What it Takes to Lower Regulatory Risk in Infrastructure Industries : An Assessment and Benchmarking of Brazilian Regulators
ELECTRICITY MARKET REFORM
FEDERAL REGULATORY AGENCIES
RISK OF EXPROPRIATION
AbstractThis article points out that regulatory
governance-how regulators manage concession contracts, or
other public-private contractual arrangements and sector
laws-can affect the private sector's perception of
regulatory risk and thus the availability of private capital
for infrastructure projects. Four key elements of the
regulatory governance structure can reduce the risk of
regulatory failure: political and financial autonomy,
decision-making structures that reduce regulatory
discretion, access to effective enforcement and other
regulatory tools, and efficient rules of accountability.
This note presents an analytical framework based on those
four elements and applies it in assessing regulatory
governance in Brazil.
TypePublications & Research :: Brief
Copyright/LicenseCC BY 3.0 IGO
Regulatory Governance and Sector Performance : Methodology and Evaluation for Electricity Distribution in Latin AmericaAndres, Luis; Lopez Azumendi, Sebastián; Guasch, José Luis (World Bank, Washington, DC, 2008-01)This paper contributes to the literature that explores the link between regulatory governance and sector performance. The paper develops an index of regulatory governance and estimates its impact on sector performance, showing that indeed regulation and its governance matter. The authors use two unique databases: (i) the World Bank Performance Database, which contains detailed annual data for 250 private and public electricity companies in Latin America and the Caribbean; and (ii) the Electricity Regulatory Governance Database, which contains data on several aspects of the governance of electricity agencies in the region. The authors run different models to explain the impacts of change in ownership and different characteristics of the regulatory agency on the performance of the utilities. The results suggest that the mere existence of a regulatory agency, regardless of the utilities' ownership, has a significant impact on performance. Furthermore, after controlling for the existence of a regulatory agency, the ownership dummies are still significant and with the expected signs. The authors propose an experience measure in order to identify the gradual impact of the regulatory agency on utility performance. The results confirm this hypothesis. In addition, the paper explores two different measures of governance, an aggregate measure of regulatory governance, and an index based on principal components, including autonomy, transparency, and accountability. The findings show that the governance of regulatory agencies matters and has significant effects on performance.
Regulatory Governance in Infrastructure Industries: Assessment and Measurement of Brazilian RegulatorsMelo, Marcus; Correa, Paulo; Pereira, Carlos; Mueller, Bernardo (Washington, DC: World Bank, 2012-06-04)The objective of this report is twofold: to provide a comprehensive assessment of the state of regulatory governance in infrastructure industries in Brazil and to suggest possible indicators for future monitoring. After the introduction, Section 2 sets up the analytical framework for the report, identifying key components of regulatory governance, namely, autonomy (political and financial), procedures for decision making, instruments (including personnel), and accountability. Section 3 assesses each of these components in practice, reporting the results of a survey with 21 regulatory agencies in Brazil, which was designed and implemented by the research team in 2005. Section 4 measures regulatory governance based on three related indexes, ranks the Brazilian regulators among themselves, and compares the proposed indexes with two other indicators available in the literature. Section 5 presents the conclusions.
Handbook for Evaluating Infrastructure Regulatory SystemsGencer, Defne; Stern, Jon; Brown, Ashley C.; Tenenbaum, Bernard (Washington, DC: World Bank, 2012-06-04)More than 200 new infrastructure
regulators have been created around the world in the last 15
years. They were established to encourage clear and
sustainable long-term economic and legal commitments by
governments and investors to encourage new investment to
benefit existing and new customers. There is now
considerable evidence that both investors and consumers-the
two groups that were supposed to have benefited from these
new regulatory systems-have often been disappointed with
their performance. The fundamental premise of this book is
that regulatory systems can be successfully reformed only if
there are independent, objective and public evaluations of
their performance. Just as one goes to a medical doctor for
a regular health checkup, it is clear that infrastructure
regulation would also benefit from periodic checkups. This
book provides a general framework as well as detailed
practical guidance on how to perform such regulatory checkups.