Electricity and Telecommunications Regulation in Small and Developing Countries
Regulation Initiative Working Paper Series No. 41
53 Pages Posted: 12 Sep 2002
Date Written: November 2000
Over the last 10-15 years, a new standard model has taken hold for the economic framework for the operation of utilities. The new model has as its core that utility services will be: -provided by a set of commercialised companies; -monopoly (eg network) elements are separated from potentially competitive elements; -competition is actively introduced into the potentially competitive elements; and -private capital is introduced where possible and appropriate, particularly into the competitive elements, typically with privatisation of some or all of the existing assets.
Over the last 10-15 years, this new model has largely replaced the traditional model of utility services being supplied by a state-owned vertically and horizontally integrated monopoly, supervised by the national government and typically operating in a non-commercial or semi-commercialised way. This change has been induced across developed and now across developing countries for the following two main reasons: (i) a major reduction in the ability of national governments to finance utility investment from tax revenues ; an (ii) a much greater emphasis on the need to improve efficiency and reduce the costs of infrastructure services (connection as well as service) coupled with (at least in developed countries) the achievement of very widespread if not universal service .
To support the newly commercialised and privatised utilities, there have been major developments in the theory and practice of regulation. New utility regulatory institutions have been discussed and introduced in many countries. In addition, it has been realised that the introduction of competition (and, in particular, the development of competition over networks) has demonstrated the need for new and more complex forms of regulation to support the utility reforms.
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