Ring Fencing and Control of Cross-Subsidization

Core References

Ring Fencing Mechanisms for Insulating a Utility in a Holding Company System
Washington, D.C.: National Association of Regulatory Utility Commissioners, 2003.
Devlin, Timothy, Rebecca Phillips, and Thomas Ferris

Describes U.S. regulators’ practices for ring fencing.

The Economics of Regulation: Principles and Institutions
Cambridge, MA: MIT Press, 1988, Reissue Edition, vol. I, Chapter 6.
Kahn, Alfred

Examines issues of pricing in the presence of competition. Discusses issues of cross subsidy and price flexibility.

Sectoral References

ELECTRICITY

Decision: Statement of Principles for the Regulation of Transmission Revenues: Transmission Ring-Fending Guidelines: Reporting Guidelines
23 October 2002.
Australian Competition and Consumer Commission

Describes accounting separations requirements for transmission provider in Australia. Includes accounting requirements, compliance, and reporting requirements.

Ring-Fencing in the Electricity and Gas Industries – Issues Paper
July 2000.
Office of the Regulator-General, Victoria

Examines ring-fencing policies in electricity and gas. Considers objectives, cross subsidization, preferential access to essential facilities, joint marketing, access to information, structural separations options, ring-fencing options, and criteria for evaluating options.

GAS

Ring Fencing Compliance Report Pro Forma
23 October 2002.
Australian Competition and Consumer Commission

Form operators must complete showing compliance with the regulator’s ring fencing requirements. Includes compliance statement, separation of accounts, allocation of shared costs, treatment of confidential information, and management of marketing staff.

Ring-Fencing in the Electricity and Gas Industries – Issues Paper
July 2000.
Office of the Regulator-General, Victoria

TELECOMMUNICATIONS

Record Keeping Rules on Initial Reports Relating to Accounting Separation
June 2003.
Australian Competition and Consumer Commission

Sets out recording keeping and reports for accounting separations for dominant telecommunications provider.

Imputation testing (Initial Reports) Record Keeping and Reporting Rules, August 2003; Explanatory Statement: Imputation Testing Record Keeping Rule
September 2003.
Australian Competition and Consumer Commission

Sets out rules and justification for imputation requirements for dominant telecommunications operator. Focuses on core services, namely local service, domestic access for originating and terminating calls, and retail services associated with the access services.

Initial Reports Relating to Accounting Separations of Telstra
December 2003.
Australian Competition and Consumer Commission

Provides regulator’s review of initial accounting separations reports provided by dominant telecommunications operator. Examines both accuracy of reports and the extent to which they comply with the accounting requirements.

Decision for Approving the Regulation for the Realization, by ‘Romtelecom’ S.A., of Accounting Separation within the Internal Cost Accounting System
2003.
Romanian National Regulatory Authority for Communications

Describes accounting separations required by the Romanian telecommunications regulator to control cross subsidization and to comply with the European Union directives.

TRANSPORTATION

Regulation and Deregulation of the Motor Carrier Industry
Ames, Iowa: Iowa State University Press, 1989.
Felton, John Richard and Dale G. Anderson

Explains the problem of backhaul price regulation. The U.S. Interstate Commerce Commission rate regulation caused a duel effect. In the absence of rate competition non-price competition such as more frequent service can result. Also, spatial imbalances in traffic are exacerbated, resulting in more empty returns.

WATER

The completed acquisition of Northumbrian Water Ltd: A position paper
August 2003.
OFWAT

Sets out ring fencing requirements imposed on an operator as part of an acquisition.

Case Studies

Decision: Statement of principles for the regulation of transmission revenues: Information requirements guidelines
5 June 2002.
Australian Competition and Consumer Commission

Initial Reports Relating to Accounting Separations of Telstra
December 2003.
Australian Competition and Consumer Commission

The completed acquisition of Northumbrian Water Ltd: A position paper
August 2003.
OFWAT