SECTORS AND THEIR CHARACTERISTICS Sebastian Morris
Higher education Municipal water Airlines Electricity Scale (sweet point) 15000 enrolment 1 m-2 m 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, Ph. D; Subjects and disciplines waste and drinking; pressure and pipe size Short /long few; but possible interruptible, voltage contestable natural monopoly in important segment Natural No; none of the classic natural Monopo segments, but significant monopoly in most ly scale import 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, consumer side conveniences network, load flow Measurabi Possible lity of output possible Any nonexclude segments nil nil Possible segments Nil
Quality (ex-ante 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 No, but industry ability of attempts can be quality distortionary/ perverse possible; through some dimensions being reduced to hygiene factors weakly , but relative quality measures expost possible; through some dimensions being reduced to hygiene factors 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 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
Repeat consumptio n in consumption status, but choice typically once 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 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 Moderate for necessary, of income, and high for discretionary can increase at higher incomes but then declines. weakly Operati Fixed assets, onal land, operations (faculty), land, equipm ent 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
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