Handbook for Evaluating Infrastructure Regulatory Systems

by Brown, Ashley C.; Stern, Jon; Tenenbaum, Bernard; Gencer, Defne

• ISBN13: 9780821365793
• ISBN10: 0821365797
• Format: Paperback
• Copyright: 2006-06-07
• Publisher: World Bank Publications

Summary

This handbook provides an analytical framework and supporting instruments for evaluating the performance of new infrastructure regulators in developing countries. It argues that an evaluation must examine both regulatory governance (the "how" of regulation) as well as regulatory substance (the "what" of regulation). If the evaluation is to produce useful "second generation" reforms, it must examine how formal elements of the regulatory system have been implemented in practice and the effect of these elements on sector performance. It describes how to "operationalize" the independent regulator model and elements of possible transitional regulatory systems. Examples are generally drawn from electricity regulation but the analytical framework, questionnaires and interview protocols can be easily adapted to other infrastructure sectors.

Table of Contents

Foreword	xi
Acknowledgments	xv
About the Authors	xvii
Abbreviations	xix
Executive Summary	1	(1)
What the Handbook Does	2	(1)
Quick Evaluation	3	(1)
Mid-Level Evaluation	3	(1)
In-Depth Evaluation	4	(1)
What Should Be Evaluated?	5	(1)
What Benchmarks?	6	(1)
Transitional Regulatory Systems	7	(4)
Evaluating the Effectiveness of Infrastructure Regulatory Systems: A Framework and Rationale	11	(18)
Why Evaluate Regulatory Effectiveness?	11	(4)
A Checkup	11	(1)
Expectations and Performance	12	(3)
Recommended Approach	15	(1)
What Should Be Evaluated?	15	(9)
The Meaning of Regulation	16	(1)
Regulatory Systems	17	(1)
Regulatory Entities	17	(1)
Quasi-Regulatory Systems and Failed States	18	(1)
Old-Style Versus New-Style Regulation	19	(1)
Two Important Dimensions of Regulation: Governance and Substance	19	(2)
Focus of This Handbook	21	(3)
The Structure of the Handbook	24	(5)
Approaches to Evaluating Regulatory Effectiveness	29	(20)
Principal Methods of Evaluation	29	(8)
Type 1---Cross-Country Statistical Analyses	29	(2)
Type 2---Cross-Country Descriptive Analyses	31	(2)
Type 3---Single-Country Structured Case Studies	33	(4)
The Approach of This Handbook and How It Differs from Earlier Approaches	37	(3)
Sector Outcomes and Regulatory Evaluations	40	(1)
Quantitative Versus Qualitative?	41	(3)
The Recommended Approach	43	(1)
Two Limitations of the Recommended Approach	44	(5)
The Limits of Regulation	44	(1)
The Good, the Bad, and the Uncertain	45	(1)
Bad Regulation	46	(1)
The Strategy of the Recommendations	47	(2)
Benchmarks for Regulatory Governance: Key Principles and Critical Standards	49	(28)
Why Benchmarks?	49	(5)
What Is an Independent Regulator?	50	(1)
Why Use an Independent Regulator as a Benchmark?	51	(3)
Are There Meta-Principles for Regulatory Governance?	54	(3)
Is the Independent Regulator Model Feasible in Countries with Limited Governance Capability?	57	(2)
Ten Key Principles for the Independent Regulator Model of Regulatory Governance	59	(4)
Independence	59	(1)
Accountability	60	(1)
Transparency and Public Participation	60	(1)
Predictability	60	(1)
Clarity of Roles	61	(1)
Completeness and Clarity in Rules	61	(1)
Proportionality	61	(1)
Requisite Powers	62	(1)
Appropriate Institutional Characteristics	62	(1)
Integrity	63	(1)
Critical Standards for Effective Infrastructure Regulation	63	(14)
Legal Framework	64	(1)
Legal Powers	64	(1)
Property and Contract Rights	65	(1)
Clarity of Roles in Regulation and Policy	65	(1)
Clarity and Comprehensiveness of Regulatory Decisions	66	(1)
Predictability and Flexibility	66	(1)
Consumer Rights and Obligations	66	(1)
Proportionality	67	(1)
Regulatory Independence	68	(1)
Financing of Regulatory Agencies	69	(1)
Regulatory Accountability	70	(1)
Regulatory Processes and Transparency	71	(2)
Public Participation	73	(1)
Appellate Review of Regulatory Decisions	73	(1)
Ethics	74	(3)
Transitional Regulatory Systems and Criteria for Evaluating Them	77	(68)
Overview of Transitional Regulatory Systems	78	(5)
Why Transitional Systems?	78	(1)
Good Fits Versus Best Practice	79	(1)
Types of Transitional Regulatory Systems	79	(2)
The Danger of Transitional Regulatory Systems That Never Evolve	81	(2)
The Importance of Starting Conditions	83	(1)
Governance	83	(5)
Commitment and Capacity	85	(3)
Commercialization	88	(4)
Evaluation Criteria for Transitional Regulatory Systems	92	(1)
Regulatory Options for Countries with Some Effective and Well-Functioning Government Institutions	92	(3)
Some Prerequisites	92	(1)
Utility Franchise and Concession Contracts, Private Investment, and the Development of Utility Regulation	93	(2)
Constraints on the Development of Effective Regulatory Institutions	95	(47)
Unwillingness or Inability to Move toward Commercialization	96	(2)
Unwillingness or Inability to Transfer Regulatory Decisionmaking Powers	98	(5)
Weak or Slowly Operating Law Courts and Regulatory Appeals	103	(5)
Uncertainty about the Nature and Strength of Regulatory Commitments	108	(21)
Limited Regulatory Capability	129	(9)
Popular Concerns That Consumer Interests Are Being Ignored Relative to Investors' Profitability	138	(3)
Macroeconomic Crises and Their Aftermath	141	(1)
Implications for the Evaluation of Regulatory Agencies	142	(3)
How to Recognize Good and Bad Regulation: Regulatory Decisions and Sector Outcomes	145	(20)
Regulatory Decisions and Sector Outcomes	146	(1)
What Other Factors Affect Sector Outcomes?	147	(2)
Should the Evaluation Ignore External Factors beyond the Regulator's Control?	148	(1)
Judging the Quality of Utility Regulatory Frameworks and Decisions: Asking the Right Questions	149	(2)
Good and Bad Regulatory Decisions	151	(3)
What Is a Regulatory ``Decision''?	151	(1)
The Meaning of ``Good'' and ``Bad''	152	(1)
What Are the Goals?	152	(1)
What If the Evaluator Disagrees with the Government's Sectoral Goals?	153	(1)
How Can Good Decisions Be Distinguished from Bad Decisions?	153	(1)
Real-World Examples of Bad Regulatory Decisions	154	(2)
The Effect of Regulation on Sector Outcomes	156	(3)
Measures of Relevant Outcomes and Criteria for Infrastructure Industries	159	(5)
Indicators for Output and Consumption	160	(1)
Indicators for Efficiency	160	(1)
Indicators for Quality of Supply	161	(1)
Indicators for Financial Performance	161	(1)
Indicators for Capacity, Investment, and Maintenance	162	(1)
Indicators for Prices	162	(1)
Indicators for Competition	163	(1)
Social Indicators	164	(1)
Conclusion	164	(1)
The Process of Conducting a Regulatory Evaluation: Discussion and Evaluation Tools	165	(20)
The Three Levels of Evaluation	166	(4)
A Short Basic Evaluation	167	(1)
A Mid-Level Evaluation	168	(1)
An In-Depth Evaluation	169	(1)
The Questionnaires and Interviews	170	(1)
The Alternative of Self-Completed Questionnaires	171	(2)
Conducting the Evaluations	173	(6)
Conducting Short Basic Evaluations	173	(2)
Conducting Mid-Level Regulatory Evaluations	175	(4)
Conducting In-Depth Evaluations	179	(1)
Ensuring That the Evaluation Is Taken Seriously	179	(2)
Conclusions and Implications for Regulatory Evaluation	181	(4)
Appendix A Critical Standards for Effective Regulation of Infrastructure: A Detailed Exposition	185	(60)
Appendix B Background Documents for Mid-Level and In-Depth Evaluations	245	(2)
Appendix C Questionnaires for Short Basic Evaluations of Infrastructure Regulatory Systems	247	(18)
Appendix D Questionnaires for Mid-Level and In-Depth Evaluations of Infrastructure Regulatory Systems	265	(22)
Appendix E Guidelines and Questions for Mid-Level and In-Depth Evaluations of Infrastructure Regulatory Systems	287	(14)
Appendix F Sample Terms of Reference for Mid-Level and In-Depth Evaluations of Regulatory Systems	301	(8)
Appendix G Summaries of Some Mid-Level and In-Depth Country-Specific Regulatory Evaluations	309	(26)
Appendix H Alternative Regulatory Governance Models	335	(10)
Appendix I Infrastructure Regulation in Failed States and Post-Conflict Countries	345	(8)
A Selected Annotated Bibliography	353	(26)
Index	379