Transcript Slide 1

SECTORS AND THEIR
CHARACTERISTICS
Sebastian Morris
Higher education
Municipal water
Airlines
Electricity
Scale
(sweet
point)
15000 enrolment
1m-2m
40-50 737
type
10000 MW
Scope
Coverage of most
disciplines
Little (waste,
sewerage)
little
(linkages
with other
transport
modes)
little
Range
of
product
s/
services
Many (vocational,
education, training),
Graduate
undergraduate, PhD;
Subjects and disciplines
waste and drinking;
pressure and pipe
size
Short /long
few; but
possible
interruptible
, voltage
Natural
Monopo
ly
No; none of the
segments, but
significant scale
classic natural
monopoly in most
import segment
contestable
natural
monopoly
natural
monopoly in
important
segment
Education
Water
Airlines
Electricity
buildings (C),
house keeping
and board(C),
records (R),
delivery (E),
knowledge
creation (E),
knowledge
dissemination
(E, Complex),
examination (R)
bulk (C,M),
treatment (C,M),
and
distribution(NM),
stand post
(NM), sewerage
collection (NM),
sewerage
treatment and
disposal (C,M)
Baggage (C),
lounge and
carriage (C),
lease (C),
ground handling
(C), flying (NM
with
Contestability),
Maintenance (C)
transmission (ISO and
wires) (NM, Flow, R),
Distribution wires
(NM), supply(C with
market creation),
ancillary services(C
with market creation),
generation (C with
market creation)
Source of
Natural
Monopoly
network
network,
consumer side
conveniences
network, load flow
Measurabi Possible
lity of
output
possible
possible
possible
Any nonexclude
segments
nil
nil
nil
Possible
segments
Nil
Quality
(exante or
immedi
ate)
almost impossiblemeasures developed
like accreditation,
ranking etc are
themselves
distortionary and user
dependent
yes at mains,
and expost
through
pressure, hours
of coverage,
peak pressure,
biological and
chemical quality
difficult but
possible
through
average
delays,
surveys,
accreditation,
rankings etc
simple in terms
of no of
interruptions,
duration, power
factor, variance
of voltage,
harmonics
Measur
ability
of
quality
No, but industry
attempts can be
distortionary/ perverse
possible; through
some
dimensions
being reduced to
hygiene factors
weakly , but
relative quality
measures
expost
possible
possible; through
some
dimensions
being reduced to
hygiene factors
Regulatory
standards and
"harm"
avoidance
Safety
standards and
impact of
measures on
demand, price
-quality
tradeoffs;
weakly
amenable to
club good
Regulatory and
safety standards
and when
customer choice
price
Determi Past quality;
nants of reputation; internal
quality
processes,
idiosyncratic
possibilities large,
culture ethos driven;
price used to signal
quality; extreme
experience good;
highly amenable to
club good possibility
Repeat
consumptio
n
in consumption
status, but
choice typically
once
in consumption
choices can be
made at each unit
of consumption
in consumption but
choices possible
with "marketisation"
for some
Subtractabil
ity in
consumptio
n
no
No; yes, when
supply limited
No; rarely but in
peak possible
In peak possibility
over shorter period
Additivity
benefits of
consumptio
n
Weakly
Significant
through health
nil
very weakly
through avoided
local negative
externalities
(smoke etc)
Externalitie
s
Large and positive
Large and
positive
Weakly
negative
Moderate
through merit
good aspects
US Access
justification
Yes (fairness, but not an
issue because of user
movement)
Strongly Yes
(and locally
provided)
No (unless no
alternative
modes)
Yes (and
locally
provided)
US Use
justification
No (limited by user
capacity, but "mis-use"
can be avoided
Yes Up to
lifeline
consumption
(right and
obligation)
No
No (but merit
good and
weak +
externalities)
Elasticity
with
income
+ after a threshold income + and declines
and then falls, significant
to zero
cultural variations,
individual ability overriding
+ after a
threshold then
never falls
even if it rises
+ slowly
declines with
income after
rising
Price
elasticity
High
Function
al
Segmen
ts of
demand
clubs,
almost no
return,
segments
"joyous,
intrinsic
, fame"
Storabilit no
y
Costs
Low above a level
of income, and
can increase at
higher incomes
but then declines.
weakly
Operati Fixed assets,
onal
land, operations
(faculty)
, land,
equipm
ent
Moderate for necessary,
high for discretionary
low, but segmental
differences, Long
term is higher than
short term
weak club which can be
amplified somewhat,
premium versus luxury,
discretionary versus nondiscretionary; (passenger,
freight and documents/small
parcels)
interruptible versus
regular, constant
price versus
variable price;
no
No (but merit good
and weak +
externalities)
Fixed assets (shiftable),
inputs, operational
Fixed assets,
inputs, operational
Other costs that
consumers bear
Qualifying
education; income
loss: travel lodging
costs
not sign
interconnect, transfer,
not sign
waiting, lodging and
boarding between flights
Asset specificity
high
very high
weak
high
Other sectors to
which the
performance is
linked
high school, overall
development,
culture etc, R&D
no
airports, aircraft, other
modes that compete
equipment,
other
energy
sectors
Critical factor in
performance
faculty
Availability
of water,
operations
equipment,
Maintenance, crews,
staff,
equipment,
maintenan
ce, staff
PP
P
Op
tio
ns
PPP on buildings , housekeeping and
canteen is easy and makes sense
where incumbent failure on these
dimensions is high
Challenge of measurement of quality
in core areas
Challenge of use of price and costs
as an indicator of quality
Impact of changes in long drawn out
Rather than PPP state support
through subsides linked to quantum
(measurable) and quality (very
difficult)
State has often had to itself perform;
then price discipline on private sector
Scope to use public service aspect
Under appropriation is necessary
since quality is dependent upon user
Broad cost regulation or support
levels per unit of usage is important
Regulator /government need to get
into the access issue to prevent
(negative) club good creation
Pricing need to be mixed to attract
better students; role of scholarships
PPP on bulk water, treatment, sewerage
treatment and disposal can be purely
commercial and go by bid fee per unit of output,
throughput (treatment, sewerage treatment), or
capacity and unit of output (bulk water). Demand
variation being low, the demand risk can be
taken by either government or the private sector.
In case of rapid growth (rapid urbanisation
phase), there is an opportunity to put demand
risk on the private sector esp when sources of
water are not limiting
Distribution pipes and water supply are not
easily broken; value of 24*7, Customer tariffs
could be bid basis as long as these do not invite
reaction, Possibility of separating customer
tariffs from costs; access subsidisation rather
than use; scope of IBT. Bids ideally done after
tariffs fixed. Case for subsidy is large. Case for
efficient tariffs as well
Large punitive measures in violating quality and
safety can be imposeed.
USO should be imposed as right and obligation
Transitional options, MOT with payments linked
to water loss and billed sales.
Counsumer groups to monitor quality and supply
can play vital roles
Best is private ownership with regulation on
safety and standards. Free pricing subject
to ceiling?. Enhancing consumer values
through interconnect rules. Route
classification with assignment and
tradability. International contestability for
small markets. Open skies?, payback rules
for lateness, management of airports,
interconnect of terminals and transfer
passenger rules?
Terminal access? or ban of dedicated
terminals for passenger?
Airport pricing and regulation also
determines competitiveness and efficacy
Unbundling with marketisation of
competitive segments, market creation for
generation and ancillary services and
trading. Key issues - nature of market for
energy and capacity separately together or
separately?, transmission pricing,
interregional flows? role of exchanges.
Regulatory approach- price cap or cost plus
in the wires business, independence and
stand alone nature of transmission and
open access to wires of distribution. USO of
obligation to make available and rights for
access.
Quality through reduction of core quality
and safety to "hygiene".
Transmission planning resp. has to be
borne by regulator. Separation of
transmission costs and recovery of the
same from the pricing, which should both
provide the signals for efficient use and for
investment. (nodal pricing, but cost
recovery on pcap or cost plus)
OTHER OPTION IS REGULATION OF
VERTICALLY INTEGRATED MONOPOLY
THROUGH A MIX OF PRICE CAP AND
COST PLUS/ COMPETION IN MARKET