
Italia
![Page 10: 1 An economist and energy regulation Pippo Ranci Professor of economic policy, Università Cattolica, Milano Director, Florence School of Regulation Course.](https://reader036.fdocuments.in/reader036/viewer/2022073121/56649e4a5503460f94b3e081/html5/thumbnails/10.jpg)
10
1. Incentive-oriented regulation of monopoly:
conditions for effectiveness
An incentive-oriented regulation only works if the utility is a profit-oriented company
(this may allow privatisation) Usually, profits increase… …and consumers benefit If government does not interfere: the
framework must be stable
![Page 11: 1 An economist and energy regulation Pippo Ranci Professor of economic policy, Università Cattolica, Milano Director, Florence School of Regulation Course.](https://reader036.fdocuments.in/reader036/viewer/2022073121/56649e4a5503460f94b3e081/html5/thumbnails/11.jpg)
11
2. From monopoly to competition: liberalisation
The European strategy for energy liberalisation Electricity directives: 1996, 2003 Gas directives: 1998, 2003
Separate the networks (unbundling) All other activities are free in a single
European market Regulation ensures access to the
networks
Applications differ across Europe
![Page 12: 1 An economist and energy regulation Pippo Ranci Professor of economic policy, Università Cattolica, Milano Director, Florence School of Regulation Course.](https://reader036.fdocuments.in/reader036/viewer/2022073121/56649e4a5503460f94b3e081/html5/thumbnails/12.jpg)
12
2. From monopoly to competition an unbundled tariff: electricity in Italy
ELETTRICITÀ: ANDAMENTO DELLE COMPONENTI TARIFFARIEcentesimi di euro/kWh
5,79 5,79 5,795,28
4,69 4,75 4,75
0,86 1,18 0,99
0,86
0,351,00 1,21
2,602,56
2,13 3,16 5,55 4,104,34
mag 1997 gen 1998 gen 1999 gen 2000 gen 2001 gen 2002* nov 2002
* Sino al 2001 il valore medio della componente a copertura dei costi fissi di generazione, trasporto e distribuzione è calcolato sull'insieme dei clienti liberi e vincolati, mentre dal 2002 è calcolato sui soli clienti vincolati.
componente a copertura del costo del combustibile
componente a copertura dei costi sostenuti nell'interesse generale
componente a copertura dei costi fissi relativi al servizio di generazione, trasmissione e distribuzione
9,269,54
8,919,30
10,59
9,85
10,30
![Page 13: 1 An economist and energy regulation Pippo Ranci Professor of economic policy, Università Cattolica, Milano Director, Florence School of Regulation Course.](https://reader036.fdocuments.in/reader036/viewer/2022073121/56649e4a5503460f94b3e081/html5/thumbnails/13.jpg)
13
2. From monopoly to competition market power
Incumbent energy companies
have market power In a market for a commodity or a
manufactured product a market share of 50% does not necessarily create a competition problem
In electricity there is no storage: if a company’s plants are necessary at peak time, the company can set the price (residual supply criterion)
![Page 14: 1 An economist and energy regulation Pippo Ranci Professor of economic policy, Università Cattolica, Milano Director, Florence School of Regulation Course.](https://reader036.fdocuments.in/reader036/viewer/2022073121/56649e4a5503460f94b3e081/html5/thumbnails/14.jpg)
14
2. From monopoly to competition market power in the UK
(from David Newbery, Cambridge University )
![Page 15: 1 An economist and energy regulation Pippo Ranci Professor of economic policy, Università Cattolica, Milano Director, Florence School of Regulation Course.](https://reader036.fdocuments.in/reader036/viewer/2022073121/56649e4a5503460f94b3e081/html5/thumbnails/15.jpg)
15
2. From monopoly to competition market power
How can we create competition in the electricity market?
Enlarge the market: remove barriers, build interconnectors
Impose a slimming of companies: Italy’s Enel was forced to sell 30% of its
generating capacity Impose sales of capacity for a few
years, on fixed price contracts (virtual power plants)
![Page 16: 1 An economist and energy regulation Pippo Ranci Professor of economic policy, Università Cattolica, Milano Director, Florence School of Regulation Course.](https://reader036.fdocuments.in/reader036/viewer/2022073121/56649e4a5503460f94b3e081/html5/thumbnails/16.jpg)
16
3. A different public administration:new institutions
In 1995 a regulatory body existed only in the UK and in the Nordic countries
Today we have 25 energy regulators in the Union, linked in an association (CEER) and in a group (ERGEG) providing advice to the EC
Regulators in Eastern Europe, in other continents
Good practices develop
![Page 17: 1 An economist and energy regulation Pippo Ranci Professor of economic policy, Università Cattolica, Milano Director, Florence School of Regulation Course.](https://reader036.fdocuments.in/reader036/viewer/2022073121/56649e4a5503460f94b3e081/html5/thumbnails/17.jpg)
17
3. A different public administration:new procedures
Stakeholders consulted openly and publicly
Decisions preceded by documents for consultation
Motivations expressed Decisions can be appealed The Courts check that decisions are
consistent with mandate
![Page 18: 1 An economist and energy regulation Pippo Ranci Professor of economic policy, Università Cattolica, Milano Director, Florence School of Regulation Course.](https://reader036.fdocuments.in/reader036/viewer/2022073121/56649e4a5503460f94b3e081/html5/thumbnails/18.jpg)
18
3. A different public administration:a new frame for policy
A weakening of politics? No As in the historic case of the central
bank: the advantage of tying one’s hands
To avoid temptation of abuse To reduce uncertainty (the regulatory risk) To maximise the contribution of private
decisions to public goals
![Page 19: 1 An economist and energy regulation Pippo Ranci Professor of economic policy, Università Cattolica, Milano Director, Florence School of Regulation Course.](https://reader036.fdocuments.in/reader036/viewer/2022073121/56649e4a5503460f94b3e081/html5/thumbnails/19.jpg)
19
3. A different public administrationneeded in the 21st century
Essential frame for public policy A balance of powers and a role for
technical bodies Reliance on markets, corrected for
imperfections Parliament and government set goals
and take basic decisions, independent regulators ensure the working of the markets