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Competitive Bidding for a Long-term Electricity Distribution Contract

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Author Info
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.

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File URL: http://www.econ.cam.ac.uk/dae/repec/cam/pdf/wp0112.pdf
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Publisher Info
Paper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0112.

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Length: 38
Date of creation: Jul 2001
Date of revision:
Handle: RePEc:cam:camdae:0112

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Related research
Keywords: franchise bidding; contracting out; natural monopoly; electricity; regulation; Public Fianance Initiative;

Find related papers by JEL classification:
L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Boundaries of Public and Private Enterprise; 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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