This kind of regulatory response to natural monopolies can (and does) result in 'gold-plating'. It incentivises profit-maximising monopolists to over-invest in

This kind of regulatory response to natural monopolies can (and does) result in 'gold-plating'. It incentivises profit-maximising monopolists to over-invest in qualifying capital: even though their ROI remains the same, their absolute profit grows larger. However, there's no easy solution here: natural monopolies are a genuinely tricky public policy issue. Alternative solutions that come to mind are more direct price controls or public ownership. I'm not suggesting these are superior alternatives; just throwing them in there to provide more grist for the conversational mill.