A. The problem of monopolies...
B. How ownership regulation solves it
STATE
STATE
STATE REGULATIVE POWER
STATE REGULATIVE POWER
INTERESTS ARE ALIGNED
INTERESTS NOT ALIGNED
COMPANY
COMPANY
PRICE
PRICE
BUYING POWER
OWNERSHIP POWER
CONSUMER
CONSUMER
Figure 2. The function of ownership power in a monopoly situation. In a normal market condition, the interests of companies are not in line with consumer interest but are kept in check by a combination of state regulative power and consumers’ buying power. In the monopoly situation (A) the buying power is suspended. In situation (B), the loss of buying power is counterbalanced with ownership power – aligning interests between state price regulation, company and consumers.
An essential aspect of the ownership policy is that it has made the state’s price regulation more efficient. It is an empirical fact that the few cases of commercial ownership in Denmark have created severe problems for the state’s ability to enforce its regulation of monopoly prices. Even though all DH compa- nies have been subject to the same price regulation, commer- cial companies have a track record of excessively high con- sumer prices and different tactics for avoiding and confusing the state’s price control. Without the openness of information and willingness to collaborate from DH companies, the state regulatory power has proven unable to control the monopoly prices – leading to high heat prices and dissatisfaction among consumers. On the contrary, as a third point, the prevalent ownership and company model have been characterized by reasonable lev- els of openness of information and willingness to collaborate with public authorities (as well as industry suppliers for tech- nological innovation). The openness has supported efficient enforcement of the state’s price regulation to ensure con- sumer satisfaction. It has also created a better environment for collaboration with municipalities in the long term urban planning. As a fourth point, the low prices for consumers and the overall aim for clean and efficient energy have created political legiti- macy for public mechanisms that provide cheap and patient capital, reinforcing the basis for low heat prices and long-term planning.
addresses both the company and consumer perspective has been the key to enable DH. Four central elements are here highlighted. First, zoning policies with obligation to connect in areas with a good socioeconomic basis for DH has created a guarantee for consumer demand to the producer. Thereby, the risk of high upfront capital costs for the company is handled. To be legitimate, these zoning policies must be based on high-qual- ity socioeconomic assessments which is connected to strate- gic energy planning in line with overall societal goals (such as decarbonisation). Second, an efficient and trust-worthy regulatory framework to control the monopoly prices has provided the trust and ac- ceptance from the consumers obliged to connect to the net- work. This has been done through the Price and ownership regulation . The problem of monopolies is that the buying power of consumers is suspended. This loss of consumer em- powerment has then been counterbalances through a com- bination of state regulatory price regulation and ownership policies. The latter implies consumer ownership for most companies but also municipal ownership. In consumer owned compa- nies the citizens have direct ownership control of the com- pany which formally can be exercised through election of the board on general assemblies. In the municipal companies, the ownership power is indirect through the municipality.
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