"the role of energy regulators in the oecd experience: the why and the how" 1 pua annual...
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"The role of Energy Regulators in the OECD experience: the Why and the How"
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PUA Annual Conference 2015
“Future Challenges & Lessons from International Energy Reforms”
Jerusalem, 30 November 2015
Luigi Carbone
Commissioner, The Italian Regulatory Authority for Electricity, Gas and Water
Chair, OECD Network of Economic Regulators (NER)
• WHAT ?THE NEEDS OF A COMPLEX SYSTEM
• WHY ?THE RATIONALE OF A REGULATOR
• HOW ?ACCOMPLISHING THE MISSION
• SOME POSSIBLE, PRELIMINARY CONCLUSIONS
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WHAT ?: The Needs of a Complex System
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From a Vertically Integrated Electricity Sector ...
WHAT ?: The Needs of a Complex System
... To Open Competition and Networks Unbundling
Generation Transmission Distribution Retailers
Generation Transmission RetailersGeneration
GenerationRetailers
RetailersRetailers
DistributionDistribution
RegulationRegulation
RegulationRegulationMORE & BETTER
MORE & BETTER
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Fields of intervention of Energy Regulation
Every regulatory
decision has an impact on
stakeholders...
WHAT ?: The Needs of a Complex System
• WHAT ?THE NEEDS OF A COMPLEX SYSTEM
• WHY ?THE RATIONALE OF A REGULATOR
• HOW ?ACCOMPLISHING THE MISSION
• SOME POSSIBLE, PRELIMINARY CONCLUSIONS
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WHY ? The Rationale of a Regulator
The Mission of the Regulator
??????
Business Consumers
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Every regulatory
decision has an impact on
stakeholders...
Balancing Stakeholders’ interests
WHY ? The Rationale of a Regulator ???
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«Regulating business considering consumers as elements of the issue,
not as constraints»
Project 1 Project 1 Project 2Project 2
OOr r
A different perspective:
NOT a trade-off, BUT an alignment
WHY ? The Rationale of a Regulator ???
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«Regulating consumer protection considering business as element of
the issue, not as costraints»
RIA
A different perspective:
NOT a trade-off, BUT an alignment
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Lack of committment
Lack of competitive neutrality
Information asymmetries
Private captures
WHY ? The Rationale of a Regulator
Time Inconsistency
Political Uncertainty
The «Why» of an Independent Regulator, according to the OECD*
“Regulation is expected to mitigate market failures at minimum cost - that is, without resulting in policy failures and excessive market distortions. They include: …”
* OECD Being An Independent Regulator: The Why» and the «How». (5° NER Meeting, Paris, 4 Nov.2015)
• WHAT ?THE NEEDS OF A COMPLEX SYSTEM
• WHY ?THE RATIONALE OF A REGULATOR
• HOW ?ACCOMPLISHING THE MISSION
• SOME POSSIBLE, PRELIMINARY CONCLUSIONS
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Within these constraints, regulatory decisions should be…
Room for Manoeuvre ?
Transparent, Participated,Evidence-based, Minimizing burdens
ArbitraryPolitical
Discretional
Laws establishing the regulatory competences
JudicialReview
Regulation
(ex ante)
(ex post)
Constraints
High quality!
HOW?
HOW: Accomplishing the Mission
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Effectiveness of the outcomes
The “Quest” for Regulatory Quality
Level of interaction with external actors
Capacity of assessing factual data
Degree of independence? (and, from who?)
Reduction of administrative burdens
Possible Possible «indicators»«indicators»of the quality of the quality of regulatory of regulatory activitiesactivities
HOW: Accomplishing the Mission
A possibile definition of Independent Regulator
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HOW: Accomplishing the Mission
«You'll not stand out in any way. Your entire image is crafted to leave no lasting memory with anyone you encounter. […] Anonymity is your name. Silence your native tongue. You're no longer part of the System. You're above the System. Over it. Beyond it. We're “them”. We're “they”.»
«You'll not stand out in any way. Your entire image is crafted to leave no lasting memory with anyone you encounter. […] Anonymity is your name. Silence your native tongue. You're no longer part of the System. You're above the System. Over it. Beyond it. We're “them”. We're “they”.»
“The Men in Black” (United States, 1997), directed by Barry Sonnenfeld, starring Tommy Lee Jones and Will Smith
An OECD definition ? No,
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HOW: Accomplishing the Mission
Regulators are not «Men in Black»... …but part of an orchestra
RegulatorRegulator
GovernmentGovernmentConsumersConsumers
BusinessBusiness
ParliamentParliament
The value of Independence
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… now, not a status to be given for granted, rather a value to be deserved on the field!
It used to be considered an “essential” feature during liberalization processes ...
A “legislative trendy” mechanism
A fundamental principle of modern institutional systems
A “POWER” to be exerted A “SERVICE”, to be delivered
Asking (& receiving) from outsidewhat is necessary
Explaining outside our utility
“De jure”, legal statement “De facto”, multidisciplinary evaluation
“We should reaffirm Independence through a frank and open analysis…”OECD NER Workshop, 17 April 2015
HOW: Accomplishing the Mission
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HOW: Accomplishing the Mission
Budget
Instructions from the executive
Staff
Relation with Industry/Stakeholder
s
The «How» of an Independent Regulator, according to the OECD*
“The analysis of the survey responses points to some preliminary insights on the practical implications of independence but also some further questions for clarification that could help dig deeper in what could be the practical implications of the requirements and practices currently in place to safeguard independence”
* OECD Being An Independent Regulator: The Why» and the «How». (5° NER Meeting, Paris, 4 Nov.2015)
Tool box
Stakeholders EngagementPerformance AssessmentPeer reviews and other “external” sources
Tool box
Stakeholders EngagementPerformance AssessmentPeer reviews and other “external” sources
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Ex post impact analysisExplaining and communicatingResponding about the use of our resources (and of our “power”)Amount of burdens imposedRatio of litigation?
Ex post impact analysisExplaining and communicatingResponding about the use of our resources (and of our “power”)Amount of burdens imposedRatio of litigation?
How to be accountable ??
The other side of the coin of independence: accountability
To demonstrate that independent regulation is USEFUL (also useful in its independence!)To gain TRUST and credibility
To demonstrate that independent regulation is USEFUL (also useful in its independence!)To gain TRUST and credibility
Why being accountable ??
HOW: Accomplishing the Mission
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Some useful tools
Permanent Forum of ex post dialogue with the stakeholders
Reducing regulatory burdens
“External” Accountability
Observatory of Energy, Water & Heating Regulation
Horizontal, interdipartimental WG on simplification
PAFER,Peer reviews
In-depth analisys Survey,Standards,Guidelines & Standards
HOW: Accomplishing the Mission
• WHAT ?THE NEEDS OF A COMPLEX SYSTEM
• WHY ?THE RATIONALE OF A REGULATOR
• HOW ?ACCOMPLISHING THE MISSION
• SOME POSSIBLE, PRELIMINARY CONCLUSIONS
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Accontability &
Performance Assessment
Independencenot a status, but a value
Evidence-based
decisions
Transparency &
Participation
Mission accomplished!
How to accomplish this (im)possible mission ?
How to accomplish this (im)possible mission ?
TRUST !!
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Loyal interaction with other
Institutions
Some Possible Preliminary Conclusions
International cooperationInternational cooperationcan help a lot! can help a lot!
MEDREGMEDREGCEERCEER NARUCNARUC
OECD\NEROECD\NER
ERRAERRA
ARIAEARIAEICERICER CAMPUCCAMPUC
RERARERASAFIRSAFIR
OOCUROOCUR
EAPIRFEAPIRF
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Pizza!Pizza!
Some Possible Preliminary Conclusions
Not a single recipe,Not a single recipe,but some common ingredientsbut some common ingredients
