STRATEGIES FOR SAFEGUARDING PUBLIC VALUES IN LIBERALIZED UTILITY SECTORS
| Author | HANS DE BRUIJN,WILLEMIJN DICKE |
| Date | 01 August 2006 |
| Published date | 01 August 2006 |
| DOI | http://doi.org/10.1111/j.1467-9299.2006.00609.x |
Public Administration Vol. 84, No. 3, 2006 (717–735)
© Blackwell Publishing Ltd. 2006, 9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street,
Malden, MA 02148, USA.
STRATEGIES FOR SAFEGUARDING PUBLIC
VALUES IN LIBERALIZED UTILITY SECTORS
HANS DE BRUIJN AND WILLEMIJN DICKE
In the utility sectors, public values such as affordability, safety, and protection of
the environment, require safeguarding. In the last 15 years, most utilities have been
either liberalized or privatized. In an attempt to protect public values under these
new conditions, this shift has been accompanied by an emphasis on tight regula-
tions and strict norms. These are examples of hierarchical safeguarding mech-
anisms. This mechanism can cause adverse effects, such as an increase in transaction
costs, which diminish or even outweigh the supposed advantages of liberalization
and privatization.
In addition to hierarchical safeguarding, this article describes two mechanisms used
to safeguard public values: network mechanisms and market mechanisms. We sug-
gest that smart combinations of network and hierarchy on the one hand, and market
and hierarchy on the other, will lead to more effective and effi cient safeguarding of
public values than relying on hierarchy alone.
INTRODUCTION
Recent years have seen a great deal of debate about the safeguarding of
public values in the liberalized utility sectors. Examples of public values are
reliability, safety and affordability of the service. The Californian electricity
crisis in January 2001 sparked off the debate in the United States. Did the
profi t-seeking private companies do enough to safeguard the supply of such
a primary necessity of life? The same question arose after two major rail
accidents in the United Kingdom in October 1999 and March 2000. In a situ-
ation where private companies now plied the rails, did the regulators actu-
ally have a grip on safety? A third example is the major power outages in
the Nordic countries (2003), Italy (2003), London (2003) and New York (2003).
The list of incidents and crises continues to grow. The debate is being con-
ducted everywhere.
In the ensuing public debate, these crises were blamed on liberalization.
According to Ken Livingstone, London ’ s mayor, ’ that great wave of privati-
zation that went round the world ’ was to blame for the problem since the
result was ‘ the lack of investment, [which] is bordering on the criminal ’
( Livingstone 2003 ). Among academics, we hear similar voices. Jørgensen and
Bozeman, for example, argue that ‘ privatization and contracting out often
have the effect of eroding public values ’ (2002, p. 65).
Hans de Bruijn and Willemijn Dicke are Professor and Assistant Professor, respectively, of Public
Administration in the Faculty of Technology, Policy and Management, Delft University of Technology.
718 HANS DE BRUIJN AND WILLEMIJN DICKE
© Blackwell Publishing Ltd. 2006 Public Administration Vol. 84, No. 3, 2006 (717–735)
The debate about whether public values are safe in private hands is the
logical consequence of liberalization and privatization in the utility sectors.
These tendencies have major impacts on traditional safeguarding mech-
anisms. In terms of infrastructure, governments used to be the sole pro-
ducers and distributors in almost all cases. Consequently, it was felt that
there was no need for a tight regulatory framework. Public actors, in whose
ethics these public values played a key role, protected them, even if they
were not always explicitly identifi ed (Van Wart 1998; Kernaghan 2003 ).
Liberalization and privatization have made production, distribution and
supply the responsibility of several public and private actors. This has cre-
ated a network of interdependent actors. Targets and procedures that used
to remain implicit in one single public body now need to be stated explicitly
between different contract partners. Thus, unavoidably, complex legal pro-
visions accompany the liberalization of utility sectors. These provisions help
to identify, allocate and mitigate the various risks involved, risks that did not
exist under conditions of public ownership (Lobina and Gall 2003, p. 22).
This article seeks to set out the safeguarding arrangements that are neces-
sary in a liberalized or privatized context in order to protect public values
while mitigating the adverse effects associated with tight regulation. Under
conditions of liberalization and privatization of utilities, it is clear that both
laws and regulation are necessary. However, given the disadvantages of
strictly defi ned targets and regulations that are too strict, how can laws and
regulations be combined with other safeguarding mechanisms so as to leave
room for the operator as well as power for the regulator?
In the section that follows, we give a brief overview of the discourse
about public values and we discuss the relativeness of the concept of
‘ public value ’ . We then outline three types of safeguarding mechanisms:
hierarchical, market-like and network-like. We then discuss smart com-
binations of the dif ferent mechanisms. The article ’ s conclusion briefly
discusses the con ditions under which the different combinations can be
successful.
DEFINING PUBLIC VALUES
The literature on public values is a broad one. An immense landscape of
theories and terminologies can be unfolded, especially when we incorporate
perspectives used in institutional economics, law and public administration.
There are services of general interest (see, for example, EC 2004), public
values (see, for example, Moore 1995; Jørgensen and Bozeman 2002) , public
objectives (see, for example, Noam 1996), public interests (see, for example,
Blumstein 1999 ; Raad voor Verkeer en Waterstaat 2003), externalities (see,
for example, Michie 1997 ; Ostrom et al. 1999), and public norms (see, for
example, ECN SEO 2004), to name only a few of these. It should be remem-
bered also that even when authors use the same concepts, they can mean
very different things.
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