LEANZ, Law and Economics in New Zealand

Next Wellington Seminar

Next Wellington Seminar


Topic:      Should Customer-owned Monopolies face Different Regulation than Investor-owned Firms?

Speaker:  Richard Meade, Principal, Cognitus Advisory Services Limited and Senior Research Fellow, Department of Economics, AUT University


Date:        Tuesday, 20 October 2015

Venue:      Meredith Connell, Level 13, Pencarrow House 58 - 66 Jervois Quay, Wellington 6011

Time:        From 5.30pm for refreshments for 6pm seminar start

RSVP:      Capacity has now been reached, however, there is a waiting list:  andreas.heuser@treasury.govt.nz

About the topic:


Electricity regulators recognise that regulating for efficiency can cause sacrifices in service quality. However, they are yet to determine how to trade off efficiency and quality. Also, many regulated firms are customer-owned, such as electricity lines companies in New Zealand. This means they pursue different objectives to investor-owned firms, changing the rationale for regulation, and its effectiveness. This seminar shows that customer ownership changes the efficiency-quality regulation of network monopolies, such as electricity, gas or water distributors. Customer-owned firms optimally set weaker performance incentives for their managers than investor-owned firms. This predicts higher quality but lower efficiency in customer-owned firms, although regulation can serve to reverse this. Such firms also present regulators with extra paths to influence managers. Failing to account for these ownership differences risks regulation creating unnecessary distortions. On the flipside, the presence of customer ownership suggests a way to optimally determine regulators’ efficiency-quality trade-off.


About the speaker:

Richard is Principal of economic consultancy Cognitus Advisory Services Limited, a Senior Research Fellow at AUT University, and lecturer at University of Auckland. He founded Cognitus in 2002, which provides economic advice, analysis, research and representation, including in antitrust and regulation. This followed a first career in investment banking, working mainly in M&A and valuation. Richard’s AUT research focuses on antitrust and regulation, as well as contracting and incentives. Previously he was a Research Principal at the New Zealand Institute for the Study of Competition and Regulation (ISCR). His main research there was on electricity sector organisation and regulation. Richard recently returned to New Zealand after completing five years at Toulouse School of Economics. There he was awarded a PhD in industrial organisation and regulation, with Distinction.

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