Methods and trends of performance benchmarking in UK utility regulation

Regulation is subject to information asymmetries that can lead to allocative and productive inefficiencies. One solution, suggested by Shleifer in 1985 and now adopted by many regulatory bodies round the world, is 'benchmarking', which is sometimes called 'yardstick competition'. In this paper we consider Shleifer's original approach to benchmarking and contrast this with the actual use of benchmarking by UK regulatory bodies in telecommunications, water and the energy sector since the privatizations of the 1980s and early 1990s. We find that benchmarking plays only one part and sometimes a small part in the setting of regulatory price caps in the UK. We also find that in practice benchmarking has been subject to a number of difficulties, which mean that it is never likely to be more than one tool in the regulator's armoury. The UK's experience provides lessons for regulation internationally. © 2006 Elsevier Ltd. All rights reserved.

Control, accounting and value-for-money implications of utility regulation:a literature review

This paper reviews and evaluates the literature concerning the privatisation and regulation of the utility industries in the UK. The economic theories behind and political reasons for the programme are considered to give the reader an appreciation of the environment from which these organisations were born and the implications for their continued existence. Once this has been established the paper then considers the role that accounting has played and will continue to play in these industries. This includes consideration of the technical questions which these new organisations are asking and also the role that accounting has in the organisational structure and culture. It draws as a conclusion that these recently privatised industries provide a unique and rich source for further accounting research.