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Competitive Bidding for a Long-term Electricity Distribution Contract

Author

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  • Littlechild, S.C.

Abstract

Demsetz (1968) advocated competitive bidding as a replacement for natural monopoly regulation. Williamson (1976) and Goldberg (1976) argued that these problems of natural monopoly regulation are inherent in long-term investment under uncertainty, and that both long- and short-term franchising contracts may be more problematic than regulation. Williams illustrated this argument with the problems experienced in bidding to provide cable TV in Oakland. London Underground recently put out top tender to provide cable (thirty-year) contract for operation, maintenance, repair and renewal of its electricity distribution network. The evidence of this contract suggests that competitive bidding to provide a natural monopoly service is feasible and advantageous. The problems in Oakland CATV case were not encountered. However, the contract involves considerable resources to formulate and monitor, and envisages repeated modification and additional works. The possibility of competitive contracting to replace or supplement utility network regulation deserves further consideration.

Suggested Citation

  • Littlechild, S.C., 2001. "Competitive Bidding for a Long-term Electricity Distribution Contract," Cambridge Working Papers in Economics 0112, Faculty of Economics, University of Cambridge.
    • Handle: RePEc:cam:camdae:0112
    Note: IO
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    Cited by:

    1. Ruiz Diaz, Gonzalo, 2017. "The contractual and administrative regulation of public-private partnership," Utilities Policy, Elsevier, vol. 48(C), pages 109-121.
    2. Lalive, Rafael & Schmutzler, Armin, 2008. "Exploring the effects of competition for railway markets," International Journal of Industrial Organization, Elsevier, vol. 26(2), pages 443-458, March.
    3. Bell, Matthew, 2003. "Regulation in developing countries is different: avoiding negotiation, renegotiation and frustration," Energy Policy, Elsevier, vol. 31(4), pages 299-305, March.
    4. Luc Baumstark & Claude Ménard & William Roy & Anne Yvrande-Billon, 2005. "Modes de gestion et efficience des opérateurs dans le secteur des transports urbains de personnes," Post-Print halshs-00103116, HAL.
    5. Agrell, Per J. & Bogetoft, Peter & Mikkers, Misja, 2013. "Smart-grid investments, regulation and organization," Energy Policy, Elsevier, vol. 52(C), pages 656-666.
    6. Paul Grout & Silvia Sonderegger, 2006. "Simple money-based tests for choosing between private and public delivery: a discussion of the issues," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 29(1), pages 93-126, September.
    7. Chiara D'Alpaos & Cesare Dosi & Michele Moretto, 2005. "Concession lenght and investment timing flexibility," Working Papers ubs0502, University of Brescia, Department of Economics.
    8. Daniel Albalate & Germà Bel & Joan Calzada, 2010. "Urban transport governance reform in Barcelona," IREA Working Papers 201009, University of Barcelona, Research Institute of Applied Economics, revised Jun 2010.
    9. Jon Stern, 2003. "Regulation and Contracts for Utility Services: Substitutes or Complements? Lessons from UK Railway and Electricity History," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 6(4), pages 193-215.
    10. Emiel Maasland & Sander Onderstal, 2006. "Going, Going, Gone! A Swift Tour of Auction Theory and Its Applications," De Economist, Springer, vol. 154(3), pages 481-481, September.
    11. Saplacan, Roxana, 2008. "Competition in electricity distribution," Utilities Policy, Elsevier, vol. 16(4), pages 231-237, December.
    12. Xeni Dassiou & Jon Stern, 2009. "Infrastructure Contracts: Trust and Institutional Updating," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 35(1), pages 171-216, September.
    13. Eshien Chong & Freddy Huet & Stéphane Saussier & Faye Steiner, 2006. "Public-Private Partnerships and Prices: Evidence from Water Distribution in France," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 29(1), pages 149-169, September.
    14. Del Bo, Chiara F., 2013. "FDI spillovers at different levels of industrial and spatial aggregation: Evidence from the electricity sector," Energy Policy, Elsevier, vol. 61(C), pages 1490-1502.
    15. Marques, Rui Cunha, 2017. "Why not regulate PPPs?," Utilities Policy, Elsevier, vol. 48(C), pages 141-146.
    16. Marques, Rui Cunha & Berg, Sanford V, 2010. "Revisiting the strengths and limitations of regulatory contracts in infrastructure industries," MPRA Paper 32890, University Library of Munich, Germany.
    17. J.A. den Hertog, 2010. "Review of economic theories of regulation," Working Papers 10-18, Utrecht School of Economics.

    More about this item

    Keywords

    franchise bidding; contracting out; natural monopoly; electricity; regulation; Public Fianance Initiative;
    All these keywords.

    JEL classification:

    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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