oa Power to the People: A New Trend in Regulation

See e.g., https://www.brookings.edu/wp-content/uploads/2017/05/es_20170531_hahnregulation.pdfPower to the People: A New Trend in Regulation Robert Hahn, Robert Metcalfe and Florian Rundhammer* * Mr. Hahn is Professor and Director of Economics at the Smith School, University of Oxford. Mr. Metcalfe is a Postdoctoral Research Scholar at the Becker Friedman Institute, University of Chicago. Mr. Rundhammer is a doctoral student in economics at Georgia State University. We would like to thank Jonathan Ashley, Harry Bush, Paul Joskow, Clement Lapeyre, Stephen Littlechild, Matthew O'Keefe, Cathryn Ross, Anna Rossington, Jon Stern and Dale Whittington for very helpful feedback. This research was funded by Ofwat and by the Smith School at Oxford. The authors, and not the institutions with which they are affiliated, are responsible for the findings of this research and any remaining errors. © 2017 by the authors. All rights reserved. Abstract This paper traces a new development in regulation that encourages utilities to engage more directly with their customers. We make four contributions: First, we perform the most comprehensive analysis to date of how regulators are using customer engagement, and offer a simple model for understanding different customer engagement initiatives. Second, we review assessments of customer engagement. We find that there are no quantitative, empirically robust assessments of the effectiveness of customer engagement as a regulatory tool. Third, we develop two detailed case studies of an energy regulator and a water regulator that are in the forefront of customer engagement efforts. We find that there is no direct link between the engagement strategy used and the economic incentives received by a firm. Finally, we propose a framework for improving the customer engagement process. The new framework relies on microeconomics, modern tools of program evaluation, and supplying the regulated firm with direct incentives to do customer engagement.