As national governments strive to reduce demands on their expenditure, there is a worldwide trend to move electricity businesses, and other utilities, from state to private ownership. At the same time there is a drive to reduce costs to customers, to enhance quality of service, as well as to seek to fund investment in this essential service area. Transmission and distribution businesses are generally considered to be natural monopolies, as it is not economic for several companies to compete in the same geographic area. Under such conditions there is a possibility of abuse of monopoly power and, without competition, there may be little incentive for companies to reduce costs or improve efficiency. As a consequence it is necessary for such businesses to be subject to regulatory control of the charges made to customers. In the United Kingdom and in a number of other countries where the electricity supply industries are deregulated, 'price cap' regulation is applied allowing incentives for the companies to retain efficiency savings. The 'Price Controls' generally take the form of an assessment of required income with a continuing requirement for efficiency gains that act as a proxy for competition.
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