Companies in the utility sector often form strategic alliances to cope with ongoing changes, such as increased competition. These alliances can help partners to build a stronger market position. Governments, however, are often suspicious of alliances. They fear that alliances are not in the public’s best interest, and impose strict regulations to keep them under control.
“In doing so, governments are in fact reluctant to let go of their responsibility,” says Mark van Twist at Berenschot. “Paradoxically, the more the utility sector is liberalized, the more regulation the government imposes to safeguard public values.” This is not always productive, Van Twist argues. On the contrary: it often does more good than harm.
“The government automatically assumes that public and private interests are at conflict,” says Van Twist. “In other words, it assumes that companies always aim to maximize their profit at the expense of their customers, and that government regulation is needed to safeguard values such as safety, affordability and environmental sustainability.” In response, the government tends to impose rules and regulations that are strict and fixed, and that deny the dynamic nature of public values. After all, public values change in response to new technological developments. Similarly, public values can be a driver of new technologies. A strict regulatory framework may disrupt these developments, which ultimately harms public values rather than safeguarding them.
“There are many examples of strategic alliances in the utility sector that have led to lower prices, better service, and increased safety and environmental sustainability,” says Van Twist. “Examples include airline alliances and the offshore windmill park in the North Sea. These would not have been realized without strategic alliances between private companies.” In these cases, as Van Twist underlines, public values turn out to be a driver of enterprise and market development, rather than a burden. Moreover, the fact that these alliances have become ‘greener’, cheaper and more efficient gives them a competitive advantage.
“All in all, it is in the government’s best interest to impose its regulations a bit more sparingly,” Van Twist concludes. “Too many rules will inhibit strategic alliances, hinder innovation, and ultimately harm public values.”
