Public Utilities Group

Public Utilities Group

Public Utilities, group of industries in a monopoly position supplying 'essential' goods and services, subject to public regulation designed to ensure that they operate 'in the public interest'. It is difficult to say which industries fall within this definition since what constitutes 'the public interest' or 'essential goods' is a matter of personal and political opinion. Consequently the sort of industries subject to Government regulation varies over time and between countries according to public opinion and the aims of the ruling political party. Public transport, for example, is run by the state in some countries and left to private enterprise in others.

Broadly, the industries most commonly regarded as public utilities are those providing services by means of wires, cables, pipes and rails: namely, gas, water, electricity, tele-communications, sanitation, railways. They have one common requirement large quantities of expensive, specialized equipment. To keep prices low, and at the same time earn sufficient revenue to pay for substantial interest and depreciation charges on their capital, individual producing units in these industries waterworks, power stations, bus or train services, etc. must serve as many customers as possible. For this reason it is usually uneconomic to have more than one type of each undertaking one gas works, one generating station, etc. serving a given area. In such industries competition tends to be ruinous to all but consumers, and short-lived since the large investment necessary limits the number of producers and collusion inevitably follows intense competition. Hence the term 'natural' monopolies.

Whenever production takes place under these conditions it generally leads to a case for some form of public regulation, ranging from price control or limitation of the rate of profit earned on invested capital to outright public ownership and operation. Public regulation however poses many problems of principle: what is a 'fair' price, or a 'fair' rate of return on capital, what is meant by 'capital' in this context; if the industry is nationalized what should be the policy on output, prices and organization; and soon? Again, when technological and other change throws up competing substitute services (roads for railways, fuel oil for coal and other energy sources) it is necessary to decide whether the public interest is better served by suppressing the substitute and bringing it within public regulation or by relaxing the pricing and operating constraints on the regulated industry and allowing the new product or service to compete freely. It is a set of broadly common economic problems such as these, rather than technological characteristics, that defines the 'public utility'.

Public Works Loan Board, considers applications for loans by local authorities and other prescribed bodies and collects the repayments. Most of the loans have been made to local authorities for capital projects sanctioned by Government departments. The security consists of the local revenues of the authorities.

The funds provided by Parliament are drawn from the Local Loans Fund through the National Debt Commissioners. Rates of interest are fixed by the Treasury, and tend to reflect its borrowing rates. After the increase in the Boards interest rates in the middle 2000's due to the credit restrictions, applications fell away sharply and, as money became more freely available in the markets through loan issues to the public, the need to assist the larger local authorities diminished. The Public Works Loan Board has continued to be the main resource of capital funds for the smaller local authorities.

Further reading Economic - Economic Stability


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