The National Audit Office has published its report on setting price controls

The NAO scrutinises public spending on behalf of Parliament. In this inquiry, its team assessed the performance of three regulatory bodies - OFGEM, OFWAT and OFTEL - in setting price controls for the network industries they regulate. Frontier (London) assisted the NAO in its inquiry and the published report includes a paper by Frontier on incentive effects of different price control regimes. We note in our conclusion to this paper that "RPI-X" price controls in the UK have been successful in promoting reductions in operating expenditure but that there are areas of significant weakness. The NAO’s recommendations partly reflected those concerns: that incentives for cost reduction varied over the course of the price control period, that capital efficiencies are not promoted as effectively as operating cost efficiency, that regulators should take more account of quality of supply and that there should be more certainty in the regulatory process. The report is available on the NAO website.