Which source of law is responsible for the creation and operation of public regulatory agencies?
Sector regulation plays a key role in PPPs and they cannot be developed without reference to the regulatory system in place. This section looks at key issues to think about when designing a regulatory framework and then provides links to materials on sector regulation. This is NOT intended to be a definitive reference on Regulation but rather an introduction to regulatory design. A key initiative on regulation is the Body of Knowledge on Infrastructure Regulation. Show
GeneralWhat is Regulation?Regulation is the monitoring and control of a sector or business by Government or an entity appointed by Government. Direct and indirect controls and limitations are imposed upon the regulated entity. Regulation tends to be categorized into economic regulation and other forms of regulation. Why regulate?(a) To protect consumers against monopoly abuse Most utility and infrastructure providers have traditionally been natural or legal monopolies. A natural monopoly arises where it is much more efficient for one supplier to provide services, such as a water utility. A legal monopoly is a supplier that has been granted the sole legal right to supply services. In any monopoly supply situation, whether involving the private sector or otherwise, there is potential for consumers to be adversely affected by the monopoly supplier, whether through excessive charging or in terms of poor service, interruptions in service, etc. Effective regulation can protect against abuse by the monopoly and create incentives to improve services. (b) To protect investors Whether they are private investors or community-based organizations—the investors need to know:
Many of the risks associated with these issues can be addressed through Regulation. (c) To monitor performance of service provider and reduce asymmetry of information. Government must monitor services outsourced under a PPP arrangement. Therefore, the Government needs to retain sufficient capacity to monitor and enforce the operator's obligations. A Regulator can provide a home for such capacity and a mechanism to enable the Government to monitor and enforce. When services are outsourced to the private sector, there is a natural asymmetry of information between the regulated entity and the Government. Regulation can help to restore the balance of information. (d) Other interests As explained below, there are other interests which are deemed important to protect through regulation, such as the environment, service standards, consumer services, asset maintenance and replacement, etc. General Principles for DesignRegulation is a means to an end—what matters are outcomes and not regulatory rules. Care should be taken when designing a Regulatory Framework to avoid developing a series of comprehensive and sophisticated rules which look great on paper but which are difficult and impractical to implement and are not necessarily tailored to the circumstances at hand. In developing countries, in particular, the most effective rules are likely to be simple and easy to implement, with a light burden imposed on both regulator and regulated entity. The benefits of regulation should exceed the cost of regulation When designing the Regulatory Framework, the potential costs of monitoring activities and data collection to all parties involved should not be forgotten. Where there are a number of regulatory bodies responsible for regulating the sector, care should be taken to try and reduce duplication of information to be collected, audits required, etc. While it may be economically viable in the UK market to have separate audited accounts drawn up for company registration and for regulatory purposes, this may not be sensible in a developing economy. Where an economic regulator is requiring information on operations, thought should be given to the fact that an environmental regulator may be seeking similar information also. What is appropriate for municipal utilities may not be appropriate or cost effective for rural or dispersed utilities with relatively few customers and a high cost base. Basic Design QuestionsWhat entities should be regulated?Is it appropriate to regulate all potential service providers in a sector or only the monopoly service providers? If a sector is to be liberated, i.e., the monopoly be extinguished or reduced, will the entrants to the sector be required to meet similar service standards, etc? What activities should be regulated (coverage)?Should all activities of the regulated entity be regulated, or only those that relate to the monopoly service?
Traditionally in regulation there is a distinction between regulated and non-regulated activities and the assets that relate to those activities (for example, in England and Wales, regulated entities are permitted to dispose of non-regulated assets, and engage in non-regulated activities). However, for service providers providing essential services such as water and/ or electricity, there is a view that regulated assets should be ring-fenced from any high risk enterprises and where the utility carries out non-regulated activities these should be limited to a small percentage of the utility’s overall business, or should be carried out in a separate limited liability company. What are the functions of Regulator(s)?Regulation of Infrastructure is usually discussed in the context of economic regulation. The functions of Economic Regulation are typically:
Economic Regulation should not be considered in isolation from other regulatory functions that may be relevant to infrastructure projects:
Is there to be more than one entity regulating the Sector?
How much Discretion should the Regulator have?If the Government is seeking to encourage investor confidence in a sector then the level of discretion that a regulatory body enjoys (particularly a new body that has no track record) in carrying out its functions is of crucial importance. Private investors will be looking for checks and balances to be built into the legal framework of regulation, and even for assurances from Government, such as:
Balanced against this desire for certainty is the interests of consumers and the benefit of giving the Regulator discretion to adapt tariff formulae to changing circumstances over time. The level of discretion to be granted to the regulatory body also depends on the level of resource that the regulator is to be granted. What are Regulator's powers?When determining the powers that the Regulator should have, consideration should be given to the Basic Principles of Design; i.e. Regulation is a means to an end and its cost should not exceed its benefits. The Regulator will need to be empowered to do the following:
The regulatory designers may seek to put limits on these powers, however, or impose general obligations of fairness and proportionality on the Regulator, and determine how often functions such as tariff setting and reviews can take place. In particular, investors/ operators will be anxious to ensure that there are limits on the extent to which the Regulator can change the rules, such as amend the license of the operator. Consumers will also want to know how they are going to have an input into regulatory decisions. Thought should be given as to whether the Regulator should be required to consult consumers and whether consumer bodies should be formally recognized. What recourse is there against Regulatory decisions?There needs to be a method of regulating the Regulator and being able to amend its powers from time to time also. Stakeholders such as investors and customers will also be anxious to know how the Regulator can be brought to account for its actions and whether there is recourse against the Regulator or its decisions. In particular, will recourse be through the courts, if so, under administrative law rules and courts or through the general court system or through arbitration? What remedies are available? What is the source of the Regulator’s powers – legislation, contract?In developed countries, there has been a difference in approach to the source of the Regulator’s powers. In the UK and US, a separate regulatory body is established under legislation and the relationship between the regulator and the regulated entity is set out in legislation and in a license. In France, the tradition is for regulation to be by contract, with the local government contracting party overseeing the activities of the operator through the contract. These are not the only two possible models, and there is a growing trend, in developing countries in particular, to combine these models. In a number of the sample agreements included on this site (for an example, click on Power Purchase Agreement (Example 1), this combination is reflected as follows:
In addition, there is a growing trend to reduce the amount of discretion that the regulatory body can apply by setting the principles and formulae for tariff setting, etc in “stone”. For more on this, go to Regulation by Contract: A New Way to Privatize Electricity Distribution. Thought should also be given to the content of primary legislation and what can be left to secondary legislation. Secondary legislation is generally subject to less parliamentary scrutiny and can be changed more easily than primary legislation and so investors may be less comfortable with key issues being left to secondary legislation. Is the Regulator to be independent?There is a general proposition that the more independent the regulator is, the more effective it is going to be. Whether true independence can ever be achieved is debatable. There are examples of good regulation by regulators that are not independent and of bad regulation by independent regulators. However, investors are more likely to trust a regulatory system which has more certainty and independence. Some key issues to consider are:
Multi-sector regulator?For a discussion of the advantages and disadvantages of multi-sectoral regulators in the Telecoms sector, which has more general relevance, go to page 30 of Telecommunications Legislation in Transitional and Developing Economies. Further Reading and Resources
Who is responsible for the creation of laws?Congress creates and passes bills. The president then may sign those bills into law. Federal courts may review the laws to see if they agree with the Constitution. If a court finds a law is unconstitutional, it can strike it down.
What is administrative law in the Philippines?o Definition: All the laws and policies that regulate. or control the administrative organization and. operations of the government through. administrative agencies (AAs)
What is an example of an administrative law?An example of administrative law is the regulation and operation of the Social Security Administration, and the administration of benefits to the people.
What are the sources of Ghanaian Constitution?The Constitution
Since the first republican Constitution in 1960, Ghana has had three other Constitutions. These are the 1969, 1979 and 1992 Constitutions. The current 1992 Constitution is available in the modern constitutions volumes of Constitutions of the Countries of the World.
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