The Role of Economic Regulators in the Governance of Infrastructure
Economic regulators are responsible for ensuring that infrastructure services are
delivered efficiently, where competition on its own is unable to achieve this outcome.
Based on a survey of 34 economic regulators covering 77 sectors and subsectors including
energy, transport, communications and water, this report explores how economic regulators
carry out this task, and suggests how this experience can be usefully applied in the
governance of infrastructure more broadly.
Beyond looking at the roles and functions of economic regulators in detail, the report examines how economic regulators are involved in the infrastructure lifecycle, the infrastructure needs of the industries they regulate, how they use data to support the delivery of their mandate, the extent to which their roles and functions have changed, the involvement of economic regulators in the policy process, and the challenges that economic regulators are currently facing in delivering their mandate
Overall, the report finds that most economic regulators are, in fact, not directly involved in the discrete decision making that occurs in each stage of the infrastructure lifecycle — this is left to the infrastructure operator to manage. Instead, they seek to influence the behaviour of the operator as it manages the infrastructure through the lifecycle. For example, to prevent the exercise of market power, economic regulators constrain tariffs to efficient levels. While this limits the operator’s budget for managing the infrastructure, it does not restrict the way the operator manages the infrastructure within this budget. Economic regulators also provide financial incentives to operators in pursuit of objectives such as improving service quality.