I cannot understand the decision of the govt to open up the electricity market for competition.
They probably thinks that market competition can bring down prices.
Market competition can add to the total cost for the following reasons:
a) The operators have to engage marketing staff and advertise to get customers and to take customers away from competitors.
b) There is higher cost moving customers to a new operator, e.g. set up the account, arrange the banking payments, etc.
c) Some operators may offer attractive promotions but this can only last for a short period and has to be recovered through other means, such as hidden charges.
Is there a better way to bring down prices?
Certainly.
If the govt provider makes its costs transparent, it will help to reduce the excessive profits and wastefulness.
An independent auditor will also play an important role. The independent auditor should NOT be a private firm appointed by the utility company.
It should preferably be the auditor general's office, which is overseen by parliament. The AGO has demonstrated the value that can be provided by a truly independent audit.
We should get away from the mistaken notion that market competition can bring down the cost of utilities. It is better for the utility providers to be state owned with independent audit of their costs and transparency.
Tan Kin Lian
They probably thinks that market competition can bring down prices.
Market competition can add to the total cost for the following reasons:
a) The operators have to engage marketing staff and advertise to get customers and to take customers away from competitors.
b) There is higher cost moving customers to a new operator, e.g. set up the account, arrange the banking payments, etc.
c) Some operators may offer attractive promotions but this can only last for a short period and has to be recovered through other means, such as hidden charges.
Is there a better way to bring down prices?
Certainly.
If the govt provider makes its costs transparent, it will help to reduce the excessive profits and wastefulness.
An independent auditor will also play an important role. The independent auditor should NOT be a private firm appointed by the utility company.
It should preferably be the auditor general's office, which is overseen by parliament. The AGO has demonstrated the value that can be provided by a truly independent audit.
We should get away from the mistaken notion that market competition can bring down the cost of utilities. It is better for the utility providers to be state owned with independent audit of their costs and transparency.
Tan Kin Lian
1 comment:
Mr. Tan,
As you have mentioned on many of your posts, Sg have very convoluted ways of doing things.
Must be all the scholars up there thinking out these schemes.
Or is it intentionally made complicated ?
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