Fondazione per l’Ambiente Teobaldo Fenoglio ISSAERE 2011
public property, political regulation and independent regulation for the public services Pippo Ranci Università Cattolica, Milano Florence School of Regulation, EUI, Florence
Ranci ISSAERE 2011
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public property, political regulation and independent regulation for the public services
1.
What is “public service”?
2.
The historic role of public ownership
3.
Network services
4.
The rise of regulation
5.
Political regulation vs. independent authorities
6.
Larger markets require coordinated regulation
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1. What is “public service”? •
Traditional (inconsistent) definition: all services provided by public entities
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Meaningful definition (referred to contents): services –
essential to life of individuals, of community
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helpful in reducing inequalities
–
presenting strong externalities (i.e. benefits to third parties who will not pay for them) so that a market economy will under-produce them
–
public goods (non-rival, non-excludable)
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What is “public service” in the EU? •
Reference term is “services of general interest”
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Member states identify them
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Separate treatment of –
“services of general economic interest” are subject to the rules of the EU Treaty: open market, competition or competitive bidding
–
“services of general non-economic interest” are not: usually provided by public entities (these include the typical tasks of the State)
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2. The historic role of public ownership
a. a substitute for missing private initiative and an engine for development b. a provider of public goods c. a remedy to monopoly
d. a remedy to natural monopoly (network services) e. ideology: public (private) is always better Ranci ISSAERE 2011
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The weakness of public ownership •
Government-owned company: conflict between profit maximisation and implementation of political directives (limits of management responsibility)
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evaluation of results: which benchmark?
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growth of markets and competition make the behaviour of public
and private companies similar: then why public ownership? •
privatisation often from Govt need for revenue or inability to fund company growth
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State aid is contrary to trade agreements (and to EU law): what is State aid? Ranci ISSAERE 2011
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The alternatives to public ownership a. good rules, infrastructures, incentives support development b. provision of public goods is contracted out c. large open markets, antitrust law and action against monopoly
d. networks regulated and accessible, services in competition or under competitive bidding e. distrust of all monopolies and of direct link between government and enterprise (ensures protection) Ranci ISSAERE 2011
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3. Network services: the “modern” approach •
separation (unbundling) of networks allows: – –
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when competition is impossible or too costly: ─ ─
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networks under strict public control services provided by companies under competition
service under competitive bidding ownership of network included in bidding, or bidding includes only use of network (value of investment, treatment of employees)
the “old” approach resists change –
culture and interests Ranci ISSAERE 2011
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4. The rise of regulation •
the US tradition of regulation –
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Public Utilities Commissions since early 20th century
the European tradition of public (or semi-public) ownership –
municipal tradition
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large post-war nationalisations (UK, F, I)
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mixed German system
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the revolution of the 1980s –
deregulation, opening of markets, retreat of State ownership
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determinants: development, pursuit of efficiency, technical advance Ranci ISSAERE 2011
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The task of a regulator •
set tariffs for monopolistic services
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promote competition where possible –
access to networks
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set technical standards for safety, interoperability
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promote development of infrastructures using obligations and incentives
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protect weak consumers
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advise Government Ranci ISSAERE 2011
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5. Political regulation vs. independent authorities •
reference case: the rise of independent central banks
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the case for “tying one’s hands” in the regulation of public services –
necessary in presence of Govt-owned companies
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problematic relationship between government and regulator
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the rise of regulatory authorities in energy (www.iern.net) Ranci ISSAERE 2011
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6. Larger markets require coordinated regulation •
the case of the financial markets
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coordination – –
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top-down: treaties, legislation bottom-up: cooperation, information, best practices
EU: will independent regulation help in bridging the “regulatory gap” between –
EU-wide markets and
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national governments? Ranci ISSAERE 2011
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bibliography • Crew M. and D.Parker, International Handbook on Economic Regulation, E.Elgar, 2006 • Henry C. et E. Quinet, Concurrence et service public, l’Harmattan, 2003 • Newbery D., Privatisation, Restructuring and Regulation of Network Utilities, the MIT Press, 1999 • Littlechild S., Regulation, over-regulation and some alternative approaches, European Review of Energy Markets, 3-3, 2009 Ranci ISSAERE 2011
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