Regulatory policy

Sixth meeting of the Network of Economic Regulators

 

11 April 2016, Paris, France

 

Meeting participants highlighted the growth in size of the Network and recognised this as a testament to the relevance and importance of its work bringing different sector regulators around the table to discuss common issues from economic, competition, consumer, environment and safety areas.

 

The meeting served to take forward the agenda on the role of regulators in the governance of infrastructure, discuss the key findings of the performance assessment review of Latvia’s Public Utilities Commission (PUC) as well as of the upcoming report on the pinch points of independence where undue influence can be exercised on regulators and how to address them.

 

The following reports were also launched: Protecting Consumers through Behavioural Insights: Regulating the Communications Market in Colombia and Governance of Regulators’ Practices, Accountability, Transparency and Co-ordination.

 

Key highlights of the discussion on the role of regulators in the governance of infrastructure included:

  • The NER is uniquely placed to contribute to wider work on the governance of infrastructure, by bringing the view and experiences of regulators as guardians of infrastructure delivery and management into the discussion. In this respect the Secretariat is undertaking further work with delegates to better understand the role, responsibilities and experiences of regulators with regard to the governance of infrastructure.
  • Regulators play a critical role with regard to the governance of infrastructure, namely by providing the right incentives for infrastructure investment and delivery through setting and enforcing the rules including tariffs. Predictability, independence and strong regulatory functions are key if these functions are to be carried out effectively. Regulators are confronted with an increasingly complex environment, where short-term returns on investment need to be balanced against long-term innovation and where there is a multiplicity of actors (including at the supranational and sub-national levels). This growing complexity challenges regulators' more traditional responsibilities (of ensuring economic efficiency, for example). This uncertainty is growing in a context of shifting policy objectives and expectations, and it poses the challenge of regulators’ capacity to adapt to new demands without over-stretching their resources. Co-ordination presents a central challenge, whether between various regulatory agencies, different levels of government or supranational entities. Regulators’ participation in all stages of the life-cycle of infrastructure enhances the need for effective co-ordination with other actors.

 

Key highlights of the discussion on independence and undue influence included: 

  • Independence needs to be seen within an overall system and not in a vacuum. Regulation isn’t static, and neither is independence. Regulators are faced with changes which are becoming more and more cross-sectorial in nature, facilitated by technology and interconnecting systems. Pinch points and events where undue influence is the highest are dynamic: changes to one aspect of independence would affect others and regulators need to demonstrate that they can withstand these dynamic changes.
  • Accountability, transparency and independence go hand in hand. Regulators need to remain relevant and engaged in the policy process without falling prey to political or industry pressures. The key is to find the balance where the regulator is integrated into the policy process and overall society, while remaining accountable and credible. In particular, accountability, transparency and independence are mutually reinforcing. Being open and transparent on the regulator’s role and objectives as well as on the processes used to make regulatory decisions can support a culture of independence within the regulator. On the other hand, too much openness can lead to regulatory capture by influential stakeholders.
  • The importance of having both robust formal/de jure and practical/de facto arrangements. Formal and practical arrangements to safeguard independence are mutually reinforcing. Formal independence can support the emergence of a culture of independence within the regulator. However, also a formally independent regulator could be subjected to undue influence.
  • Information and resources. In a changing and challenging environment, regulators are sometimes confronted with an overflow of information from the regulated industry. Processing this information transparently is very important for taking regulatory decisions, Regardless of where the pinch points occur, the main challenges for regulators is either the lack of information or the  inability to anticipate and process the huge flow information, which feeds into the timely key regulatory decisions and interventions needed. As a result, regulators need to be equipped with the ability (de jure and de facto) and resources to access and process information. Also for this reason, having budgetary and enforcement autonomy is vital for to act without undue influence and deliver the required objectives.
  • Balancing independence and co-operation with stakeholders. It is important to have an effective dialogue with non-government stakeholders (industry and, equally important, consumers), without being captured by them or not attracting them to engage in the first instance. Consultative bodies can help in this respect as they can provide a transparent platform for exchanges and inputs on approaches and decisions.

 

For more information, please contact Faisal Naru

 

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» Regulatory policy and governance

» Network of Economic Regulators

 

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