Publications
Regulatory Pricing and Access Issues
OCCASIONAL PAPER
The issues for Victoria and Australia are:
* the structure and powers of the regulatory agencies
* the services to be regulated
* the standards that should be regulated
* the "just" price for the regulated services
* ensuring information is available to make satisfactory regulatory decisions without imposing undue cost on the businesses and regulators.
Pricing of "essential" facilities is likely to be the most controversial aspect of the Victorian privatisation process. It is presents issues of vast importance in view of the "sunk" nature of the costs of provision.
The key task for a regulator is to determine the "just" price---the price that would emerge if the market were fully competitive. A test in determining whether a regulated price for a sunk asset provides the correct incentives is to ask whether that price would have been sufficient to justify the investment had it been stipulated prior to the system being built.