Skip to Main Navigation

Taking stock of economic regulation of power utilities in the developing world : a literature review (English)

The model of power sector reform that emerged during the 1990s placed considerable emphasis on the creation of an independent regulatory agency, with a strong orientation toward technically-driven tariff-setting procedures. Despite widespread uptake of regulation, implementation has proved to be challenging in the developing world. Regulators were seldom as independent as originally envisaged, with widespread divergence between the formal regulatory framework and the day-to-day practice of regulation. In practice, many developing countries operate with “advisory regulators” whose main role is to provide technical support to the ultimate political decision makers. Nevertheless, there is some evidence that regulation has had a positive performance impact, particularly where utilities are privatized and in middle-income settings. But the impact is more questionable in cases where regulation is primarily directed toward state-owned enterprises, which lack the commercial incentives to respond to regulatory instruments. On the choice of regulatory regimes, the ongoing debate between price cap and rate of return regulation suggests that the latter may be better suited to developing country environments where the priority is to provide predictable returns to support large capital investment programs. Furthermore, the advent of technological disruption in the power sector demands an adaptation of the way in which regulatory instruments are designed and applied. Regulators will need to pay closer attention to providing the right incentives for utilities to innovate and become more energy efficient, and for consumers to take economically grounded decisions on distributed generation. Finally, the literature leaves many important questions unanswered, such as how regulatory design affects regulatory effectiveness and the impact of tariff regulation on cost recovery.

Details

  • Author

    Rodriguez Pardina,Martin Augusto, Schiro,Julieta

  • Document Date

    2018/05/31

  • Document Type

    Policy Research Working Paper

  • Report Number

    WPS8461

  • Volume No

    1

  • Total Volume(s)

    1

  • Country

    World,

  • Region

    The World Region,

  • Disclosure Date

    2018/05/31

  • Disclosure Status

    Disclosed

  • Doc Name

    Taking stock of economic regulation of power utilities in the developing world : a literature review

  • Keywords

    power sector market design and regulation; impact of privatization on performance; regulatory system; rate of return regulation; Internal rate of return; legislative branch of government; marginal cost of supply; exercise of monopoly power; tariff regime; tariff structure; performance contract; cost of capital; regulatory governance; quality of governance; autonomous regulatory agencies; electricity sector regulator; impact of regulation; conflicts of interest; independent regulatory entity; power sector reform; content of regulation; regulatory regime; regulatory commitment; allocative efficiency; private enterprise; good regulatory governance; development of regulation; court of law; good corporate governance; state owned enterprise; commercial law system; equal marginal cost; price cap mechanism; human resource capacity; return on capital; price cap regime; basket of services; elasticity of demand; autonomous regulatory body; regulatory asset base; alternative to regulation; adjustment of tariff; natural monopoly industry; independent regulatory agency; large capital investment; political decision maker; good regulatory practice; competition in electricity; body of knowledge; minimum quality standard; dimension of governance; form of regulation; regulation electricity; regulation of electricity; power sector regulation; internationally accepted accounting; allocation of resource; managers of state; small power system; lack of transparency; regulation by agency; law and regulation; hard budget constraint; price cap regulation; regulation of tariff; Rule of Law; regulation by contract; allocation of risk; ex ante controls; regulatory authority; productive efficiency; financial sustainability; infrastructure sector; utility regulation; literature review; tariff level; regulatory independence; regulatory function; regulatory decision; regulatory incentive; regulatory model; econometric study; institutional model; regulatory process; efficiency gain; tariff setting; Clean Energy; regulatory mechanism; public consultation; regulatory instrument; electricity tariff; carbon intensity; supply side; labor productivity; private operator; alternative regulatory; efficiency improvement; political pressure; rank correlation; government entity; performance variable; high tariff; operational efficiency; external influence; regulatory design; tariff regulation; explanatory variable; regulatory activity; efficient performance; regulatory period; price level; good performance; regulatory transparency; legal framework; regulatory performance; institutional framework; accounting costs; infrastructure company; legal mandate; great power; regulatory institution; governance arrangement; fiscal transfer; anecdotal evidence; performance result; cross-country study; infrastructure concession; autonomous body; price decline; political expediency; price index; incomplete contract; regulatory action; carbon emission; previous work; legal system; legal tradition; regulated utility; electricity regulator; average score; regulatory competency; infrastructure reform; bureaucratic delegation; empirical result; sectoral performance; regulatory expert; vulnerability measure; utility performance; review period; behavioral response; tariff grid; invest capital; fiscal contribution; scarce resource; cost minimization; alternative use; production cost; poor household; social concern; investment need; output level; Universal Service; variable cost; consumption pattern; dismissal procedure; market economy; interest group; privatization process; regression line; performance difference; solid line; management board; regulatory variable; regulatory problem; income elasticity; natural monopolies; average cost; consumption level; capital resource; residential consumer; profit maximization; social objective; electricity pricing; legal arrangement; competitive outcome; regulatory contract; expert panel; market mechanism; regulatory arrangement; contract enforcement

Downloads

COMPLETE REPORT

Official version of document (may contain signatures, etc)

  • Official PDF
  • TXT*
  • Total Downloads** :
  • Download Stats
  • *The text version is uncorrected OCR text and is included solely to benefit users with slow connectivity.

Citation

Rodriguez Pardina,Martin Augusto Schiro,Julieta

Taking stock of economic regulation of power utilities in the developing world : a literature review (English). Policy Research working paper,no. WPS 8461,Rethinking Power Sector Reform Washington, D.C. : World Bank Group. http://documents.worldbank.org/curated/en/732921527773002514/Taking-stock-of-economic-regulation-of-power-utilities-in-the-developing-world-a-literature-review