Dealing with natural monopolies

This chapter looks at the nature of utility regulation as it has been conducted in Australia since the 1990s and the manner of the issues that have arisen in its conduct. It looks at the nature of the natural monopoly elements that exist in the utilities sector and the changing perceptions on where these elements lie. Over time the perception has arisen that only parts of the utilities have natural monopoly characteristics, and it is only these that need to be the subject of economic regulation. The role of the regulators and the various approaches to regulation are also examined (including the light-handed approach, rate of return, CPI-X, and efficient cost of service).