13 March 2015

Infrastructure Regulation Models

International Insights for the Better Economic Regulation of Infrastructure, the tenth paper in the the Australian Competition and Consumer Commissioner and Australian Energy Regulator Working Paper Series, is based on a major study of seven key infrastructure areas (energy, telecommunications, postal services, water and wastewater, rail, airports and ports) across seventeen countries.

The expectation is that the 108 page paper [PDF] will provide "insights for the continuous development of Australia’s regulation of infrastructure by comparing and contrasting regulatory design, processes and practices that exist around the world".

The ACCC comments that the countries "include the ten largest economies in the OECD and encompass a wide range of physical, economic and social conditions" and that
While this research suggests that Australia is in a comparatively good position with respect to regulatory design and practice, there are a lot of good ideas around that are worth considering. There are also some lessons of the other kind – things that should probably be avoided.
 Key insights are
  • Regulatory agencies that are independent of government are a common feature of the surveyed jurisdictions. However, the precise nature of ‘independence’ varies across countries, with Ministerial involvement in regulation evident in a few. 
  • Regulators in most surveyed jurisdictions are assigned efficiency-based objectives. Where regulators are given broader remits, such as the promotion of social and environmental objectives, conflicts with regulatory objectives often arise. 
  • The collection of regulatory responsibilities for a number of infrastructure industries in a single institution, at least to the sectoral level (for example, energy or communications), is common. 
  • In four of the five surveyed jurisdictions where national multi-sectoral regulators exist, the multi-sectoral regulator also has responsibility for competition enforcement. 
  • There appears to be a trend towards a single-institution model, with Spain and the Netherlands both combining regulatory and competition activities in recent years. 
  • Regulators are placing an increasing emphasis on establishing processes for more effective ‘engagement’ with consumers. 
  • The surveyed jurisdictions have different approaches to issues of information asymmetry between regulators and the businesses they regulate; balancing the trade-off between broad information collection powers, the protection of commercial-in-confidence information, and timeliness in regulatory processes. 
  • Innovations such as ‘alternative dispute resolution’ and negotiated settlements can potentially speed-up regulatory outcomes if they are successful in avoiding the full, formal regulatory process. However, speedier decision-making may come at the cost of diminished consultation and less transparency.