BEECHER - NAWC

Water ComparedAlternative ModelsTable 4-7 (continued)Regulatory AssumptionsalternativeContract-Based RerulationTechnical Technology limits Moderate tocompetition but operations high.are separable fromRecognizesownershio.monopolyEconomic Contracts can be bid character ofcompetitively; contractors water andhave adequate incentives dominance offor cost control.pubicInstitutional Local governments can ownership.provide adequateoversight; contractsprovide effective oversightvehicles.Performance-Based RegulationTechnical Technology allows Moderate.substantial service Requires aunbundling anddegree ofcompetition; performance competition (orbenchmarks can be contestability);established.establishingEconomic Competitive markets and performanceconsumer choice will benchmarks canexpand and drivebe difficult.investment and prices forsome services.Institutional Regulation should focus onperformance rather thancosts; incentive regulationcan ensure performance,and protect consumers.ModelEnsure performancethrough contract-basedincentives.Manage costs throughcontract provisions andperformance rewards andPenalties.Maintain localgovernmental controland oversight; does notrequire commissionregulation.Ensure performancethrough benchmarkingand a system ofregulatory incentives.Allow markets to shapeutility investment andpricing decisions;provide efficiencyincentives.Shift focus of regulationand replace traditionalmodel with one or moreof many availableincentive mechanisms(such as price or revenuecaps, indexing, profitsharing).Efficacy ofthemodelModerate.Competition is notsustained andcontractors can bemonopolistic;model fails topromote longtermprivateinvestment orconsolidationbeyond localgovernmentboundaries.Moderate tohigh. Clearer andenhancedperformanceincentives may beappropriate; canbe combined withstructuredcompetition.Dere~ulationTechnical Technology allows full Low.competition for unbundled Inconsistentservices.with persistentEconomic Competition will drive monopolydemand, investments and power of waterprices for all services and utilities (marketprices will fall.failure issues).Institutional Competitive markets and~onsumer choice willflourish; economicregulation will not beneeded.Ensure performancethrough competition.Allow market-basedinvestment and pricingdecisions.Eliminate economicregulation. Defer toother institutions forconsumer protection.Low.Would notadequately protectratepayers orinvestors, orpromote watersectorgoals (suchas safety, quality,and reliability).NAWC 91September 1998