Where the words come from
Cost-plus (rate-of-return) regulation and its weak incentive to control costs; price cap regulation, its incentive for efficiency and innovation, comparison with producers in other areas, and the risks of a cap set too low or overtaken by a cost shock; regulatory capture in the regulated US airline industry — Principles of Economics 2e, OpenStax, licensed CC BY 4.0. https://openstax.org/books/principles-economics-2e/pages/11-3-regulating-natural-monopolies and https://openstax.org/books/principles-economics-2e/pages/11-4-the-great-deregulation-experiment. Changes: "Cost-plus regulation" given its A-level name, rate-of-return regulation; "building huge factories or employing many staff" shortened to building more than it needs; the heating-oil example shortened to a rise in world energy prices; the airline example kept in one sentence with the Civil Aeronautics Board unnamed; the RPI − X card definition and example, the checks and the exam answer are ours; British spelling.
The purpose of economic regulation; Ofwat's five-yearly price reviews and their roots in the RPI − X model; the capex bias ("pouring concrete") before totex was introduced at the 2014 review; outcome delivery incentives and performance commitments from the 2014 review, including leakage; stakeholders' view that low bills cost resilience, and Ofwat's reply; investors' evidence that four companies lost their entire allowed equity returns in the first four years of the 2019 period; the suggested cooling-off periods for senior staff leaving the regulator, against regulatory capture — Independent Water Commission, Final Report (21 July 2025), GOV.UK, Open Government Licence v3.0. https://assets.publishing.service.gov.uk/media/687dfcc4312ee8a5f0806be6/Independent_Water_Commission_-_Final_Report_-_21_July.pdf. Changes: Paragraphs 373-375, Box 20, paragraphs 385, 401-402 and 438 summarised in our own words; the evidence is attributed as the report attributes it (stakeholders, investors, Ofwat); the RPI − X formula itself is ours, since the report names the model without spelling it out.
What Ofwat, Ofgem and the Office of Rail and Road regulate — Ofwat, Ofgem and Office of Rail and Road organisation pages, GOV.UK, Open Government Licence v3.0. https://www.gov.uk/government/organisations/the-water-services-regulation-authority and https://www.gov.uk/government/organisations/office-of-rail-and-road. Changes: Each organisation's one-line description shortened into one clause of the exam tip; the rest of the exam tip is ours.
Questions, options, diagrams and feedback are our own. Figures credited to a source above are that source's; every other figure is invented to show the method.