BEECHER - NAWC

Water ComparedAlternative ModelsFinally, deregulation surrenders state control to the marketplace, based on the belief thatconsumer choice and other market forces will discipline the economic behavior of the utility. provider. Deregulation presumes that market failures (such as imperfect information) will beminimal. Deregulation places a high value on consumer choice, but the model also canappear to undervalue some traditional policy goals (such as reliability).General advantages and disadvantages of each approach, based on contemporary regulatorytheory, are compared in Table 4-3. This analysis generally does not consider methods ofsocial control outside of the general economic regulatory paradigm, some of which might berelevant in the context of deregulation. These methods include antitrust litigation, generalconsumer-protection regulation, and general certification or licensure.Table 4-2Regulatory Models and Modes of Social ControlModel Public ownership Economic regulation by state Competitive marketpublic utility commissionsTraditional -- Ratebase/rate-of-retum --regulationregulationStructured -- Modified ratebase/rate-of- Competitivecompetition return regulation, attention to incentivesdisincentives and incentives,and possible extension ofjurisdiction to all water utilitiesto level the playing fieldContract- Contracts with -- Competitivebased local incentivesregulation governments; canbe highlycompetitive attime of biddingPerformance- -- Performance-based Competitivebased ratemaking, including price incentivesregulationand revenue caps, etc.Deregulation -- -- Competition andnoneconomicregulatory,Source: Author s construct.mechanisms83 September 1998