Trends in the management of regulation: A comparison of energy regulators in member countries of the Organisation for Economic Development and Co-operation

This paper studies the design and functions of energy regulatory agencies building on a cross-country analysis of energy regulators in OECD (Organisation for Economic Development and Co-operation) member countries. There is a strong trend towards specialization of the regulatory function that has resulted in the creation of separate regulatory organizations in many of the countries examined. Regulatory organizations, however, show significant differences in their independence, powers, and relationship with the executive branch of the government. The focus of this paper is on two questions. First, what do independent regulatory agencies have in common? It has been shown that most independent regulatory agencies share a common blueprint concerning their decision-making structure, procedures and core activities. This suggests that international benchmarking and identification of best practices can help improve the performance of regulatory agencies where they exist. Second, what explains the variation in the powers and independence of regulatory agencies? The analysis suggests that differences among regulators reflect not only different legal and administrative traditions, but also the regulatory framework adopted in each country. Regulatory agencies generally have more power in countries and industries practising active competition policies, such as those requiring the unbundling of networks, and active regulatory policies, such as ongoing regulation of network prices. At the other extreme, regulatory agencies do not exist in countries that practice ‘light-handed’ regulation. In other words, the choice and design of regulatory organizations reflects to some extent the scope of the functions that regulators have to manage.