Competitive Bidding for a Long-term Electricity Distribution Contract

Stephen Littlechild

Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge

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.

Keywords: franchise bidding; contracting out; natural monopoly; electricity; regulation; Public Fianance Initiative (search for similar items in EconPapers)
JEL-codes: L33 L51 L94 Q48 (search for similar items in EconPapers)
Pages: 38
Date: 2001-07
New Economics Papers: this item is included in nep-ene, nep-ent and nep-net
Note: IO
References: Add references at CitEc
Citations: View citations in EconPapers (1)

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Journal Article: Competitive Bidding for a Long-Term Electricity Distribution Contract (2002)
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