Regulation by Contract : A New Way to Privatize Electricity Distribution?
In with the performance of recently privatized electricity distribution companies. Governments complain that tariffs have increased without visible improvements in service. Investors contend that they have not earned reasonable returns on their inv...
| Main Authors: | , , |
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| Format: | Publication |
| Language: | English en_US |
| Published: |
Washington, DC: World Bank
2013
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2003/10/2684450/regulation-contract-new-way-privatize-electricity-distribution http://hdl.handle.net/10986/15078 |
| Summary: | In with the performance of recently
privatized electricity distribution companies. Governments
complain that tariffs have increased without visible
improvements in service. Investors contend that they have
not earned reasonable returns on their investments. Both
sides often express dissatisfaction with the new independent
regulatory commissions established at the time of
privatization. In particular, investors argue that the
commissions have not lived up to their commitments and
almost always side with consumer interests. Some investors
claim that the design of the new regulatory system in many
developing and transition economies is fundamentally flawed.
They often recommend that independent regulatory commissions
be supplemented or replaced by more explicit
"regulation by contract." This paper examines
whether regulation by contract or a combination of
regulation by contract and regulatory independence would
provide a better regulatory system for developing countries
that wish to privatize some or all of their distribution
systems. The paper: Describes the key characteristics of
regulation by contract as it has been implemented in several
developing countries Focuses on how regulatory contracts in
several countries handle certain key issues (pass-through of
power-purchase costs, foreign exchange fluctuations, loss
reduction and the obligation to serve) Describes the
strengths and weaknesses of different approaches for dealing
with disputes that inevitably arise in the application of
regulatory contracts Compares and contrasts some recent
experiences of distribution entities in Latin America and
India. Examines some of Brazil's recent problems that
may have arisen because Brazil adopted a flawed variant of
regulation by contract. The paper concludes with a
discussion of some lessons that can be learned from the
experience of several countries. |
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