Competitive Bidding for a Long-Term Electricity Distribution Contract

Review of Network Economics, Vol. 1, March 2002

38 Pages Posted: 6 Dec 2002

See all articles by Stephen C. Littlechild

Stephen C. Littlechild

University of Cambridge - Judge Business School

Abstract

Demsetz (1968) and Posner (1972) suggested competitive bidding as an alternative to natural monopoly regulation. Williamson (1976) and Goldberg (1976) argued that the problems of natural monopoly regulation are inherent in long-term investment under uncertainty. Long- and short-term franchising contracts may be more problematic than regulation. This paper reviews the literature and UK experience. It examines London Underground's recent long-term (thirty-year) contract for its electricity distribution network. This has avoided the Oakland CATV problems described by Williamson, but involves considerable resources to monitor. Competitive contracting seems feasible and advantageous versus public provision. Its merits versus utility regulation warrant further consideration.

Keywords: franchise bidding, contracting out, natural monopoly, electricity, regulation, Public Finance Initiative

JEL Classification: L94

Suggested Citation

Littlechild, Stephen C., Competitive Bidding for a Long-Term Electricity Distribution Contract. Review of Network Economics, Vol. 1, March 2002. Available at SSRN: https://ssrn.com/abstract=337900 or http://dx.doi.org/10.2139/ssrn.337900

Stephen C. Littlechild (Contact Author)

University of Cambridge - Judge Business School ( email )

White House, The Green
Tanworth in Arden
Solihull, West Midlands, B94 5AL
United Kingdom

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