institutional arrangements for electricity network regulation insights into decision-making...
TRANSCRIPT
Institutional Arrangements for Electricity Network Regulation
Insights Into Decision-Making Processes in Germany, the UK and the USA
Vincent PálDipl.-Jur. (Univ.)
Humboldt University Berlin – Faculty of Law
London School of Economics and Political Science - Department of Law
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Outline
1. Setting the Problem
2. Extending the Framework
3. Case Studies
4. Analysis
5. Concluding Remarks
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1. Setting the Problem (1)
• Traditional Analysis of Network Industries based on– Positive and Normative Theory
• Important Results– Rent-seeking and capture– Allocation and Inefficiency
• Policy Recommendations– Unbundling/Industry restructuring– ‚Incentive Regulation‘
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1. Setting the Problem (2)
• Regulatory decision-making: black box
• Regulatory governance and respective costs?
• Regulatory process and the connected rules as well as the instituional environment
• Similar problem: governance structures in regulated firms
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2. Extending the Framework (1)
Why decision-making processes?
• Implementation of economic models determine effectiveness: legal rules as a condition for success or failure
Methodology:
• Comparative Law: functional analysis
• Institutional Economics
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2. Extending the Framework (2)
Relevant questions to ask:
• What is the operational framework of the players?
• Who are the players involved?
• What are the players‘ reactions to the framework?
• What is the scope for players to shape regulatory goals with respect to investments?
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3. Case Studies Germany
• General statutory provisions (EnWG) and detailed regulations in ordinances
• Parties: FNA, network companies, consumer groups, industry groups?
• Administrative Procedure (APA, adversarial)
• Ordinances: list of admissible investments, deviation difficult
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3. Case Studies UK
• General statutory framework (Acts) and detailed provisions in licences
• Stakeholders (wide notion): network companies, consumers, users of network services, environmental groups, Ofgem, government
• RIIO: Outputs-led framework
• Common understanding of what to deliver should be reached through consultations
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3. Case Studies USA
• General statutory provisions (NGA, FPA)
• Parties (wide notion): utilities, customers, interstate (FERC) and state regulators
• Administrative Procedure (APA): filed-tariff-doctrine; adversarial/notice-and-comment or negotiated settlements (but still threat of litigation)
• Parties actively engage in assessing investment and projects
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4. AnalysisOperational Rules and Reactions
• Ordinances:– Low search costs for admissible investments– Stable investment framework– Regulatory commitment still questionable– Weak incentives to reveal information
• Licences/Settlements:– Higher search and negotiation costs– Consultations incentivise to reveal information
in order to avoid further scrutiny– Innovative solutions possible
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4. AnalysisParties
• General assumption: the fewer the parties involved, the lower the transaction costs– In GER: Only 2 or 3 parties, litigation as a rule– In UK and USA: High number of participating
stakeholders, litigation is the exception
• Regulatory authorities: different degrees of discretion and independence– FNA: discretion restricted by statute, political
influence– Ofgem: body sui generis detached from gov.
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4. AnalysisScope for shaping regulatory goals
• Germany: narrow scope– Project assessment according to pre-set listing
• UK/RIIO: potential wide scope– Business plans and stakeholder engagement– RPI-X highly complex; Number of Publications
during RIIO-T1 indicate the same for RIIO
• USA/settlements: potential wide scope– Qualitative different outcome than litigation
possible (‘rate moratorium’)– Non-transparent cost structures problematic
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4. AnalysisMain Findings
We can assume that
• Players use regulatory leeway creatively
• Ex-post opportunism can be mitigated through non-litigation solutions
• Multitude of players do not necessarily hinder joint solutions; PA-Problems are still present
• Self-regulatory characteristics pose the problem of capture; complete absence of litigation seems problematic
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5. Concluding Remarks
• Work in progress
• Informal institutions?
• Regulatory innovation?
• A language for comparative analysis?
• Heuristics
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Thank you very much
for your attention!