… [UK] consumers have overpaid for the natural monopolies and other networks underpinning many of these markets for at least the past 15 years. Because of patchy reporting from regulators, it’s impossible to document the full extent of these overpayments. However, this research finds that regulators have systematically set prices too high, leading to consumers facing unnecessarily high bills – that is, bills well in excess of what is required to deliver the necessary investment in these essential services.
We’re able to put concrete figures on these overpayments for water, energy, telephone and broadband infrastructure. Our conservative estimate is that that excess figure is £24.1bn. We find that the errors in energy and water have cost consumers £11bn and £13bn respectively.
… just focusing on the technicalities would neglect a simpler explanation: regulators have been out-resourced and outgunned. If this was just a story of errors in financial modelling, the errors would sometimes fall in consumers’ and sometimes in investors’ favour. But this is not what we see: instead, the errors are biased. Indeed, as we show below, this has sometimes been a conscious strategy from regulators: fearing under-investment, they have ‘aimed up’ on capital costs, choosing higher values than their estimates indicated they should.