Category: Regulation

Gormanston, Tarbert and regulation

The Examiner has a story on the proposed LNG terminal at Tarbert in the Shannon estuary. This is a privately funded project and a welcome stimulus for North Kerry. As long as the developers play within the rules, public policy analysts should have no opinion on such matters. But as the gas market is so heavily regulated, private actors affect the public good. The LNG terminal would, for instance, improve the security of supply, which is very valuable.

Minister Rabbitte argues that Shannon LNG would increase the price of gas. This is absurd at first sight. Increased competition should reduce the price. The minister is right, though. To see why, we need to consider the gas interconnector from Scotland that lands in Gormanston in Co Meath, or rather the way in which its price is regulated: The annual cost of the pipe is distributed over the gas it carries.

The interconnector is a competitor’s wet dream. If you capture a small part of the gas market, the interconnector will increase its price — because its annual cost is distributed over a smaller volume. You can then increase your price to just below that of the interconnector and gain yet more market share. And the interconnector will raise its price again.

The solution surely is to change the regulation of the interconnector rather than to block the LNG terminal. The current regulation, which may date back to the days of Minister Woods or Fahey, is a neat example of something that makes sense in the short run only.

Note the separation of powers. Minister Rabbitte is the executive branch of government and an influential part of the legislative, he appoints and controls the budget of the regulator, and he is the trustee for the shareholders (us) of the dominant company in the market.

Towards transparent government

DubLinked is a small step, but one in the right direction.

Only two county councils so far and a distinct lack of apps, but let’s say it’s early days.

Legal Services Regulation Bill

The Department of Justice has published a press release indicating that the Legal Services Regulation Bill is to be published within the next few days, having received the approval of cabinet.

Regulatory reform in respect of legal services is a key commitment in theEU/IMF Programme for Financial Support for Ireland. A blueprint for reform, indicated in the financial support programme, was provided by the Competition Authority’s 2006 report on the legal professions. The detailed indications of the content of the Bill in the press release suggest the government has rejected some aspects of the Competition Authority report. Notably the proposal that a new regulator would oversee professional self-regulation (as occurs in England and Wales through the Legal Services Board established in 2009) appears to have given way to a new regulatory body which will have direct responsibility for oversight of the professions.

In addition to the Legal Services Regulatory Authority, two further new public bodies are to be established: an Office of the Legal Costs Adjudicator (who will take on regulatory functions over costs currently administered by the Taxing Master) and a Legal Professions Disciplinary Tribunal which will take over responsibility for addressing complaints of professional misconduct, currently administered by the Bar Council and the Law Society of Ireland.

The central rationale stated for the reforms is the promotion of a more competitive environment for provision of legal services, and this is reflected in proposals to allocate tasks concerning entry to the profession and the education of lawyers to the new Legal Services Regulatory Authority so as to liberalize certain aspects of professional education and end the situation under which the profession is both provider and regulator of legal education.

The establishment of three distinct agencies may be controversial and raises the question whether the variety of functions could be undertaken by a single agency. The press release indicates that the industry will be levied to pay for the new regulatory bodies (as occurs with a number of existing regulatory bodies such as the Broadcasting Authority of Ireland). Comments in the press suggest that the professions are concerned that the power of the minister to appoint members of the Legal Services Regulatory Authority will compromise the professional independence of lawyers. It is actually not unusual to find ministers exercising such powers of appointment (appointments to the Legal Services Board in England and Wales are made by a government minister, the Lord Chancellor). Clearly board members must be appointed by someone and ministers are accountable to parliament for their actions. Even the most independent of actors within the legal system, judges, are appointed by ministers (though this is not uncontroversial).

Certain of the more controversial aspects of potential reform, such as fusing the barristers’ and solicitors’ professions and introducing multi-disciplinary partnerships have been assigned to the new Regulatory Authority for research and consideration rather than be provided for directly in the Bill, according to the press release.

A Review of Irish Energy Policy

Continue reading “A Review of Irish Energy Policy”

Waste collection

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.