Research On The Government Regulation Of The Privatization Of Public Utilities

The paper discusses government regulation of privatization of public utility. The legal regulation to that is special for some attributes, such as the need of people's livelihood, the public interest, the natural monopoly to some extend and the natural qualities of public goods, and it tends to privatization in nature with the development of public utility. Public utility has three characters: firstly it is irreplaceable by anything else; secondly, it is public; thirdly it is a monopoly industry. Then from the sight of economies of scale, it may not be the best way of protecting the public interests by a trade monopoly adding the government's supervise, and we can get win-win in both economic and social effect through properly competing market mechanism, therefore we argue that the regulation before the privatization of public utility is more important. As the definition of privatization made by Savas, privatization means that the government will not be in favor of this kind of state-owned enterprises with low quality and withdraw founds from them, meantime the government relaxes regulation of private enterprises to encourage them to provide with product and service, then the government can commit the duty to these private enterprises and individuals in the market through contracting and franchising and so on. There are basically three modes of systems of public utility all round the world: the first mode is direct investment or management of government; the second mode is outsourcing by contract; the third mode is the franchising of public utility. So far, the third mode is the most common system using in China.The franchising is substantially a measure to carry out the goal of public interests by redistributing the public resource efficiently and regulating outside the market by signing administrative contract, and it is a special category of permission, which is a preventative regulation system by the power of government to prevent the situation of the social economic activities illegal or illogical in the field of public utility. The franchising of public utility isn't entirely market-oriented, on one hand the government gives some preferential policies and support to these enterprises, on another hand the government should make complete and effect regulation to ensure its social benefit. The biggest motivation of reform in the field of public utility is the public interest, and we can feel directly and judge whether the quality improvement of public goods and services results from the solution of the fiscal problem or not. Though it is not the best choice to realize the most optimum distribution of resource by the necessary and effect market competition, that can actually prevent the worst things happen: rent-seeking, low efficiency and public interest damage and so on. For public utility, the industrial monopoly from top to bottom should be smashed up or be divided breadthways, in which the competition and market system can be brought, competition of the market players is the best approach to improve the efficiency of public utility. Of course that the franchising is not a panacea which can solve all the problems, so government needs to pay more attention on finding where is the forbidden zone for privatization and retaining the capability of choosing policies, it should develop the regulator's initiative and dynamic role in the practice.The theory foundation of privatization of public utility, including the theory of public choice, the theory of benefit group, the theory of regulative capturing, the theory of contestable markets and the theory of incentive regulation and so on, is the basic motivation to its reform, among those, the contestable markets theory gives a new standard of valuing the actual economic activities and regulation polices. The regulation polices is a guide for the enterprises to promote the competition in market and then realize a good economic benefit on the base of specific analysis the situation of actual contestable market. The experiences of other countries such as England, French, Germany, America and Japan plays an positive role to the privatization of public utility in China, and some of their methods are worthy, for the key to privatization of public utility in China is not the discussion of whether we need it or not, but how we develop and regulate the privatization. Privatization resolves the big problem of low efficiency as it focuses on the efficiency and innovation capability, which all meet the need of public goods of people. The privatization of public utility motivated by the government can not only set the principle of public interest coming first preventing the detour of market failure, but also push us to better the regulations when the franchising carried out. The privatization shall be developed as a approach according with the situation of China.The franchising is an important field of applying the administrative contract, which is vital to administrative law as the role of competition to market. The French administrative contract is a balance policy adjusting the need of government and individual interest. English scholars argued that the orientation of legal reform of administrative contract shall take it as a combination of public law and private law. And in China, the absence of the system and concept results that the franchising contract in China faces an unfortunate situation. The development of administrative contract in China shall pay more attention on the combining public law and private law. Even we build the law system of administrative contract shall reflex the situation of combination of public and private facts of administrative contract.The market needs the government's regulation for its limitation, and the regulation for its own bounded rationality of regulator causes people's suspicion on its rationality. This means reform--it should balance the social economic benefit and individual interest and prevent the enterprises do the monopoly after privatization hurting the public interest.There are some patterns of government intervention, and the main one is the regulation and competition. The regulation means a lot to the reform of privatization of public utility, for it is an activity of intervention in advance and the regulator shall set the rules of price, investment, interest and risk in advance. the reason for the intervention in advance is better than that in two other periods of time is these as follows: firstly, it is helpful to the new financing by lessening dubious fact of the intervention; Secondly, it can prevent the misunderstanding happening by the regulator makes promise to some extend to the market player; Last, it can cut down the business cost when some problem happens.The new economic environment calls for a new concept of regulation of government. The regulation complying with the privatization of public utility is not only the requirement of public administration but also the precondition of construction of a limited and service-oriented government. Under the concept of that 'the state steers, it dose not row', the mechanism of 'control of administration' is help to the full competition of the whole field and realization of public interest: in the new undergrounding of the public-private partnerships, the theory of control of administrative of administrative law will be complete on adding the concept of service-orient. The problems of privatization of public utility are mostly because of our imperfect law, and the improvement of law system would be the solution. This article proposes that a set of unified code of regulation of public utility is necessary and feasible in China under the quotation of experiences of other countries; what's more, the universality is more than individuality during the process of the reform of market system of public utility, so it would provide an important guide to the public utility's development.