As has already been noted the Government is in the process of implementing a commitment in the EU/IMF aid package to re-regulate aspects of the legal profession in Ireland with a view to enhancing competitiveness in the sector. The Legal Services Regulation Bill has been controversial in some of its aspects and UCD School of Law is hosting a conference, drawing in a variety of overseas and local experts, with a view to locating debates within a wider international context.The keynote speaker will be Lynn Mather, Professor of Law & Political Science, Buffalo University. Other speakers include Isolde Goggin, Chair of the Competition Authority, Julian Webb, Professor of Legal Education, University of Warwick and Ferdinand von Prondzynski, Principal of Robert Gordon University, Aberdeen. A full programme and online booking facilities are available at http://www.ucd.ie/reggov/.
Category: Competition policy
The government has announced that it will sell a minority share of the ESB. This is welcome news. Privatization of non-core activities is a matter of principle. The ESB has paid poor dividends. It has frequently been used to bankroll projects of dubious commercial (yet clear electoral) value. Selling a minority share is a low risk strategy for price discovery and much better than a fire sale.
So far so good. However, the government also announced that it would keep the ESB “as an integrated utility”. The ESB is a conglomerate. It generates power, it owns the transmission network, it sells electricity, and it provides consultancy services.
The network is a natural monopoly, and should probably not be sold. The rest of the ESB can be safely left to the market (if properly regulated).
As an integrated utility with a natural monopoly, The ESB enjoys considerably market power. The nominally independent transmission system operator, EirGrid, gets electrons from ESB, transmits them over lines owned by the ESB, and delivers them to the ESB (who then retails them). The ESB’s dominant position is the main reason why few companies have entered the Irish electricity market.
Today’s announcement suggests that the government plans to continue the current situation. It would make more sense to sell the network to EirGrid. The price of such a sale matters because the ESB is part-owned by an ESOP; and because the ESB is using the network as collateral for cheap loans.
The future ESB will therefore face three demands, compared to two now. The workers will want well-paid jobs, as they had in the past. The political masters will want their pet projects, as they had in the past. And the private owners will want dividends. The consumer will have to pay for all of this.
The Dept Environment is now moving to change the regulation of waste collection from “competition in the market” to “competition for the market”. The reason is simple: Economies of density. In my street, we have three bins (black, green, brown) and four companies collecting bins. Every fourth Monday, no less than 12 waste trucks drive up our road, to the delight of the children and the annoyance of drivers. Three trucks (one company) could do the same work for a little more than a quarter of the cost. Even after allowing for monopoly mark-ups, there would be cost savings for households. Market power would be limited if tendering is competitive and concessions are short (waste trucks are mobile).
A perfectly sensible move by the Department so.
In today’s Irish Times, this is spun (and again) as a way to promote incineration. This is nonsense. At the surface, “competition for the market” was a recommendation in the International Review commissioned by the previous minister, and in the Gorecki report of the ESRI.
The markets for waste collection and waste disposal are largely separated; economies of vertical integration are small. Nonetheless, Irish waste collectors have vertically integrated with waste disposal. The competition in waste collection is such that hardly any money is made. The market for waste disposal would be lucrative with the EU cap on landfill and without additional incineration, but the Poolbeg incinerator would undercut the price of any other disposal technology except landfill. If waste collection would be run as a profit center, waste would be sent for incineration.
Competition for the market will allow waste collectors to make money in their core business again.
‘Competition and consumer choice’ has become a policy mantra to shake up dozy and inefficient industries and to benefit consumers. EU and national policy-makers and regulators have expended huge effort – and continue to expend effort – to complete the internal EU markets in electricity and gas in line with this mantra. But all that has been achieved is to move from vertically integrated national monopolists in the individual member-states to a pan-European oligopoly comprised of 12 members (responsible for 85% of EU energy supply) and some residual dominant national incumbents. (Successive Irish government, not surprisingly, have implemented their own cunning variation on a theme.)
So how did this happen – and what can be done? The Troika is demanding some action on electricity and gas in Ireland. The solution outlined has relevance to sectors that, at first sight, appear unlikely candidates.
A number of the papers/presentations from last week’s Competition Authority conference are now available: see here.
Last night’s The Frontline programme had an interesting discussion on competition in the market for GPs, among other topics related to the functioning of the health care system: see here.
Coming soon . . . a guest post by regular IE contributor Paul Hunt on the failures of the “competition model” in key utility industries.