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1. REGULATION OVERVIEW a. General References 1 Current Debates on Infrastructure Policy. World Bank Policy Research Working Paper No. 4410. Estache, Antonio Nov-07 and Marianne Fay World Bank Policy Research Working Paper No. 4410 World Bank, This paper provides an overview of the major current MS Washington DC debates on infrastructure policy. It reviews the evidence on the macroeconomic significance of the sector in terms of growth and poverty alleviation. It also discusses the major institutional debates, including the relative comparative advantage of the public and the private sector in the various stages of infrastructure service delivery as well as the main options for changes in the role of government (i.e. regulation and decentralization). Oxera In this brief article, the author looks back at the key events MS and ideas that have shaped todays regulatory landscape, and considers what might lie ahead. World Bank, This handbook provides an analytical framework and MS Washington DC supporting instruments for evaluating the performance of new infrastructure regulators in developing countries. It argues that an evaluation must examine both regulatory governance (the "how" of regulation) as well as regulatory substance (the "what" of regulation). If the evaluation is to produce useful "second generation" reforms, it must examine how formal elements of the regulatory system have been implemented in practice and the effect of these elements on sector performance. It describes how to "operationalize" the independent regulator model and elements of possible transitional regulatory systems. Examples are generally drawn from electricity regulation but the analytical framework, questionnaires and interview protocols can be easily adapted to other infrastructure sectors. Cambridge, UK: This book represents an effort to deal with issues of MS Cambridge regulatory governance and substance for infrastructure University regulatory institutions in developing countries. Written by an Press. economic theorist who traveled extensively throughout Africa, it pays special attention to utility pricing. Much of the book is highly mathematical, although the key results in each chapter are set out and discussed in nontechnical language. The most relevant chapters for readers of this handbook are likely to be the overview (chapter 1) and the chapter on the development of regulatory institutions (chapter 7). A central thesis of the book is that regulatory institutions and policies cannot be blindly transferred from developed countries. A similar conclusion was reached in Levy and Spiller (1994) and is expanded on in the discussion of possible transitional regulatory systems in chapter 4. . (Summary adapted from Brown et al. 2006) .

2 25 years in regulation: a revolution in pipes, cables and tracks. Oxera Agenda. 3 Handbook for Evaluating Infrastructure Regulatory Systems. Handbook.

Holt, Derek.

Nov-07

Agenda

Brown, Ashley, 2006 Jon Stern, Bernard Tenenbaum, and Defne Gencer

Handbook

4 Regulation and Development

Laffont, JeanJacques.

Mar-05

Federico Caffe Lecture Series.

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5 Economic Appraisal of Regulatory Reform: Checklist of issues. Transport Note No. TRN-24 (Applicable to all sectors, not only transport)

Jan-05

Transport Note No. TRN-24

6 The Body of Knowledge on Utility Regulation. Website

Jamison, Mark, 2004 Sanford Berg, Farid Gasmi and Jose Tavara

Website

World Bank, The purpose of this brief note is to set out a checklist of MS Washington DC issues which need to be considered when assessing the likely economic impact of regulatory reform. There is a great deal of relevant world literature, but a note of caution is appropriate when considering the transferability of experience, and especially outcome, from one country to another. Circumstances alter cases. Applicable for all sectors, not only transport. PPIAF, World This site provides summaries of and links to more than 300 MS Bank and references, an 80+ page glossary and self-testing features PURC Web to facilitate learning. The references include publications Site. and decisions by regulatory agencies and other governmental bodies; policy advisories by think tanks, consultants, donor agencies, and others; and research by academics, consultants, and other experts (Website). World Bank, This report indicates that although privatization, competitive MS Washington DC restructuring, and regulatory reforms improve infrastructure performance, several issues must be considered and conditions met for these measures to achieve their public interest goals. First, reforms have significantly improved performance, leading to higher investment, productivity, and service coverage and quality. Second, effective regulationincluding the setting of adequate tariff levels-is the most critical enabling condition for infrastructure reform. Regulation should clarify property rights, and assure private investors that their investments will not be subject to regulatory opportunism. Third, for privatization to generate widely shared social benefits, infrastructure industries must be thoroughly restructured and able to sustain competition. Thus restructuring, to introduce competition should be done before privatization, and regulation should be in place to assure potential buyers of both competitive, and monopoly elements.

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7 Reforming infrastructure: privatization, regulation, and competition. (Note: There is also an original version from 2001). World Bank Policy Research Report

Kessides, Ioannis Jan-04 N.

World Bank Policy Research Report

8 Private Participation in Infrastructure in Developing Countries: Trends, Impacts, and Policy Lessons. World Bank Working Paper No. 5

Harris, Clive

Apr-03

World Bank World Bank, This paper explains the rise and fall of both public sector MS Working Washington DC monopolies and private participation in infrastructure. It also Paper No. 5 describes when private sector participation improves results and how important regulatory issues, such as pricing and competition, need to be addressed if private participation in infrastructure is to succeed. (Summary taken from the Regulation Body of Knowledge Website, 2004).

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9 Sustainable Regulatory Systems: Laws, Resources, and Values. Utilities Policy 9: 15970.

Berg, Sanford V. 2000

Utilities Policy 9: 15970.

Elsevier

The article identifies organizational resources, the legal MS mandate, and core agency values as the three main factors that will affect regulatory performance. It describes each of these factors and explains how they affect the functioning of a regulatory agency. According to Berg, for the work of a regulatory agency to move forward, the agency must have adequate resources to perform its functions, a legal mandate that legitimizes its activities, and values or operational principles that uphold those activities. He notes that each of these factors are, in turn, shaped by the political and institutional forces that influence the associated reform process. Defining the overlap of all three factors as the ideal state for the realization of a regulatory agencys objectives, Berg proceeds to describe different situations that involve various permutations of the three factors and their impact on regulatory performance. (Summary adapted from Brown et al. 2006 ).

b. Regulation by Sector i. Electricity 1 Regulation of Power Markets. Chapter 6 in "Reforming Power Markets in Developing Countries: What have we learned?" (2006). Energy and Mining Sector Board Discussion Paper No. 19. Ch 6 Besant-Jones, John E. Sep-06 Energy and World Bank, Mining Washington DC Sector Board Discussion Paper No. 19 . . This chapter covers regulation of power markets for all E types of market structure. These structures range from a single integrated power supplier responsible for all publicly supplied electricity to a decentralized competitive wholesale power market with many participants. The structure of the regulatory system is linked to the market structure, since regulation is an important component of power market governance. In particular, the need for a separate, autonomous regulatory agency operating under transparent processes is much stronger with private sector participants in a power market than when all public power supply is under state ownership. Even in large middle-income countries, various forms of contractual arrangements and third party guarantees against regulatory risk are needed for attracting large amounts of private investment in the power systems with a new regulatory agency that has not had time to develop a track record for credibility. In small low income countries, contracting out of regulatory functions is an option under their weak institutional capacity. E N&P

2 Electricity Sectors in CAREC Member Countries: A Diagnostic Review of Regulatory Approaches and Challenges.

2005

CAREC, PPIAF, This study was undertaken to provide a foundation upon ADB. which the CAREC (Central Asia Regional Economic Cooperation) Members Electricity Regulators Forum (CMERF) would be established, and to identify the key challenges that this Forum must address. CMERF and this study serve both regional and domestic objectives.

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3 Infrastructure in East Asia and the Pacific - The Way Forward. Background for the ADB-JBIC-World Bank East Asia and Pacific Infrastructure Flagship Study.

Besant-Jones, John E.

Oct-04

Background for the ADBJBIC-World Bank East Asia and Pacific Infrastructure Flagship Study.

This paper addresses the theme "Lessons from experience E on the appropriate roles of the public and private sectors in infrastructure planning, regulation, financing, risk bearing and operations". Especially, Section 3 presents lessons and their contexts for sector governance and regulation. The lessons are organized into the following themes: ways to improve governance in the power sector, alternative arrangements for regulating the power market, the extent to which power markets should be liberalized and the scope for introducing competition into the power markets of developing countries, and power sector reform and the poor.

ii. Telecom and ICT 1 Broadband for Africa: Policy for Promoting the development of backbone networks. GICT Publication. Williams, Mark Jul-08 GICT Publication Infodev and GICT, World Bank, Washington DC Increasing access to broadband connectivity is currently ICT emerging as a high priority issue for policymakers across Africa. This report focuses on one important part of the challenge the lack of high-capacity backbone networks, and identifies two main types of constraints to the development of high-bandwith backbone carrier networks in Sub Saharan Africa: the first relates to the regulatory environment, while the second relates to the stage of market development. The document discusses how these two factors result in very high prices and limited availability of broadband connectivity in that region, and provides recommendations on how to address these problems . N

2 Convergence in ICT services: Emerging regulatory responses to multiple play. GICT Publication.

Singh, Rajendra and Siddhartha Raja

Jun-08

GICT Publication

GICT, World Multiple play in the information and communication ICT Bank, technology (ICT) sector refers to the provision of multiple Washington DC servicessuch as voice telephony, broadcasting, and Internet accessby one operator over a single communications network, typically telephone or cable television. This offers numerous potential benefits to customers, including lower prices, better services, and more choices among service providers. It enables new business models and opportunities for increased competition and reduced costs. However, regulation is subject to complex challenges in the face of multiple play. This report focuses on regulatory responses, typically by telecommunications regulators, to market-driven multiple play over broadband networks. It also examines how regulators can remove obstacles to multiple play. It describes experiences and responses from around the world, with the goal of deriving principles for best practiceenabling countries to devise responses suited to their situationswithout being prescriptive or offering a universal solution.

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3 Establishing an Enabling Legal and Regulatory Environment. Chapter 2 in "China's Information Revolution: Managing the Economic and Social Transformation" (2007). Book No. 39975.

Ch 2

2007

Book No. 39975

The International Bank for Reconstruction and Development / The World Bank, Washington DC

A key element in achieving the full potential of the ICT contribution of ICT to economic and social goals is a comprehensive and supportive environment. In particular, fostering ICT use and ICT-led growth requires implementing credible, transparent, and nondiscriminatory policies, laws, and regulations. This book examines the fast-changing nature of ICT, including the convergence of telecommunications and information technologies, and how it has posed challenges to some of Chinas policies, laws, and regulations that may no longer fit the new environment.

4 Regulatory trends in service convergence. World Bank Working Paper No. 40828

Global ICT Department

Jun-07

World Bank Working Paper No. 40828

World Bank, This report proposes a framework to analyze different ICT Washington DC countries' responses to regulatory challenges posed by convergence. It proposes an analytical framework within which to consider the specific issues related to service convergence. It first discusses the genesis of the regulatory challenge due to convergence and then proposes a framework for the comparative analysis of the regulatory responses to convergence in different countries and discusses the different issues identified within this framework. Finally, it discusses regulatory responses to convergence regulation in specific areas such as the institutional framework, service licensing, interconnection, universal service, and spectrum management. GICT, World The purpose of this paper is to show how interconnection Bank, regimes can be adapted to the African specificities in a Washington DC context of convergence and increased competition. It analyzes how interconnection regulation in Africa has been defined at the onset of the convergence phenomenon and explores the issues related to new technologies (for example Internet protocol [IP] telephony) and interconnection regulation policies. Infodev Overview of telecommunications growth and innovation, telecommunications and economic development, rationale for regulation, principles for effective regulation, key success factors and risk of failure, and institutional responsibilities. World Bank, Provides an overview of reasons for regulation of private Washington DC telecommunications operators. (Summary taken from the . Regulation Body of Knowledge Website, 2004). . T&I CT

5 Interconnection challenges in a converging environment : Policy implications for African telecommunications regulators. Working Paper No. 33193.

Bezzina, Jerome

Jun-05

Working Paper No. 33193

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6 Regulating the Telecommunications Sector. Module 1 in "Telecommunications Regulation Toolkit" (2004). Toolkit. . . 7 Telecommunications Regulation Handbook (Available in: English, Chinese, Arabic, Russian, French, and Spanish). Handbook. . .

Module 1

2004

Toolkit

Intven, Hank and Nov-00 McCarthy Tetrault (editors)

Handbook

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8 The Institutional Foundations of Regulatory Commitment: A Comparative Analysis of Telecommunications Regulation. Journal of Law, Economics, and Organisation.

Levy, Brian, and Pablo Spiller.

1994

Journal of Law, Economics and Organisation 10 (2): 20146.

This seminal article provides an excellent introduction to T issues of regulatory governance. Its particular strength is its discussion of how the choice of effective regulatory arrangements is affected by a countrys constitutional and political condition, as well as available resources. The article was written at a time of considerable optimism about the prospects for private investment in infrastructure and the prospects for the establishment of effective regulatory agencies for utilities. The article argues strongly for tightly defined regulatory arrangements with little or no regulatory discretion in most developing countries. Whether or not the readers agree with these views, this article is an essential starting point for considering the design of effective regulatory agencies in developing countries. (Summary taken from Brown et al. 2006).

iii. Natural Gas 1 Regulatory Reform in Mexico's Natural Gas Industry: Liberalization in the Context of a Dominant Upstream Incumbent. World Bank Working Paper 2537. Roselln, Juan and Jonathan Halpern Jan-01 World Bank Working Paper No. 2537. World Bank, Liberalization of the natural gas industry is complex because G Washington DC the sector combines naturally monopolistic activities with potentially competitive ones. The challenges are compounded when the state opts to retain vertically integrated monopolies in otherwise contestable segments of the industry. In this paper, regulatory issues associated with partial liberalization of natural gas markets are analyzed through a case study of Mexico. After a brief overview of the early structural reform process, the paper describes the reforms introduced in the natural gas industry, assesses the policy decisions made for the natural gas industry, and presents results to date and future challenges associated with the continued development of the industry. P

iv. Transport 1 Privatization and Regulation of Transport Infrastructure: Guidelines for Policymakers and Regulators (Available in: English and Spanish). WBI Development Study. Estache, Antonio Jun-00 and Gines de Rus (Editors) WBI World Bank, The first part of the book provides an overview of what Development Washington DC economic theory has to say about why economic regulation Study is important. Its objective is to introduce potential regulators to some of the key underlying concepts. It is a basic, but useful overview for many professionals recruited to serve as the staff of regulatory bodies. It provides theoretical support to the sector specific chapters that constitute the second part of the book. The second part covers four subsectors: airports, ports, railways, and roads. Each chapter can stand apart from the rest of the book and be read on its own, but to facilitate comparisons across subsectors, they all follow exactly the same structure. The first section provides a snapshot of the key economic characteristics of the sector and discusses their relevance from the viewpoint of a regulator. The second section summarizes the main privatization and regulation trends that have been observed in the sector. Tr: N AP, P, Rw, Rd.

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Airplanes 1 Flying in the face of regulation: lessons in liberalisation for airlines. Oxera Agenda. Holt, Derek (Contact). Feb-07 Agenda Oxera The proliferation of regulation underpinning many industries AL such as international aviation has come under increasing scrutiny in recent times. Do excessively stringent regulations contribute to low rates of return while simultaneously restricting the flow of benefits to consumers? What lessons can be learnt for this debate from cross-sectoral experience? On January 2007 the European Commission proposed what AP it calls a landmark regulatory package for airports in the EU. The author discusses the likely implications of this for the future development of the aviation industry. The year 2006 saw major changes in the global aviation AP industry, with airports increasingly regarded as tradeable assetsindeed, the takeover of UK airport operator, BAA, by an international consortium has been the focus of attention for many stakeholders. In this article, the author asks whether regulation can keep pace with an industry in flux. N

Airports 1 The Airport Charges Directive: is more regulation in the interests of passengers? Oxera Agenda. Holt, Derek Feb-07 Agenda Oxera

2 Airport regulation: keeping up with an industry at full throttle? Oxera Agenda.

Toms, Mike (Contact)

Jan-07

Agenda

Oxera

Ports 1 Port Regulation: Overseeing the Economic Public Interest in Ports. Module 6 in "Port Reform Toolkit" (2007). . . 2007 Port Reform PPIAF, World This module is intended to assist public officials in designing P Toolkit Bank, an economic regulatory framework that will keep ports costWashington DC effective and responsive to changing demand. The module provides guidance on how to: Identify regulatory requirements and issues to be considered when developing a port reform strategy, design a port regulatory system, formulate an institutional strategy for establishing the regulatory structure and capabilities to perform the relevant regulatory functions, select appropriate regulatory techniques and instruments under a spectrum of port reform options and competitive conditions, prepare a checklist of items that need to be included in port reform concession or operating agreements, and to specify operational and financial information necessary for monitoring performance of terminal operators. Public officials can use the module when initially formulating a port reform strategy or for establishing an effective post-reform port regulatory system.

Module 6 Rail 1 Railways in Development: Global Round-up 19962005. Transport Note No. TRN-36. Amos, Paul and Lou Thompson Sep-07 .

Transport Note No. TRN-36

World Bank, The note provides a high level view of traffic, policy and Rw Washington DC regulatory developments. Particular emphasis is given to the Banks six regions of operations as the Banks Transport Strategy is being updated with the intention of increasing the attention given to the role of railways in development. For completeness, important policy developments in the higher income countries are also summarized.

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2 Regulatory Reform of Railways in Russia. European Conference of Ministers of Transport (ECMT).

2004

European Conference of Ministers of Transport

OECD Publications Service, France.

The report examines the fundamental issues of regulation Rw and their relation with the structure of the sector and the development of competition in providing rail services. This is the first in-depth review of rail policy in ECMT member countries in the light of the Resolution on the development of European railways agreed by Ministers in 2002.

Urban Transport 1 Institutional and regulatory framework selfregulation by default. Chapter 4 in "Stuck In Traffic: Urban Transport in Africa" (2008). Kumar, Ajay and Fanny Barrett Jan-08 Stuck in Traffic: Urban Transport in Africa The WB Group Transport Papers No. TP-15 PPIAF, World Bank, SSATP This chapter reviews the main dimensions of the regulatory framework. It covers: Route allocation and market entry, licensing of vehicles and operations, licensing of drivers, and fare control. UT

2 A Framework for Urban Transport Projects: Operational Guidance for World Bank Staff. The WB Group Transport Papers No. TP-15

Jan-08

Transport Sector Board, World Bank, Washington DC

3 A Study of Institutional, Financial and Regulatory Frameworks of Urban Transport in Large SubSaharan African Cities. SSATP Working Paper No. 82.

Prepared by Adam Smith International

Jul-05

SSATP Working Paper No. 82

This paper is meant to close the gap between nominal Tr sector strategies and project design activities in urban transport by presenting an operationally-oriented strategic approach. Since a great majority of Bank-funded urban transport projects consists of an investment program alongside specific policy, regulatory, and institutional changes under a set of common development objectives, the strategy laid out in this paper is made using these same categories. Africa Region, This study examines the existing institutional arrangements UT World Bank, in four Sub-Saharan African cities and identifies Washington DC opportunities and constraints for policy reform. The general focus is on identifying mechanisms suitable in different cultural and political environments to organize planning, regulation and monitoring of urban transport services. The arrangements for meeting financing needs of the sector in the four cities are reviewed with a focus on processes, performance, monitoring indicators, and outcomes.

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v. Water and Sanitation 1 Economic Regulation of Urban Water and Sanitation Services: Some Practical Lessons . Water Sector Board Discussion Paper Series No. 9. Ehrhardt, David, Eric Groom, Jonathan Halpern, and Seini OConnor Apr-07 Water Sector World Bank, Board Washington DC Discussion Paper Series No. 9 This paper aims to show how real experience supports the theoretical principles of good design, and to present key regulatory concepts in way that is accessible to policy makers, service providers, nongovernmental organizations, and other stakeholders concerned with improving the provision of water supply and sanitation services. W& S N

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2 Explanatory Notes on Key Topics in the Regulation of Water and Sanitation Services. Water Supply and Sanitation Sector Board Discussion Paper Series No. 6.

Groom, Eric, Jonathan Halpern, and David Ehrhardt

Jun-06

Water PPIAF, World Supply and Bank, Sanitation Washington DC Sector Board Discussion Paper Series No. 6

3 Ten years of water service reform in Latin America: toward an Anglo-French model. Water Supply and Sanitation Board Discussion Paper Series, Paper No. 3.

Foster, V.

Jan-05

Water World Bank, Supply and Washington Sanitation DC. Board Discussion Paper Series, Paper No. 3.

Considerable confusion has arisen about what regulation means in the context of water supply and sanitation (WSS) services. In particular, there are questions about the application of the independent regulator model to WSS in the developing world. What types of problems can it can address effectively? What is its relevance, especially as provision and oversight of these services are often the responsibility of subnational governments with limited resources? These Notes provide a consistent set of principles and practices that respond to these questions. Such information will be of interest to service providers, policy makers, and development practitioners interested in improving the performance of WSS services in urban areas. The notes draw upon current regulatory thinking and research, but are intended to be accessible to those who are not regulatory experts. Each of the notes can be read separately, and together the notes provide an integrated framework for the development of practical approaches to the regulation of WSS. During the 1990s, most countries in the Latin American region undertook major reforms of their water supply industries. Chile was the first to attempt to modernize its water sector with new legislation passed as early as 1988. By 1991, both Argentina and Mexico were beginning to conduct a series of experiments with private sector participation (PSP). In a second wave, Peru, Colombia, and Bolivia enacted ambitious new legislation in the mid-1990s, and during the second half of the decade, reform began to take root in Brazil and Central America. By the end of the 1990s, nearly all countries had completed reforms, had major reforms in process, or were actively considering reforms. This report explains that there is a lot of variety among nations on the roles of regulators, and describes typical responsibilities of the regulator (or ministry) which include: licensing, interconnection, spectrum management, numbering, price regulation, universal service, and service quality.

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c. Role of Regulator 1 Telecommunications Regulations: Institutional Structures and Responsibilities. Working Party on Telecommunication and Information Services Policies. Min, Wonki May-00 Working OECD, Paris, Party on France. Telecommun ication and Information Services Policies Public Policy World Bank, for the Washington DC Private Sector Note No. 128 . ICT N

2 Utility Regulators: Roles and Responsibilities. Public Policy for the Private Sector Note No. 128.

Smith, Warrick

Oct-97

Examines issues of sector coverage, relationships with ministers, and relationships with other government agencies. (Summary adapted from the Regulation Body of Knowledge Website, 2004).

MS

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d. Regulating SOE's vs. Private Operators. 1 Governance Arrangements for State Owned Enterprises. WB Policy Research Working Paper No. 4542.

Vigliasindi, M.

Mar-08

WB Policy Research Working Paper No. 4542.

World Bank, The aim of this paper is to shed new light on key challenges Washington DC in governance arrangements for state owned enterprises (SOEs) in infrastructure sectors. Three policy recommendations emerge: (1) Some of the structures implied by internationally adopted principles of corporate governance for SOEs favoring a centralized ownership function versus a decentralized or dual structure have not yet been sufficiently "tested" in practice and may not suit all developing countries. (2) General corporate governance guidelines (and policy recommendations) need to be carefully adapted to infrastructure sectors. Because the market structure and regulatory arrangements in which SOEs operate matters, governments may want to distinguish the SOEs operating in potentially competitive sectors from the ones under a natural monopoly structure. Competition provides not only formidable benefits, but also unique opportunities for benchmarking, increasing transparency and accountability. (3) Governments may want to avoid partial fixes, by tackling both the internal and external governance factors. World Bank, Most of the infrastructure regulatory agenda has tended to Washington DC focus on the regulation of the newly privatized utilities. However, there is some evidence of the differential responses of privatized and public firms to regulatory incentives (Berg: JRE, 2005) Does it make a difference to the choice and design of regulation if governments look into options of public-private partnerships which do not require private sector investment? If so, can you adjust the standard tools normally used for privatized infrastructure enterprises? For instance, "sticks" (penalties) for SOEs are problematic and "carrots" may not translate into incentives within the organization--given civil service salary constraints. For example, who is hurt if the X factor is increased for a poorly performing utility? Since infrastructure revenue is in some cases not even covering OPEX, the result of weak cash flows is slower network expansion, reduced maintenance, increased losses, and lower service quality. This dilemma has been inadequately addressed by scholars and by analysts.

2 How to Improve the Performance of Infrastructure Service Providers: Workshop I.

Berg, S.

May-07

World Bank Workshop.

3 The economic regulation of publicly owned water utilities: The case of Finland. Utilities Policy, Volume 14, Issue 3, Pages 158-165.

Vinnari, Eija M.

2006

Utilities Policy, Volume 14, Issue 3, September 2006, Pages 158-165.

The adoption of business management principles at publicly W& owned water and wastewater utilities in Finland presents S challenges for the current system of economic regulation. This paper presents the results of empirical research on the need for regulatory reform from the utilities' point of view. The interviewed utility managers supported widening the scope of regulation to include, in addition to fairness of customer charges, the rate of return allowed for the owner of a water utility. Further research is recommended on the degree and scope of official regulation as well as on a system based on self-regulation, benchmarking, and peer reviews.

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4 Is it possible to regulate State-Owned Utilities Effectively? Presentation prepared for the PURC 19th International Training Program on Utility Regulation and Strategy.

Eberhard, A.

2006

5 Regulating publicly-owned water and sanitation utilities in developing countries. A report for the World Bank. NERA Economic Consulting

Houston, Greg Jun-06 and Adrian Kemp (Project Team)

Presentation prepared for the PURC 19th International Training Program on Utility Regulation and Strategy. A report for NERA the World Economic Bank. Consulting Report financed by PPIAF.

Presentation prepared for the PURC 19th International Training Program on Utility Regulation and Strategy. The topics covered include: confused governance roles, improved governance of SOEs, public entity management legislation, performance contracts, corporatization, commercialization, structural reform, and improved regulatory design.

6 Regulating Government-Owned Water Utilities. Note 6 in "Explanatory Notes on Key Topics in the Regulation of Water and Sanitation Services" (2006). Water Supply and Sanitation Sector Board Discussion Paper Series No. 6.

Groom, Eric, Jonathan Halpern, and David Ehrhardt

Jun-06

The central question addressed in this paper is the nature and extent of the potential role for economic regulation in improving the performance of publicly-owned water and sanitation utilities. The authors use examples from a variety of developing and developed countries to illustrate the topics that are addressed. On the strength of the authors key conclusion that some form of economic regulation does have the potential to contribute to improved performance, the principal focus of the paper is to identify the most important elements of a regulatory framework for achieving that goal. Water PPIAF, World This note looks at the regulation of government-owned Supply and Bank, water utilities and poses the questions: Given that monopoly Sanitation Washington DC power can be controlled by the government (as owner), is Sector Board there a need for separate regulation of government-owned Discussion utilities? If the governments can control their utilities for the Paper Series public good, why are the outcomes often so poor? In some No. 6 countries, governments have established independent regulators for their water utilities. This can increase transparency, reinforce the positive incentives for utilities operating within a framework of good governance, and create more political space for tariff increases. But the history of these agencies shows the difficulty of the task. Further work has been commissioned on this issue, and the note highlights that a separate regulator is not a panacea. Whether a separate regulatory agency should be established and the extent of separation between the governance, policy, and regulatory functions will depend on the sector objectives, governance and incentive structures, and institutional and capacity constraints within the country.

W& S

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7 Regulation of State-Owned and Privatized Utilities: Ukraine Electricity Distribution Company Performance. Journal of Regulatory Economics.

Berg, S., C. Lin, and V. Tsaplin

Nov-05

Journal of Regulatory Economics

Springer Netherlands

Both ownership and regulation affect the behavior of utility E managers. Private ownership rewards managerial decisions that enhance shareholder value. Regulatory incentives reward behavior that affects profits and costs. An empirical analysis of 24 Ukraine electricity distribution companies from 1998 to 2002 indicates that privately owned firms do respond to incentives that add to net cash flows (associated with reducing commercial and non-commercial network losses). However, they also respond more aggressively than do state-owned distribution utilities to mark-up (cost-plus) regulatory incentives that increase shareholder value but decrease cost efficiency. (SSRN Abstract).

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8 Some Options for Improving the Governance of State-Owned Electricity Utilities. Energy and Mining Sector Board Discussion Paper No. 11.

Irwin, T. and C. Yamamoto

Feb-04

Energy and World Bank, Mining Washington DC Sector Board Discussion Paper No. 11

This paper examines performance issues in state-owned E electricity distributors and suggests options for improving performance. It covers the following topics: applying privatesector company law, legislation and contracts, public reporting, corporate culture, pressure from lenders, listing minority shares, and techniques for alleviating the government's conflict of interest as owner and policy-maker. (Summary adapted from the Regulation Body of Knowledge Website, 2004).

2. MARKET STRUCTURE a. General References 1 Fundamentals of Economic Regulation. PURC. Berg, Sanford Jun-05 PURC, Gainesville, FL Explains that infrastructure industry networks consist of MS links, nodes, and branches, with heavy fixed costs associated with each point. Competition may be feasible in the market, but even with natural monopoly competition is feasible for the market. (Summary taken from the Regulation Body of Knowledge Website, 2004.) World Bank, The main purpose of this paper is to provide a first set of MS Washington DC quantitative assessments of the degree of concentration in infrastructure at the global and at the regional level. The authors find no correlation between the degree of concentration and the degree of reform adopted by a region or a sector. In more general terms, they find no scope for simple encompassing regional or sectoral statements because issues are region- and sector-specific. They conclude by arguing that there are a few cases and regions in which it would make sense for a supranational competition or regulation agency to ensure that the interests of the users are protected more effectively against the risks of collusion and other types of anti-competitive behaviors local regulators would not be equipped to address. World Bank and ECARES (Universit Libre de Bruxelles) In 1974, Chile launched the first large-scale privatization in a MS developing country. About 15 years later, Argentina provided a new model of global infrastructure management. Since then a variety of public private partnerships in infrastructure have been adopted throughout the developing and transition world. Because many of these experiences are also turning sour and the privatization fad of the 1990s seems to be turning into an anti-privatization fad, it seems important to separate facts from emotions. The paper argues that the wide differences in interpretations of the facts can be explained by wide differences in the assessment criteria used by analysts, including the definition of the baseline data chosen to assess the incremental effect of reforms. It is also driven by the sectors, the regions and probably most importantly the actors on which the analysis tends to focus. Once all these factors have been considered, a relatively fair and quantitative assessment of the prospects of the public-private relationship in infrastructure is possible. N

2 How Concentrated are Global Infrastructure Markets? World Bank Policy Research Working Paper 3513.

Benitez, Daniel and Antonio Estache

Feb-05

World Bank Policy Research Working Paper 3513

3 PPI partnerships versus PPI divorces in LDCs (or are we switching from PPPI to PPDI?). World Bank Policy Research Working Paper No. 3470.

Estache, Antonio. Jan-05

World Bank Policy Research Working Paper No. 3470

b. Market Structure by Sector i. Electricity

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1 Competition in Energy Markets: A consumer Perspective. Oxera Agenda.

Asher, Allan

Apr-08

Agenda

Oxera

2 Energy Supply Markets: Are they competitive?. Oxera Agenda.

Brough, Martin (Contact)

Mar-08

Agenda

Oxera

In this article, Allan Asher, Chief Executive of energywatch, E P the independent watchdog representing gas and electricity consumers in Great Britain, suggests that competition in energy markets may not be effective in practice. This article is in response to the March 2008 issue of Agenda. . Increasing energy retail prices in Great Britain have raised E&G N concerns about ineffective competition and possible anticompetitive behaviour in energy supply markets, with an investigation into these markets being launched by Ofgem. In light of this inquiry, this article assesses the competition concerns that are likely to be discussed in relation to energy retailing, the methods that may be used to assess their presence, and potential remedies. The power sector has a number of unique characteristics E&G N that affect the reform process in the sector. This process involves three discrete, but interrelated, elements: modifying the structure of the industry to enhance the prospects for competition, changing ownership patterns and/or creating various forms of public-private partnerships to provide stronger incentives for efficiency and growth and establishing a transparent regulatory framework to balance private and public interests. Each of these reform elements are discussed in Chapter 2. Chapter 4, section 4, describes Market Structure Options (retail competition, bid-based wholesale competition, and cost-based wholesale competition). This chapter shows how market structure and the form of E&G N trading within the power market are linked to market size and income level. This relationship is clearly evident in the extent to which a power supply chain should be unbundled into separate entities. Unbundling of generation from distribution can be worthwhile even in small power systems, but forming numerous generation entities or distribution entities is only suited to introducing competition in large power markets that are at least in the middle-income level. Competition for the right to supply an incumbent supplier under long-term agreements by independent power producers, by contrast, can work in power markets of any size and at any income level, whatever unbundling is undertaken. These producers, however, are expected to carry more investment risk in the large middle-income countries than in the small low-income countries. A short updated article from the April 2001 report "Lessons from the California Power Crisis." E P

3 Power Sector Structure, Ownership, Regulation. Chapters 2 and 4.4 in "Energy sector reform: strategies for growth, equity and sustainability" (2007). SIDA Studies No. 20.

Ljung, Per

Aug-07

SIDA Studies SIDA, Sweden No. 20 .

4 Market Structure and Governance. Chapter 5 in "Reforming Power Markets in developing countries: What have we learned?" (2006). Energy and Mining Sector Board Discussion Paper No. 19.

Ch 5

Besant-Jones, John E.

Sep-06

Energy and World Bank, Mining Washington DC Sector Board Discussion Paper No. 19 . .

5 The California Power Crisis: Lessons for Developing Countries. Finance and Development.

Besant-Jones, John and Bernard Tenenbaum

Sep-01

Finance and IMF, Development Washington, DC.

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6 Lessons from the California Power Crisis. Energy and Mining Sector Board Discussion Paper No. 1.

Besant-Jones, John and Bernard Tenenbaum

Apr-01

Energy and World Bank, This paper assesses whether the California Power crisis Mining Washington DC could have been avoided through better market design and Sector Board management. Discussion Paper No. 1

ii. Telecom and ICT 1 Developing Broadband with Non-competing networks - The Case of Peru. WB 2007 ICT Training Courses. 2 Transforming telecoms in Afghanistan: Expanding affordable access by introducing competition. Gridlines No. 1. Tania Begazo (Speaker) Mar-07 WB 2007 Training Courses (ICT) Gridlines No. 1 Apoyo Consultoria This course presents the case of a country where most ICT telecom infrastructure is owned by a single operator and discusses regulatory measures to reduce the market gap, promoting Internet penetration. PPIAF, World Afghanistan has transformed its telecommunications from a T Bank, fragmented system serving few people to a modern one Washington DC putting Afghans in touch with one another and with the global economy. The government moved quickly to approve a Telecommunications and Internet Policy in 2003, and identified telecommunications as one of the two lead sectors for attracting private and foreign investment. The experience in Afghanistan shows that wireless communications can play a critical role as the primary telecommunications infrastructure in a post-conflict country. The key factors in Afghanistan's success in developing its telecommunications sector have been strong government commitment, a procompetitive reform agenda, early focus on regulatory reforms and capacity building, and a transparent bidding process. ICT Africa lags the World in access to quality, affordable ICT Department, international connectivity. Building additional international World Bank, infrastructure will be an important part of meeting this need, Washington DC but the ownership structure and policy and regulatory environment under which capacity is built will determine the development impact of such projects. This paper discusses emerging best practice in the area of public support and oversight of private and public-private ventures to develop international connectivity in the region. Countries with fully liberalized telecommunications markets T have adopted different mixes of antitrust and sector-specific regulatory instruments. Does the balance between the two approaches matter for competitiveness? Drawing on the experiences of Australia, Chile, New Zealand, the United Kingdom, and the United States, this Note finds that it does matter. Countries that get the balance right tend to have more competitive telecommunications markets. P

Bhatia, Bhavna and Neeraj Gupta . .

Apr-06

3 Fostering Pro-Competitive Regional Connectivity in Sub-Saharan Africa. Newsletter No. 36234

Isabel, Cecile Nov-05 Niang and Mavis Ampah

Newsletter No. 36234

4 Regulation and Competition: How Antitrust and Sector Regulation Affect Telecom Competition. Public Policy for the Private Sector Viewpoint No. 296.

Kerf, Michel, Isabel Neto, and Damien Gradin

Jan-05

Public Policy World Bank, for the Washington DC Private Sector Viewpoint No. 296.

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5 Competition Policy. Module 5 in "Telecommunications Regulation Handbook" (2000). (Available in: English, Chinese, Arabic, Russian, French, and Spanish)

Module 5

Intven, Hank and Nov-00 McCarthy Tetrault (editors)

Telecommun World Bank, ications Washington DC Regulation Handbook

(Available in: English, Chinese, Arabic, Russian, French, T and Spanish). This module explains general principles for competition policy and how to define the market, identify barriers to entry, define market power and market dominance, and identify essential facilities. It also explains remedies for anticompetitive conduct, such as abuse of dominance, restricting access to essential facilities, and engaging in cross-subsidization, predatory pricing, and price squeezes. Finally, this module describes how to assess mergers and joint ventures. (Summary adapted from the Regulation Body of Knowledge Website, 2004)

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iii. Natural Gas iv. Transport Urban Transport 1 Designing Competition in Urban Bus Passenger Transport: Lessons from Uzbekistan. TWU-41. Gwilliam, Apr-00 Kenneth M., Ajay Kumar, Richard T. Meakin TWU-41 This paper attempt three things: to summarize recent trends UT by region, to collate that experience on a global basis in a number of critical issue areas, and to elicit some lessons on how best to assist developing countries to sustain their public transport systems. The focus of this paper is on examining the process of development of route franchise arrangements (in Uzbekistan), from the initial imperfect stage to an improved process, and identifying lessons of experience and areas for further improvements. The authors conclude by listing nine conditions which, if present, should facilitate a successful competition in urban bus transport. P

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v. Water and Sanitation 1 Optimal Size for Utilities? Returns to Scale in Water: Evidence from Benchmarking. World Bank Group Public Policy for the Private Sector 283. Tynan, Nicola Jan-05 and Bill Kingdom World Bank World Bank, Group Public Washington DC Policy for the Private Sector 283. Using data from 270 water and sanitation providers, this W& Note investigates the relationship between a utility's size S and its operating costs. The current trend toward transferring responsibility for providing services to the municipal level is driven in part by the assumption that this will make providers more responsive to customers' needs. But findings reported here suggest that smaller municipalities may face higher per-customer costs and could lower costs (and prices for consumers) by merging. P

c. Regional Regulation (see section 11) 3. REGULATORY PROCESS a. Institutional Design 1 Do Regulation and Institutional Design Matter for Infrastructure Sector Performance? Policy Research Working Paper No. 4378. Andres, Luis, Oct-07 Guasch, Jose Luis Guasch, Stephanie Straub Policy Research Working Paper No. 4378 World Bank, This paper undertakes a benchmarking exercise of the MS Washington DC design of regulatory agencies. The analysis uses an extensive data set of about 1,000 infrastructure concessions granted in Latin America from the late 1980s to the early 2000s. The analysis finds that as the theory indicates, regulation matters. It shows that institutions and procedures of regulations matter in three relevant economic aspects: aligning costs and tariffs; dissuading renegotiations; and improving productivity, quality of service, coverage, and tariffs. Regulation matters for protecting both consumers and investors, for aligning closely financial returns and the costs of capital, and for capturing higher levels of benefits from the provision of infrastructure services by the private sector. MS P

2 What it takes to Lower Regulatory Risk in Infrastructure Industries: An Assessment and Benchmarking of Brazilian Regulators. Gridlines No. 29.

Correa, Paulo

Sep-07

Gridlines No. PPIAF, World Regulatory governancehow regulators manage 29 Bank, concession contracts, or other public private contractual Washington DC arrangements and sector lawscan affect the private sectors perception of regulatory risk and thus the availability of private capital for infrastructure projects. Four key elements of the regulatory governance structure can reduce the risk of regulatory failure: political and financial autonomy, decision-making structures that reduce regulatory discretion, access to effective enforcement and other regulatory tools, and efficient rules of accountability. This note presents an analytical framework based on those four elements and applies it in assessing regulatory governance in Brazil.

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3 Regulatory Governance in Infrastructure Industries: Assessment and Measurement of Brazilian Regulators. Trends and Policy Options No. 3.

Correa, Paulo, Carlos Pereira, Bernardo Mueller, Marcus Mello

2006

Trends and Policy Options No. 3

4 Institutional Approaches to Power Market Regulation. Chapter 6.2 in " Reforming Power Markets in developing countries: What have we learned?" (2006). Energy and Mining Sector Board Discussion Paper No. 19.

Besant-Jones, John E.

Sep-06

PPIAF, World The objective of this report is twofold: to provide a Bank, comprehensive assessment of the state of regulatory Washington DC governance in infrastructure industries in Brazil and to suggest possible indicators for future monitoring. After the introduction, Section 2 sets up the analytical framework for the report, identifying key components of regulatory governance, namely, autonomy (political and financial), procedures for decision making, instruments (including personnel), and accountability. Section 3 assesses each of these components in practice, reporting the results of a survey with 21 regulatory agencies in Brazil. Section 4 measures regulatory governance based on three related indexes, ranks the Brazilian regulators among themselves, and compares the proposed indexes with two other indicators available in the literature. Section 5 presents the conclusions. Energy and World Bank, This paper describes institutional approaches to Power Mining Washington DC Market Regulation. It includes an OECD list of three Sector Board frameworks used in developing countries and two Discussion institutional approaches for achieving regulatory flexibility Paper No. and commitment. 19 Public Policy World Bank, for the Washington DC Private Sector Viewpoint Note No. 294

Ch 6.2

E&G N

5 Controlling Market Power: Balancing Antitrust and Sector Regulation in Telecoms. Public Policy for the Private Sector Viewpoint Note No. 294.

Kerf, Michel, Isabel Neto, and Damien Gradin

Jun-05

6 Interconnection Disputes: Antitrust or Sector Regulation and the Case of New Zealand. Public Policy for the Private Sector Viewpoint Note No. 295

Kerf, Michel, Isabel Neto, and Damien Gradin

Jun-05

Among the countries fully liberalizing their T telecommunications sector, some have chosen to rely mainly on sector-specific rules, often applied by sectorspecific institutions, while others have depended on economywide antitrust rules and institutions to control market power. This Note describes the choices made by five notable reformers: Australia, Chile, New Zealand, the United Kingdom, and the United States. Drawing on their experiences, it then assesses whether antitrust or sectorspecific processes have dealt more quickly and effectively with key regulatory issues. Public Policy World Bank, Full liberalization of telecommunications markets provides T for the Washington DC scope for relying largely on general antitrust rules and Private institutions for economic regulation. But at least for a time Sector after liberalization, sector-specific rules and institutions are Viewpoint likely to be needed in some areas, including interconnection. Note No. This Note draws lessons from the experience of New 295 Zealand. After fully liberalizing its telecommunications market in the late 1980s, the country relied primarily on antitrust instruments to regulate interconnection until 2001, when it introduced a new regime putting heavier emphasis on sector-specific regulation.

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7 New Tools for Studying Network Industry Reforms in Developing Countries: The Telecommunications and Electricity Regulation Database. World Bank Policy Research Working Paper 3286.

Wallsten, Scott, Mar-04 George Clarke, Luke Haggarty, Rosario Kaneshiro, Roger Noll, Mary Shirley and Colin Xu Lixin.

World Bank World Bank, Policy Washington DC Research Working Paper 3286.

In the 1990s, hundreds of privatization transactions valued T&E at billions of dollars were completed in these sectors in developing and transition economies. While privatization has received the most attention, reforms also included market liberalization, structural changes like unbundling, and the introduction of new laws and regulations. To date, regulations have received far less attention than their potential economic effects warrant, largely due to lack of data. In order to address this problem, the authors set out to compile a comprehensive and consistent dataset through an extensive survey of telecommunications and electricity regulators in developing countries. The authors describe the surveys and the resulting database. The publication provides a thoughtful discussion of the E&G P establishment of the new regulatory frameworks in South ,T Asia, primarily India and Nepal. The description of the basic institutional arrangements of regulatory agencies in the power and telecommunications sectors of those two countries is concise and informative. It is relevant both as a survey of institutions and as a reminder of the political realities faced by embryonic regulatory institutions. Its methodology is largely that of statutory survey and analytical thinking by an astute observer of the regulatory process. (Summary taken from Brown et al. 2006 ).

8 Issues in Institutional Design of Regulatory Agencies. Tata Energy Research Institute.

Srivastava, Leena.

2000

Tata Energy New Delhi, Research India. Institute

i. Regulatory Agency vs. Regulation by Contract 1 Infrastructure Regulation in Developing Countries: An Exploration of Hybrid and Transitional Models . Working Paper No. 4. Eberhard, Anton 2007 Working PPIAF, World Paper No. 4 Bank, Washington DC . . This paper summarizes the experiences of regulation in MS developing countries over the past 15 years and explores ways of improving the design and performance of regulatory systems. It highlights some of the problems and challenges with existing regulatory models, proposes a menu of regulatory options and looks at various further ways of strengthening regulatory performance. The paper also looks at ways of mitigating regulatory risk through partial-risk guarantees and other investment protection instruments. Finally, the paper argues that whereas independent regulation may in many instances be an appropriate model, the credibility and legitimacy of regulation depends on judicious use of hybrid and transitional regulatory models incorporating varying degrees of regulatory discretion that best fit the local country context of regulatory commitment and institutional and human resource capacity. Developing countries attempting to implement the standard MS model of independent regulation have encountered many problems and challenges. These may arise when a regulatory system is incompatible with the country's regulatory commitment and institutional and human resource endowment. Selecting from a menu of regulatory options to create a hybrid model -- one that best fits a country's own circumstances and challenges -- can improve regulatory performance. This issue is examined by this Gridline. N

2 Matching regulatory design to country cirumstances: The potential of hybrid and transitional models. Gridlines No. 23.

Eberhard, Anton

May-07

Gridlines No. PPIAF, World 23 Bank, Washington DC .

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3 Regulatory Credibility for Private investment and Regulation by contract to support a new regulation regime. Chapters 6.3 and 6.4 in "Reforming power markets in developing countries: What have we learned?" (2006). Energy and Mining Sector Board Discussion Paper No. 19.

Ch 6.3-6.4

Besant-Jones, John E.

Sep-06

Energy and World Bank, Mining Washington DC Sector Board Discussion Paper No. 19 . . Water PPIAF, World Supply and Bank, Sanitation Washington DC Sector Board Discussion Paper No. 6 . .

Chapter 6.3 examines regulatory credibility for private E&G N investments in the context of regulatory agencies. It states, among other things, that the principal means for developing credibility is by establishing a designated regulatory agency that discharges its duties in a neutral and depoliticized manner. Chapter 6.4, on the other hand, examines regulation by contract.

4 Regulation and Private Participation contracts. Note 4 in "Explanatory Notes on Key Topics in the Regulation of Water and Sanitation Services" (2006). Water Supply and Sanitation Sector Board Discussion Paper No. 6.

Note 4

Groom, Eric, Jonathan Halpern, and David Ehrhardt

Jun-06

5 Regulation and Contracts for Utility Services: Substitutes or Complements? Lessons from UK Railway and Electricity History. Journal of Policy Reform.

Stern, Jon

2003

6 Regulation by Contract: A New Way to Privatize Electricity Distribution? Energy and Mining Sector Board Discussion Paper No. 7.

Bakovic, Tonci, May-03 Bernard Tenenbaum, and Fiona Woolf

This note explores regulation of services provided by privately operated utilities. There are two distinct traditions: one that relies on courts or arbitrators to fulfill the regulatory functions when the parties cannot agree; and another that relies upon government-established regulatory agencies. In the former, services are typically provided under contract to the government, which retains ownership of the assets, whereas the latter approach arose in the context of investorowned utilities. This note outlines the range of contractual options available for delivery of WSS by privately owned utilities and highlights the problems that have occurred where there are both contracts and an independent regulatory agency. Journal of This article describes how regulatory systems evolved in the Policy UK by providing different ways of monitoring, enforcing, and Reform 6 (4): eventually revising concession contracts for the railway and 193216 electricity sectors. The development of regulation in these sectors started with dispute resolution and the monitoring of concession contracts, and then evolved to regulatory institutions that were established with some powers to review and revise contract terms (including prices). However, these pre-1939 U.K. institutions for infrastructure industry regulation were not well designed and did not provide a stable solution to reconciling the needs of consumers with a reasonable rate of return to investors. The discussion in the article relates to the economic theory of incomplete contracts. It also provides support for the proposition that, effective infrastructure regulatory agencies can promote better and simpler infrastructure concession contracts, while also offering useful insights on stages of regulatory development. (Summary adapted from Brown et al. 2006). Energy and World Bank, The specific focus of the paper is on how regulatory Mining Washington DC contracts can be combined with independent regulatory Sector Board commissions to promote successful privatization of Discussion electricity distribution. Paper No. 7

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Rw, P E

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ii. Outsourcing Regulation

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1 Outsourcing Regulation: When Does it Make Sense and How Do We Best Manage it? Working Paper No. 5.

Trmolet, Sophie 2007

Working PPIAF, World Paper No. 5 Bank, Washington DC . .

Outsourcing regulatory functions or tasks can play a MS significant role in improving the effectiveness of institutions in charge of utility regulation, be they independent regulatory agencies or other types of institutions (including line ministries or contract supervision units set up at the level of the contract). The focus of this note is on outsourcing regulatory functions, to understand when it makes sense and how it can be best managed. For illustration purposes, the note contains references to a World Bank survey of outsourcing practices by existing regulators that was conducted in 2004 and had results from 51 regulation agencies throughout the world. Regulating infrastructure utilities can be extremely complex MS and fraught with risks of political interference and capture by interest groups, especially in countries with little tradition of politically independent government agencies. To deal with these challenges, policymakers and regulators have sometimes contracted third partiessuch as independent experts and consultantsto provide advisory or binding input into the administration of regulatory functions. This Note examines international experience in this area and explores the key implications for policymakers.

2 Regulating Utilities: Contracting Out Regulatory Functions. Public Policy for the Private Sector Note No. 269.

Bertolini, Lorenzo

Apr-04

Public Policy World Bank, for the Washington DC Private Sector Note No. 269

b. Consultations with Stakeholders/Transparency 1 Ways To Improve Water Services By Making Utilities More Accountable To Their Users : A Review. Water Working Notes, Note No. 15. Muller, Mike, Robin Simpson, Meike van Ginneken May-08 Water Working Notes, Note No. 15 World Bank, Using country studies and personal interviews to Washington DC complement the available literature, this article provides an overview, a structured analysis, practical guidance, and sources of further information for managers seeking to design and apply tools to improve the performance of utilities. African Operations This note describes Celtel's approach to governance and Region Results and corruption. Findings No. Learning Unit in 274 Africa Region and World Bank Trends and Policy Options No. 5 W& S P

2 Fighting Corruption the Celtel Way: Lessons from the front line. African Region Findings No. 274.

May-07

3 Unsolicited Infrastructure Proposals: How Some Countries Introduce Competition and Transparency, an international experience review. Trends and Policy Options No. 5.

Hodges, John T. Feb-07 and Georgina Dellacha

PPIAF, World This paper assesses the major issues and impact of MS Bank, unsolicited proposals which are not requested by a Washington DC government and usually originate within the private sector. It suggests that some unsolicited proposals, when subject to competition and transparency, may contribute to the overall infrastructure goals of countries.

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4 Utilities reforms and corruption in developing countries. World Bank Policy Research Working Paper 4081.

Estache, Antonio Dec-06 and Ana Goicoecha

World Bank World Bank, Policy Washington DC Research Working Paper 4081.

5 How to improve regulatory transparency: Emerging lessons from an international assessment. Gridlines No. 11.

Bertolini, Lorenzo Jun-06

6 Creating the Right Enabling Environment for ICT. ICT Regulation Toolkit Document.

Guermazi, Boutheina and David Satola

2005

This paper shows empirically that "privatization" in the MS energy, telecommunications, and water sectors, and the introduction of independent regulators in those sectors, have not always had the expected effects on access, affordability, or quality of services. It also shows that corruption leads to adjustments in the quantity, quality, and price of services consistent with the profit-maximizing behavior that one would expect from monopolies in the sector. The results suggest that privatization and the introduction of independent regulators have, at best, only partial effects on the consequences of corruption for access, affordability, and quality of utility services. Gridlines No. PPIAF, World Managing the different and often conflicting interests and MS 11 Bank, expectations of stakeholders-the government, consumers, Washington DC service providers-is a demanding task for infrastructure regulators. Transparency can be a big help. A core principle of good regulatory governance, transparency creates credibility for regulatory decisions and helps foster sustainable investment in infrastructure. This gridline examines how policymakers and regulators can best improve regulatory transparency through a recent PublicPrivate Infrastructure Advisory Facility (PPIAF)-funded review of international experience while identifying emerging lessons. ICT infodev, ITU Based on success stories from a wide range of countries ICT Regulation (both developed and developing), this chapter provides Toolkit pointers for policymakers on how to create the requisite Document environment for promoting ICT-led growth. Such an enabling environment requires not only ICT-specific considerations, but macro-level improvements in the business and political environment, among other factors. This chapter focuses primarily on the policy, legal and regulatory conditions needed to advance the e-development agenda at the national level. The chapter follows a three-layered approach to the enabling environment, which emphasizes improving: access to ICT tools (the access layer), access to edevelopment applications (the application layer); and consumer confidence and trust (the trust layer). World Bank Working Paper 66 World Bank, Most East Asia and Pacific countries are in the process of MS Washington DC reforming their infrastructure industries, focusing on strengthening the regulatory framework and making the investment climate more predictable. In this context, assessing the status of consumer participation in infrastructure regulation is essential to ascertain to what extent regulatory reforms in the region are supported by adequate mechanisms to safeguard consumer interests. World Bank, This section summarizes the literature on four policy issues MS Washington DC related to corruption: its level in infrastructure, its effects, its drivers, and what can done about it.

7 Consumer Participation in Infrastructure Regulation: Evidence from the East Asia and Pacific Region. World Bank Working Paper No. 66.

Muzzini, Elisa

May-05

8 Corruption. Chapter 7 in "Emerging Infrastructure Policy Issues in Developing Countries: A Survey of the Recent Economic Literature" (2004). World Bank Policy Research Working Paper No. 3442.

Ch 7

Estache, Antonio Oct-04

World Bank Policy Research Working Paper 3442.

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9 Timing it all right: Information collection, consultation, and stakeholder engagement. Chapter 6 in "New designs for water and sanitation transactions" (2002).

Ch 6

2002

Water and Sanitation Program

PPIAF, World This chapter outlines the key steps to be taken during the Bank, preparation process and the tasks that should be specified Washington DC in terms of reference for those supporting it. The topics examined are: Information to be collected and analyzed, consultation and stakeholder engagement, definition of objectives and design intervention, and timing.

c. Reviews and Appeals of Regulatory Decisions 1 Experts Panels in Regulation of Infrastructure in Chile. Working Paper No. 2. Jadresic, Alejandro 2007 Working PPIAF, World Paper No. 2 Bank, Washington DC . This paper sheds some light on the Chilean experience with MS expert panels and presents some conclusions that could eventually inspire regulatory improvements in Chile and other developing countries. Expert panels consist of specialized, independent ad hoc entities that are enlisted as third party experts or arbitrators on regulatory issues. The paper deals with the role of panels of experts in four areas: Power, Telecom, Water and sanitation, and Public works (toll roads). Following a brief conceptual taxonomy of panels of experts, the specific experiences are presented in broad chronological order, according to the time the institutions were established as law. Gridlines No. PPIAF, World Starting in the 1980s Chile initiated wide-ranging economic MS 22 Bank, reforms, paving the way for private sector involvement in Washington DC major infrastructure sectors. With these reforms came new regulatory rules, institutions, and processes to manage the interests and expectations of such diverse stakeholders as the government, consumers, and service providers. One innovative feature is the use of expert panels -- specialized, independent, ad hoc entities affiliated with neither the government nor the sector regulator -- to resolve disputes arising from regulatory decisions. The Chilean experience with these panels offers useful lessons for policymakers. Working Paper No. 33194 GICT, World Bank, Washington DC. The U.S.-Mexico case is the first (and so far only) case of T World Trade Organization (WTO) dispute resolution on telecommunications services and, indeed, the first on services generally. The findings of the Panel charged with resolving the dispute, formally adopted by the WTO members, contain interpretations of the General Agreement on Trade in Services (GATS). This paper analyzes how the findings from this case may have implications for other countries that have made or intend to make market access commitments on telecommunications. P

2 Relying on expert panels to help settle regulatory disputes: Lessons from Chilean experience. Gridlines No. 22.

Jadresic, May-07 Alejandro and Lorenzo Bertolini

3 Telecommunications and the WTO: The case of Mexico. Working Paper No. 33194

Wellenius, Bjrn , Jun-05 Juan Galarza, and Boutheina Guermazi

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4. CONTRACTUAL ARRANGEMENTS 1 Infrastructure and law website. Website. 2008 PPIAF, World This Web site is designed for task team leaders and other Bank, operational staff of the World Bank group who are working Washington DC on the planning, design and legal structuring of infrastructure projects, especially those involving the private sector. It helps address legal and contractual issues related to infrastructure projects and provides practical guides and checklists, sample legislation, regulations and agreements, with annotations and practical drafting notes to help project managers access an array of legal materials and other sample documents drawn from reform initiatives around the world. Updated Resource UK Department This Resource Guide is designed to assist national and subApril Guide for International national road agencies in developing and transition 2008 Development countries to launch or enhance a performance-based (Publishe and the World contracting (PBC) program to manage and maintain their d March Bank road networks. The Guide contains information and practical 2006) documentation to: identify a PBC approach to fit specific conditions in a given country; design bidding and contract documentation; and develop an efficient PBC implementation strategy. Aug-07 SIDA Studies SIDA, Sweden Depending on the circumstances, different models have No. 20 evolved that provide for sharing of risks and rewards . between the government, the consumers and the private . sector (Table 1). This chapter describes the main forms of public-private partnership found in the power sector. These are: Service Contracts, Management Contracts, Affermage Contract, Lease Contracts, Design-Build-Operate Contracts (DBO), Concessions, Build-Own-Operate-Transfer Contracts (BOT), and Divestitures. 2006 Toolkit PPIAF, World This chapter provides an overview of the key issues to be Bank, addressed and the steps involved in selecting an operator. It Washington DC focuses on selecting an operator for the main utility rather . than for alternative providers. For relatively small utilities, . the steps in the selection process are the same, but the selection process is adapted to fit the requirements and to limit expenses. In particular, the eligibility and selection criteria could be relaxed in order to attract regional operators. The topics examined are: Choosing a selection method, setting the selection criteria for competitive bidding, managing the bidding, and dealing with other issues. Website. MS N

2 Resource Guide: Performance-based Contracting for Preservation and Improvement of Road Assets (also available in English, French, Russian, and Spanish). Resource Guide.

Rd

3 Main forms of public-private partnership. Chapter 2.2 in "Energy sector reform: strategies for growth, equity and sustainability" (2007).

2.2

Ljung, Per

4 Selecting an Operator. Chapter 9 in "Approaches to private participation in water service" (2006).

Ch 9

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5 Allocating Responsibilities and Risk. Chapter 6 in "Approaches to Private Participation in Water Services" (2006).

Ch 6

2006

Toolkit

PPIAF, World Bank, Washington DC .

This chapter discusses how to best allocate business W responsibilities and risks and how to design tariff adjustment and other rules to achieve the desired allocation. Risks come about because the world is unpredictable. Demand for water services may be higher or lower than forecast. Costs may be higher or lower than forecast. Exchange rates will change. The question is, who should bear these risks? Who should bear the losses or experience the gains? If the operator bears cost risks, for example, then the operator makes bigger profits if costs fall and smaller profitsor lossesif costs rise. On the other hand, if customers bear cost risks, then customers lose if costs rise and win if they fall; the operators profits are unaffected. It is useful to think about responsibilities and risks together. Operators may be given responsibility for the things they are able to do better than government, and may take the risks naturally associated with those responsibilities.

6 Using Management and Lease Affermage Contracts for Water Supply: How Effective Are They in Improving Service Delivery? Gridline No. 12.

Ringskog, Klas, Mary Ellen Hammond, and Alain Locussol . . .

Sep-06

Gridline No. 12

7 Centralized Purchasing Arrangements: International Practices and Lessons Learned on Variations to the Single Buyer Model. Energy and Mining Sector Board Discussion Paper No. 16.

Arizu, Beatriz

Mar-06

As governments in developing countries seek to expand W access to water supply and improve the quality of service, they are considering a range of options for public-private partnerships. Yet proposals to involve the private sector have often been met with concerns - about tariff hikes, staff cutbacks, and ability to reduce inefficiency and expand access to service among the poor. Experiences with the more than 300 contracts bringing private operators into water supply in 1990-2004 have been mixed. This study examines the performance of water utilities under management and lease-affermage contracts, by looking at eight case studies across developing regions which show that performance has generally improved-across a range of measures. Energy and World Bank, Developing countries often pose the question of whether or E Mining Washington DC not the Single Buyer is the only remaining alternative to Sector Board attract private capital when a comprehensive restructuring of Discussion their power sectors is not technically feasible or politically Paper No. desirable. This paper tries to give a fresh perspective and 16 examine how this concept was implemented, what objectives it served, how it changed over time, and what arrangements have been introduced to overcome its drawbacks, while preserving its positive attributes. Paper World Bank, prepared for Washington DC the World Bank This report has been prepared for the World Bank with the objective of categorizing, describing and assessing the different performance incentives that have been used in a selection of thirteen management contracts in the water supply and sanitation (WSS) sector. The variety of performance incentives outlined in this report demonstrates that practitioners developing contracts face substantial choices in designing incentives. W& S

PPIAF, World Bank, Washington DC .

8 Improving the Regulation of Water and Sanitation Services: Preliminary Review to Categorize, Describe and Assess Incentive Provisions in Management Contracts. Paper prepared for the World Bank.

Smith, Bill Hume

Feb-06

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9 Consumer Cooperatives: An Alternative Institutional Model for Delivery of Urban Water Supply and Sanitation Services? Water Supply and Sanitation Working Notes. Note No. 5.

Fernando RuizMier and Mieke van Ginneken

Jan-06

Water Supply and Sanitation Working Notes. Note No. 5.

World Bank, This paper describes the essential characteristics of W Washington DC consumer cooperatives engaged in the provision of basic services and discusses their applicability as a model for water supply and sanitation service provision in urban areas. A cooperative is an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointlyowned and democratically-controlled enterprise. The paper focuses on system-wide urban water supply cooperatives and is thus not concerned with urban or peri-urban cooperatives that depend on either boreholes or bulk purchases of water from a utility for distribution, nor does it refer to rural water supply cooperatives that are generally small. After a general overview of cooperatives and a discussion of the main characteristics of utility cooperatives, the paper reviews the case of SAGUAPAC, a successful urban WSS cooperative in Bolivia, from which it draws some conclusions. PPIAF, World Bank, Washington DC . . . This section summarizes the recent experience in water and W sanitation plant concessions in Toluca, Mexico. With a payment guarantee from the country of Mexico, the municipal organizations of Toluca Norte and Oriente granted concessions to private companies for the construction and operation of two treatment plants. Lessons from this experience that stand out are: the establishment of minimum capital requirements from investors with the purpose of avoiding delays in the attainment of the required financing, the need to secure financing of complementary activities by the government, and a clear definition of the responsabilities of all the parties involved in the contract.

10 Concesion y contrato de prestacion de servicios de plantas de tratamiento de aguas residuales en Toluca: Lecciones Aprendidas. Chapter 2 in "Esquemas de Financiamiento del Sector Agua" (2005).

Ch 2

Gulesserian, Haig

Nov-05

11 Mobile license renewal. What are the issues? What is at stake? Working Paper No. 33190

Guermazi, Boutheina and Isabel Neto

Jun-05

Working Paper No. 33190

GICT, World Bank, Washington DC.

This note provides an overview of mobile license renewal T issues covering the legal regime of license renewal, the renewal process, the non-renewal context and the changes in licensing conditions including spectrum implications of the renewal process. It draws best practices that started to emerge in recent renewal practices, to ensure that the renewal process leads to the best outcome for all stakeholders.

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12 Innovative Contracts, Sound Relationships: Urban Water Sector Reform in Senegal. Water Supply and Sanitation Sector Board Discussion Paper No. 1

Brocklehurst, Jan-04 Clarissa and Jan G. Janssens

Water World Bank, Supply and Washington DC Sanitation Sector Board Discussion Paper No. 1 . .

This paper describes Senegal's Urban Water Sector W Reform. In 1995, the Government of Senegal launched widereaching reforms in the urban water sector. The reforms consisted of dissolving the state-run water company and creating a new asset-holding company that owned all the fixed assets in the government's name and had a mandate to manage the sector. The distribution and production was delegated to a separate entity, and a private operator was engaged to run the system. Eight years later, these reforms have resulted in significantly better services and financial health for the sector. There has been a 20 percent increase in the amount of water supplied, and the number of customers connected has increased by 35 percent. Consumers experience better service delivery in terms of response time to complaints, hours of service, and water quality. The utility is better run, with lower water losses and higher bill recovery. Both the private operating company and the state asset-holding company are healthy organizations, and their working relationship is good. Provides an overview of concessions, including how they work, benefits, drawbacks, and experiences. (Summary taken from the Regulation Body of Knowledge Website, 2004). MS

13 Granting and Renegotiating Infrastructure Concessions: Doing It Right. WBI Development Studies.

Guasch, J.L.

Jan-04

WBI World Bank, Development Washington DC Studies . . . Cambridge: Harvard University Press.

14 Regulating Infrastructure: Monopoly, Contracts and Discretion.

Gmez-Ibez, Jos.

2003

This book explores the advantages of different regulatory MS systems in solving the fundamental problem of establishing a commitment to a fair and stable set of rules governing the relationship between the government and private infrastructure providers (p. 2). Gmez-Ibez argues that there are three principal regulatory options: private contracts, concession contracts, and discretionary regulation. He contends that the success or failure of a regulatory system must be judged against whether the system produces outcomes that are politically acceptable and economically sensible. Using these criteria and a transaction cost framework, he presents case studies of regulatory systems for Sri Lankas buses, Argentinas railroads and electricity, the United States telephones and electricity, and the UKs water and railroads. He contends that the future of private provision of infrastructure, especially in developing countries, will depend critically on the ability of governments to create regulatory systems that treat investors and consumers fairly. (Summary taken from Brown et al. 2006 ).

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15 Making the contract work for the poor. Chapter 4 in "New designs for water and sanitation transactions" (2002).

Ch 4

2002

Water and Sanitation Program

PPIAF, World Bank, Washington DC . .

This chapter explores the range of forms and designs of W& contracts, and how they can be used to guide and direct the S private sector. It argues that careful contract design is vital for realizing the potential of the private sector to serve the poor. The following topics are examined: Types of contract, allocation of responsibility for key service characteristics, incentives for service to the poor of different contract types, issues in choosing the type of contract, and specific contract design issues (contracting for expansion, multiple providers, and multiple service levels).

16 Experiences and Issues in Urban Transport Infrastructure Concessions. TWU-38

Menckhoff, Gerhard and Christopher Zegras

Mar-00

TWU-38

17 Concessions for Infrastructure: A guide to their design and award. World Bank Technical Paper No. 399

Kerf, Michel, Mar-98 Irwin, Timothy , Levesque, Celine , Taylor, Robert R. , Klein, Michael

World Bank Technical Paper No. 399

World Bank, This paper provides an overview of recent experiences in UT Washington DC urban transport infrastructure concessions around the world, with a particular focus on Bangkok, Buenos Aires, and the United Kingdom. The work is based largely on a literature review, including the trade press, complemented by personal knowledge and unpublished data from Bangkok and especially Buenos Aires. World Bank and This report provides a guide to the complex range of issues MS IABD, and options related to design, award, implementation, Washington DC monitoring, and modification of concessions. The main rationale for concessions is that they can facilitate the regulation of natural monopolies. They can be used to create competition for the market under conditions in which the service provider has significant market power. Concession arrangements can take any number of forms involving the shifting of risks and responsibilities from the public to the private sector. They also entail legal and economic issues, including the organization of government entities responsible for concession programs and the adequacy of the legal and regulatory environment. The design and implementation of concession contracts that allocate risks and responsibilities and the mechanisms for evaluating and awarding projects are also of paramount importance. The report also assesses the government's role as a regulator and as a provider of support for infrastructure concessions.

5. INCENTIVE REGULATION a. Types of Pricing Regulation 1 RPI-X: Time to RIP?. Oxera Agenda. Edited by: Derek Jun-08 Holt . . Agenda Oxera There is little question that price cap regulation has MS performed well as a regulatory innovation. From its development in the 1980s it has been applied in one form or another to different sectors from energy to water to airports, telecoms, and postal services. But across a number of sectors governments and regulators are reassessing the basis of the current approach to regulation. Does this herald significant change? How should regulators and infrastructure companies engage in the debate that is sure to follow? N

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2 Incentive Regulation to Promote Efficiency. Chapter 6.5 in "Reforming Power Markets in developing countries: What have we learned?" (2006). Energy and Mining Sector Board Discussion Paper No. 19.

Ch 6.5

Besant-Jones, John E.

Sep-06

Energy and World Bank, Mining Washington DC Sector Board Discussion Paper No. 19 World Bank Policy Research Working Paper 3001.

This chapter provides a basic overview of the types of incentive regulation that have been used by different countries. These include: Cost-of-Service Regulation (or rate of return regulation), price cap regulation, and benchmarking.

3 An Introduction to Financial and Economic Modeling for Utility Regulators. World Bank Policy Research Working Paper 3001.

Estache, Antonio, Mar-03 Martn Rodrguez Pardina, Jos Mara Rodrguez, and Germn Sember

This paper summarizes rate of return regulation, price cap regulation, and hybrid schemes and describes how to choose incentive regulation schemes based on regulatory objectives. (Summary taken from the Regulation Body of Knowledge, 2004).

MS

4 Comparison of Building Block and Index-based Approaches. Farrier Swier Consulting.

Jun-02

Farrier Swier Consulting

This paper examines price cap and revenue cap regulation MS in Australia, focusing on efficiency incentives, risk, robustness, transparency, simplicity, administration, and cost and availability of information required. It also considers whether regulators should incorporate utility-specific factors, benchmarking, and appropriateness to statutory objectives. This paper examines price caps, revenue caps, and hybrids. MS It considers advantages and disadvantages, with particular attention to price volatility and discusses options for addressing price volatility. MS

5 Risk, Volatility and Smoothing: Regulatory Options for Controlling Prices.

6 Creating the Detail Engineering of Regulation: Price Setting Policies. Chapter 5 in "Managing the Regulatory Process: Design, Concepts, Issues, and the Latin America and Caribbean Story" (1999). World Bank and Caribbean Studies: Viewpoints.

Alexander, Ian Nov-99 and Chris Shugart . . Guasch, J.L. and Jul-99 Pablo Spiller

Body of Knowledge on Utility Regulation Website. World Bank Latin American and Caribbean Studies: Viewpoints

Body of Knowledge on Utility Regulation.

Ch 5

World Bank, This chapter summarizes rate of return regulation, earnings Washington DC sharing, price caps, revenue caps, and yardsticks and discusses the U.K. case for electricity and telecommunications.

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b. Benchmarking of Performance and Cost Indicators 1 The International Benchmarking Network for Water and Sanitation Utilities (IBNET). 2008 Website. IBNET This website provides direct access to the world's largest database for water and sanitation utilities performance data, while supporting and promoting good benchmarking practice among water and sanitation services by: Providing guidance on indicators, definitions, and methods for data collection, facilitating the establishment of national or regional benchmarking schemes, and undertaking peer group performance comparisons. In this report from the Asociacion de Entes Reguladores de W& Agua Potable y Saneamiento de las Americas - ADERASA S (Association of Water and Sanitation Regulatory Entities of the Americas), the author compares 128 companies from 14 countries in the Americas, with chapters pertaining to the analysis and integration of indicators, econometrics, and Data Envelopment Analysis (DEA). P

2 Informe Anual Benchmarking 2006 (Datos 2005). Ejercicio Anual de Benchmarking 2006

Molinari, Alejo Feb-07 and Romn Ghio

ADERASA Report.

ADERASA

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3 Efficiency and regulatory issues in the Brazilian water and sewage sector: An Empirical Study.

Tupper, Henrique 2004 Cesar and Marcelo Resende

Utilities Policy 12 (2004) 2940

Elsevier

4 Strategic Behaviour under Regulation Benchmarking. Working Paper WP 0312.

Jamasb, Tooraj. Paul Nillesen, and Michael Pollitt

2003

Working Paper WP 0312

Department of Applied Economics, University of Cambridge, U.K.

The paper quantifies the relative efficiencies of state water W& and sewage companies in Brazil during the 19962000 S period. Relative efficiency scores obtained by Data Envelopment Analysis (DEA) indicate that sub-optimal performance is salient for some utilities. In order to control for regional heterogeneities, the complementary between DEA and econometric procedures is explored as one controls for network density and water loss factors. The procedure leads to distinct adjusted relative efficiency scores that are considered in the construction of a linear reimbursement rule that constitutes a yardstick mechanism. The comparison of actual costs and reimbursed values defined by the comparative efficiency analysis makes salient different patterns across the different utilities and the possibility of important cost savings. The feasibility of the actual implementation is, however, constrained by the current regulatory framework for the Brazilian water and sewage sector. This paper examines how electricity distribution companies E regulated by benchmarking can engage in strategic behavior to increase profits without improving efficiency. (Summary taken from the Regulation Body of Knowledge, 2004).

5 The Case for International Coordination of Electricity Regulation: Evidence from the Measurement of Efficiency in South America. World Bank Policy Research Working Paper 2907.

Estache, Antonio, Oct-02 Martin A. Rossi, and Christian A. Ruzzier

World Bank Policy Research Working Paper 2907

World Bank, In this paper, the authors state that monitoring performance E Washington DC of public and private monopolies in South America is difficult because operators control most of the needed information and do not provide it to regulators. They argue that Latin Americas electricity regulators should use benchmarking based on performance rankings using comparative efficiency measures, given that this approach has modest data requirements, and demonstrate how this could be done.

6 Utility Benchmarking. View Point Note Number 229.

Kingdom, Bill, Vijay Jagannathan

Mar-01

View Point World Bank, In some countries regulators routinely publish indicators of MS Note Washington DC utility service performance through the local media. Number 229 Exposing the worst in class has proven to be a powerful way of pressuring utilities to provide better services to consumers. By focusing political attention on service quality, benchmarking can also help to shield regulators from political interference. This Note reviews the requirements for effective benchmarking: choosing indicators that are unambiguous and verifiable, consistent with long-term incentives for good performance, and easy for the public to understand.

6. REGULATORY ACCOUNTING

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1 Accounting for Infrastructure Regulation: An Introduction

Groom, Eric, Richard Schlirf Rapti , Martin Rodriguez Pardina . .

Apr-08

Book

2 Regulatory accounting guidelines. OFWAT.

2007, 2005, and 2003.

OFWAT

OFWAT

This title provides a practical guide for regulators, policyMS makers, and utility managers for establishing regulatory accounts that can be the cornerstone for better, more complete, and more reliable information. It sets out the essential accounting features of regulatory accounts and provides practical guidance on controversial areas such as cost allocation, asset valuation, and depreciation. It emphasizes the essential requirements for consistency with Generally Accepted Accounting Principles (GAAP). This website provides a series of guidelines on regulatory W accounting from the Water Services Regulation Authority (Ofwat), the economic regulator of the water and sewerage industry in England and Wales. These guidelines cover the following topics: Accounting for current costs and regulatory capital values, classification of expenditure regulatory accounting, contents of regulatory accounts, analysis of operating costs and assets, and transfer pricing in the water industry.

3 Regulatory Accounting Guidelines. Office of Rail Regulation (UK).

Apr-07

4 Regulatory Requirements Under Different Forms of Utility Service Delivery.

Rodriguez Pardina, Martin, Richard Schlirf Rapti

Feb-07

5 Cost of Service and Tariffs for Water Utilities. Note 5 in "Explanatory Notes on Key Topics in the Regulation of Water and Sanitation Services" (2006). Water Supply and Sanitation Sector Board Discussion Paper No. 6.

#REF!

Jun-06

Office of Rail These Guidelines from the United Kingdom's Office of Rail Rw Regulation (UK) Regulation cover the following topics: Components of the regulatory accounts, policies, and required statements and disclosures. Macroconsultin The aim of this analysis is to present and summarize the MS g, PPIAF, World specifics of utilities management, regulatory instruments and Bank, informational requirements under different contract types, Washington DC with a focus on the water and electricity sectors and on the following types of legal arrangements: concession, lease, affermage and management contracts. Water PPIAF, World This note provides a brief analysis of consistent approaches W Supply and Bank, to resetting tariffs for WSS services. Most successful Sanitation Washington DC approaches have used a cost building-block approach that Sector Board sets average prices or revenues on the basis of forecasts of Discussion reasonable costs by broad categories (operational Paper No. 6 expenditures, depreciation or renewals expenditures, and . return on assets). Because it is forward looking, it still . provides incentives for the utility to improve its efficiency, and because it is reset on the basis of utility specific costs, it provides some assurance that the utility will be able to recover reasonable costs incurred (including the cost of capital). The note explores the key issue of what to do where actual costs exceed the assessed efficient costs. The note emphasizes the need for caution. Trends and Policy Options No. 2 PPIAF, World This report estimates the returns that private investors in MS Bank, infrastructure projects in Latin America really made on their Washington DC investments, and assesses the adequacy of these returns relative to the risks takenthe cost of capital and the impact that the quality of regulation had on the closeness of alignment between returns and the cost of capital. (For more info, see comment)

Note 5

6 How Profitable are Infrastructure Concessions in Latin America? (2005). Trends and Policy Options No. 2. (Technical note, not only policies).

Sirtaine, Sophie, Jan-05 Maria Elena Pinglo, J. Luis Guasch, Vivien Foster

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7 Financial Modeling of Regulatory Policy. World Bank Institute CD.

2004

World Bank, World Bank, PPIAF, Washington, Macroconsul DC ting CDRom.

Interactive CD-ROM including a video course on regulation theory, simulations of regulatory policies and a complete downloadable regulatory model, offered in two versions: one dedicated to the water and energy sectors and the other, to the the transport sector.

8 Investment and the Regulatory Asset Base, and The Rate of Return. Chapters 7 and 9 in "Resetting Price Controls for Privatized Utilities: A Manual for Regulators" (1999). EDI Development Study.

Ch 7 and 9

Green, R., and Feb-99 Martin Rodriguez Pardina . . Alexander, I., and Dec-97 A. Estache

9 A Back-of-the-Envelope Approach to Assess the Cost of Capital for Network Regulators.

EDI World Bank, These chapters consider the regulatory treatment of MS Development Washington DC investment, depreciation, and the asset base and examine Study whether to value assets at historical cost or replacement cost, while also considering valuation at time of privatization. (Summary adapted from the Regulation Body of Knowledge Website, 2004). Taken from This article provides a description of how to estimate cost of MS Regulation capital in a developing country context. (Summary taken Body of from the Regulation Body of Knowledge Website, 2004). Knowledge website.

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7. TARIFF DESIGN AND STRUCTURE a. Tariff Design Economics 1 Transmission pricing in privately-owned electricity grids: An illustration from the Argentine electricity pool. Energy Economics. Abdala, Manuel Jul-08 Energy Economics Elsevier The Argentine electricity reform of 1992 offers an interesting E example of decentralized transmission pricing arrangements within a competitive system. This paper is a shortened version of an original analysis made in 1994 of the regulation of the Argentine transmission system, with emphasis on investment cost allocation rules. To make up for the limitation of short-run marginal cost (SRMC) pricing, incentives on service quality were put in place, including penalties for lack of line availability. The mechanism for capacity expansion, based on ad-hoc rules for allocations of investment costs, had the potential to produce non-optimal investment outcomes, as such rules ignored beneficiaries on the demand side. For fine tuning of this system, Abdala proposed an alternative rule based on traditional welfare analysis that broadens the universe of identified beneficiaries, and thus can be expected to produce a fairer outcome on investment cost allocation, reducing the potential risks of non-optimal investment. P

2 The Pricing Dynamics of Utilities with Underdeveloped Networks. World Bank Policy Research Working Paper No. 4198.

Kessides, Ioannis Apr-07 N. and Chisari, Omar O.

World Bank Policy Research Working Paper No. 4198

World Bank, This paper analyzes the dynamic pricing of a utility with an MS Washington DC underdeveloped network--typical in most developing countries-- facing a competitive fringe, short-run network adjustment costs, theft, and threat of a retaliatory regulatory review that increases with the price it charges. This model yields insights with important implications for the design of post privatization regulatory governance in developing countries. Many lack several institutional prerequisites for complex regulatory mechanisms. With scarce technical expertise, information problems, and lack of good accounting and auditing systems, the U.S.-U.K. regulation models are likely too challenging for many developing countries, especially during the early stages of the reform. Most developing countries are ill-suited to the traditional control techniques of regulation. More appropriate regulatory mechanisms for these countries would be simple, decentralized, flexible, and light-handed. The papers dynamics highlights the critical importance of a stable, credible, and predictable policy environment for the utilities to expand their networks. Under those circumstances, utilities will tend to employ a low discount rate which effectively will cause them to set low

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3 Cost of Service and Tariffs for Water Utilities. Note 5 in "Explanatory Notes on Key Topics in the Regulation of Water and Sanitation Services" (2006). Water Supply and Sanitation Sector Board Discussion Paper No. 6.

Note 5

#REF!

Jun-06

Water PPIAF, World Supply and Bank, Sanitation Washington DC Sector Board Discussion Paper No. 6 . .

This note provides a brief analysis of consistent approaches W to resetting tariffs for WSS services. Most successful approaches have used a cost building-block approach that sets average prices or revenues on the basis of forecasts of reasonable costs by broad categories (operational expenditures, depreciation or renewals expenditures, and return on assets). Because it is forward looking, it still provides incentives for the utility to improve its efficiency, and because it is reset on the basis of utility specific costs, it provides some assurance that the utility will be able to recover reasonable costs incurred (including the cost of capital). The note explores the key issue of what to do where actual costs exceed the assessed efficient costs. The note emphasizes the need for caution. This paper explains the importance of rules on pass through E of power purchase costs. It identifies, compares and contrasts pass through methodologies used in both developed and developing countries and presents lessons learned and best practices. The authors recommend pass through methods that rely on market prices and competitive procurements and consider cases where data restrictions necessitate an evolutionary path for pass-through regulation. (Summary adapted from the Regulation Body of Knowledge Website, 2004).

4 Pass Through of Power Purchase Costs: Regulatory Challenges and International Practices. Energy and Mining Sector Board Discussion Paper No. 10

Arizu, Beatriz, Feb-04 Luiz Maurer, and Bernard Tenenbaum

Energy and Washington, Mining D.C.: The World Sector Board Bank Discussion Paper No. 10

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5 Regulation of Electricity Lines Businesses: Analysis of Lines Business Performance 19962003. Report prepared for Commerce Commission, Wellington, New Zealand.

Meyrick Consulting

Dec-03

Report Meyrick prepared for Consulting Commerce Commission, Wellington, New Zealand

This paper examines the use of benchmarking in establishing an X-factor for an electricity distribution company. (Summary taken from the Regulation Body of Knowledge Website, 2004).

6 A Model for Calculating Internconnection Costs in Telecommunications (English and French). Guidebook.

Noumba Um, Paul, Laurent Gille, Lucile Simon, Christophe Rudelle

Dec-03

Guidebook

PPIAF, World This guidebook consists of six chapters. Chapter 1 T Bank, introduces the guidebook. Chapter 2 provides an overview Washington DC of the guidebook. Chapter 3 reviews cost modeling principles for calculating interconnection rates, while chapter 4 illustrates how these principles are integrated in the cost model. Chapter 5 is a user guide and chapter 6 reviews cost modules composing the model and illustrates how interconnection costs are computed.

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7 Background to Work on Assessing Efficiency for the 2005 Distribution Price Control Review: Scoping Study Final Report for Ofgem (CEPA).

Sep-03

CEPA report Cambridge for OFGEM Economic Policy Associates (Taken from Body of Knowledge Website). WBI World Bank, Development Washington Studies DC.

This study examines approaches for analyzing E&G benchmarking data. It considers regression analysis, data envelope analysis, and corrected ordinary least squares, stochastic frontier analysis. It also examines scale variables, cost drivers, the benchmark variable, and quality. (Summary adapted from the Regulation Body of Knowledge Website, 2004).

8 A Primer on Efficiency Measurement for Utilities and Transport Regulators (Also available in Spanish). WBI Development Studies.

Coelli, Tim, Feb-03 Antonio Estache, Sergio Perelman, and Lourdes Trujillo.

This paper describes the tools used for measuring efficiency. It considers total factor productivity measures, frontier analysis, and data concerns and describes how these measures are incorporated into X-factors. (Summary taken from the Regulation Body of Knowledge Website, 2004).

Tr

9 How to Determine the X in RPI - X Regulation: A User's Guide. Telecommunications Policy.

Bernstein, Jeffrey Feb-00 I. and David E. M. Sappington

Telecommun Taken from ications Regulation Policy 24(1) Body of Knowledge website.

This paper explains that price cap regulation is intended to T replicate the discipline of competitive market forces. Competitive forces compel firms to realize productivity gains and to pass these gains on to their customers in the form of lower prices, after accounting for unavoidable increases in input prices. Therefore, if all industries in an economy were competitive, output prices in the economy would grow at a rate equal to the difference between the growth rate of input prices and the rate of productivity growth. (Summary taken from the Regulation Body of Knowledge Website, 2004). This paper examines price caps, revenue caps, and hybrids. MS It considers advantages and disadvantages, with particular attention to price volatility and discusses options for addressing price volatility. (Summary taken from the Regulation Body of Knowledge Website, 2004). N

10 Risk, Volatility and Smoothing: Regulatory Options for Controlling Prices

Alexander, Ian and Chris Shugart

1999

Taken from Regulation Body of Knowledge website.

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b. Pricing for the Poor (for other topics on regulation for the poor, see section 9). 1 Financial Viability and Affordability. Chapter 7 in "Reforming Power Markets in Developing Countries: What have we learned?" (2006). Energy and Mining Sector Board Discussion Paper No. 19. Ch 7 Besant-Jones, John. Sep-06 Energy and World Bank, Mining Washington DC Sector Board Discussion Paper No. 19 This chapter recognizes that power market reform entails a MS number of important social dimensions for the poor. These dimensions include the prices of electricity services, access to electricity services, and quality of electricity services. The higher power prices that have followed power market reform in many developing countries raise concerns about affordability for low-income households and the role of subsidies in the new power markets. Topics relating to pricing for the poor that can be found in this chapter include: Institutional reforms for supporting access and affordability, financial viability and affordability, and designing appropriate tariffs. Given the relatively small segment of the population that W& faces genuine affordability problems in Latin America, there E appears to be a promising case for using targeted subsidies to reconcile the cost recovery objective with social protection concerns. Social tariff schemes of various kinds are already widespread in Latin America, but they suffer from a number of design flaws. Increasing block tariff (IBT) structures are the most prevalent form of social tariffs in the region. These are likely to be more successful in the electricity sector than in the water sector because the correlation between consumption and income is much stronger in the case of electricity than water. A number of more sophisticated social tariff schemes are also being applied that combine consumption criteria with some form of socioeconomic screening. These are generally found to perform better than IBTs, although they also present significant room for improvement. N

2 Is cost recovery a feasible objective for water and electricity ? The Latin American experience. World Bank Policy Research Working Paper No. 3943.

Foster, Vivien and Tito Yepes

Jun-06

World Bank Policy Research Working Paper No. 3943.

World Bank, Washington DC.

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c. Subsidy Schemes 1 Public money for private infrastructure : deciding when to offer guarantees, output-based subsidies, and other fiscal support. World Bank Working Paper. World Bank Working Paper No. 10 Irwin, Timothy Sep-06 World Bank Working Paper No. 10 World Bank, This report sets out a framework intended to help MS Washington DC governments make better decisions about giving fiscal support for private infrastructure services and provides some tools to facilitate analysis. The report does not try to draw universally applicable conclusions about the usefulness of the various instruments of fiscal support. It argues, however, that output-based cash subsidies have two valuable features: they can be carefully targeted towards the achievement of the desired objective, and their costs are usually clear. This does not imply that cash subsidies are always cost-effective; in practice, they often appear poorly targeted. Whenever other instruments are used, however, the question naturally arises: is this instrument being used because it most efficiently achieves the objective or only because its cost is opaque and its use not subject to standard expenditure controls? In some cases, instruments other than output-based cash subsidies should be considered. The author also notes that government decisions are rarely driven solely by the dictates of cost-benefit analyses. World Bank, While consumer utility subsidies are widespread in both the W& Washington DC water and electricity sectors, their effectiveness in reaching E and distributing resources to the poor is the subject of much debate. Water, Electricity, and the Poor brings together empirical evidence on subsidy performance across a wide range of countries. It documents the prevalence of consumer subsidies, provides a typology of the many variants found in the developing world, and presents a number of indicators useful in assessing the degree to which such subsidies benefit the poor, focusing on three key concepts: beneficiary incidence, benefit incidence, and materiality. The findings on subsidy performance will be useful to policy makers, utility regulators, and sector practitioners who are contemplating introducing, eliminating, or modifying utility subsidies, and to those who view consumer utility subsidies as a social protection instrument. N

2 Water, Electricity and the Poor: Who benefits from utility subsidies?

Komives, Kristin, 2005 Vivien Foster, Jonathan Halpern, Quentin Wodon

3 Tariffs and Subsidies. Chapter 5 in "New designs for water and sanitation transactions" (2002). Water and Sanitation Program.

2002

Water and Sanitation Program

PPIAF, World Bank, Washington DC . .

This chapter covers the following topics that relate to tariffs W& and subsidies: tariff reform and the principles of tariff S setting and subsidy delivery, getting the tariff level and the tariff structure right helps all consumers including the poor, subsidize access, not consumption, subsidy delivery mechanisms should be targeted, transparent, and triggered by household indication of demand, new information is often required to evaluate whether a proposed tariff or subsidy will hurt or help poor households, tariffs and subsidies require modifications over time: decisions must be made about how social equity concerns will be incorporated in the tariff and subsidy revision process.

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4 Designing Direct Subsidies for the Poor A Water and Sanitation Case Study. Public Policy for the Private Sector No. 211.

Foster, V., A. Gmez-Lobo, and J. Halpern

Jun-00

Public Policy World Bank, for the Washington DC Private Sector No. 211

5 The Role of Energy Subsidies. Chapter 7 in "Energy Services for the Poor" (2000). Energy and Development Report 2000.

Barnes, Douglas Apr-00 F., and Jonathan Halpern.

This paper describes direct subsidies for making W& infrastructure services more affordable to the poor, S considers how governments pay part of the water bill of poor households that meet certain eligibility criteria, and describes the case of Chile, illustrating how simulation techniques can be used to improve the effectiveness of such programs. (Summary adapted from the Regulation Body of Knowledge Website, 2004). Energy and ESMAP, World This chapter explores the case for subsidies to promote the E Development Bank, use of energy that enhances the quality of life of the poor or Report 2000. Washington DC reduces their expenditures on energy and to encourage businesses to serve poor and rural populations. Topics covered are: reasons for energy subsidies, typical subsidy problems, and the subsidy decision (who, what, how, and how much to subsidize).

d. Promoting Access through Price Designs 1 Price Structure and Network Externalities in the Telecommunications Industry : Evidence from SubSaharan Africa. World Bank Policy Research Working Paper No. 4200. Iimi, Atsushi Apr-07 World Bank Policy Research Working Paper No. 4200 World Bank, This paper examines the factors that facilitate the most T Washington DC network expansion, using micro data from 45 fixed line and mobile telephone operators in 18 African countries. In theory the telecommunications sector has two sector-specific characteristics: network externalities and discriminatory pricing. It is found that many telephone operators in the region use peak and off-peak prices and termination-based price discrimination, but are less likely to rely on strategic fee schedules, such as tie-in arrangements. The estimated demand function based on a discrete consumer choice model indicates that termination-based discriminatory pricing can facilitate network expansion. It also shows that the implied price-cost margins are significantly high. Thus, price liberalization could be conducive to development of the telecommunications network led by the private sector. Some countries in Africa are still imposing certain price restrictions. Importantly, however, it remains a policy issue how the authorities should ensure reciprocal access between operators at reasonable cost. P

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e. Demand Forecasting 1 Appendix C: Statewide forecast of energy consumption and peak demand in Maryland and Appendix D: Determinants of electricity demand growth in Maryland. In Maryland Power Plants and the Environment. . . C and D Feb-08 Maryland Power Appendix C provides the results of the most recent (2005) Plant Research statewide forecast of electric energy consumption and peak Program demand in Maryland. The statewide totals developed through the forecasting process were disaggregated by region within the state, thus providing projections of energy consumption and peak demands in each of the following regions: Marylands Eastern Shore, the Baltimore region, the Washington suburban region, Southern Maryland, and Western Maryland. For the state as a whole and for each of the regions, base case, high case, and low case forecasts were prepared. Only the base case results are presented in this appendix. Appendix D provides an overview of the basic theoretical foundations upon which these forecast studies rest, and an analysis of the trends of some of the economic and non-economic determinants of the demand for electricity. Transport World Bank, The demand forecasts form a key input to the economic Note No. Washington DC appraisal. As such any errors present within the demand TRN-12 forecasts will undermine the reliability of the economic appraisal. The minimisation of demand forecasting errors is therefore important in the delivery of a robust appraisal. In this note the authors address this issue by introducing the key issues and error types present within demand forecasts (Section 1). Following that introductory section the error types are described in more detail: measurement error (Section 2), model specification error (Section 3) and External or Exogenous Errors (Section 4). The final section presents a discussion on how to manage demand forecasting errors (Section 5). Transport World Bank, The note focuses on three specific ways in which subNote No. Washington DC optimal pricing can impact on project benefits: 1) through TRN-23 congestion and overcrowding (Section 1); 2) through overpricing and loss of user benefits (Section 2); and 3) through financial deficits which have implications for the rest of the economy (Section 3). Sections 1-3 of the Note seek to give practical advice on each situation, including how to approach the economic analysis of the situation, and the key implications for project appraisal. If pricing policy is not known with certainty at the time of the appraisal, then alternative pricing policies must form part of the risk and uncertainty analysis. This is covered in Section 4. Conclusions are given in Section 5. EDI World Bank, This paper describes forecasting of costs, investment, and Development Washington DC revenue in a price review setting, and how these forecasts Studies are incorporated into present value calculations. (Summary taken from the Regulation Body of Knowledge Website, 2004). E P

2 Demand Forecasting Errors. Transport Note No. TRN-12.

Jan-05

Tr

3 Evaluation and Implications of Sub-optimum pricing. Transport Note No. TRN-23.

Jan-05

Tr

4 Present value calculations, operating costs, investment and the regulatory asset base, and revenues (including revenue forecasting).Chapters 5-8 in "Resetting Price Controls for Privatized Utilities: A Manual for Regulators" (1999). EDI Development Studies.

Ch 5-8

Green, Richard, and Martin Rodriguez Pardina

Feb-99

MS

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f. Conducting a Price Review 1 Improving the Regulation of Water and Sanitation Services: Tariff Adjustment Rules - Guidelines for Regulators. Draft. Shugart, Chris, and Ian Alexander Jun-08 Draft PPIAF, World Guide Section: This part of the report gives an overview of MS Bank, the Rules and explains the underlying regulatory philosophy, Washington DC the trade-offs, and the choices made. It should be read as a preliminary orientation by anyone using the Rules, and it may also be a helpful primer for policy makers who do not want to plunge into the details of the Rules but want to understand why they are needed and what they do. The Guide would also be useful for those who are managing the process of developing system-specific tailored regulatory rules in their discussions with the people working on the detail. Rules Section: This part of the report sets out the draft regulatory rules, along with explanatory notes. The intention is for the Rules to be a self-contained document, when read by suitably qualified people. Variants have been included in the Rules in a number of places. For each set of variants applying to a particular rule, only one variant is to be selected. Green states that the regulatory process needs to begin two MS years before the new control is due to come into effect. He explains that the review process includes: (1) Gathering and analyzing information on costs, investment plans, and demand forecasts; (2) Forecasting revenue requirements; (3) Choosing whether to use price caps or revenue caps; (4) Projecting revenue and cash flows using different price control parameters (such as the service baskets and the anticipated efficiency gains) to find a set of parameters that result in the appropriate cash flows; and (5) Making the announcement. Green also holds that the regulator should release information at several stages of the review process so that interested parties are kept informed and suggests a timetable for the process. N

2 Utility Regulation A Critical Path for Revising Price Controls. Public Policy for the Private Sector No 133.

Green, Richard

Nov-97

Public Policy World Bank, for the Washington DC Private Sector No 133

g. Bringing Collection Up 1 Selected Instruments for Promoting Affordability of Infrastructure Services. Table 4.1 in "Accounting for Poverty in Infrastructure Reform: Learning from Latin America's Experience" (2002). WBI Development Studies. Ch 4 Estache, Antonio, Feb-02 Vivien Foster, and Quentin Wodon. WBI World Bank This chapter has a section on "improving consumption MS Development Institute, affordability for the poorest". Table 4.1 in this section Studies Washington DC provides an inventory of the instruments that can be used to improve affordability, and hence facilitate bill payment, with a brief overview of their advantages. N

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h. Incentive Program to reduce Energy/Water Losses 1 The Challenge of Reducing Non-Revenue Water (NRW) in Developing Countries. Water Supply and Sanitation Board Discussion Paper No. 8. Kingdom, Bill, Roland Liemberger, Philippe Marin Dec-06 Water World Bank, Supply and Washington DC Sanitation Board Discussion Paper No. 8 One of the major issues affecting water utilities in the W developing world is the considerable difference between the amount of water put into the distribution system and the amount of water billed to consumers (also called nonrevenue water -NRW). High levels of NRW reflect huge volumes of water being lost through leaks, not being invoiced to customers, or both. It seriously affects the financial viability of water utilities through lost revenues and increased operational costs. In this report, a number of case studies, taken from some of the largest and most recent performance-based NRW contracts, are studied and discussed in terms of their technical and financial performance. Lessons learned from the case studies are analyzed, showing the potential benefits of NRW performance-based service contracting with the private sector. The limited evidence available suggests that performance-based service contracting can be very efficient in reducing NRW levels. N

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8. QUALITY a. Quality of Service 1 Service Quality and Prospects for Benchmarking: Evidence from the Peru Water Sector. Utilities Policy, Volume 13, Issue 3, Pages 230-239. Lin, C. Sep-05 Utilities Policy, Volume 13, Issue 3, Pages 230239. Service quality is a very important aspect of the water and W& sewerage industry. Empirical studies have tended to focus S on production costs, without explicitly introducing key dimensions of quality. Using data from the Peruvian water sector (19962001), this study examines how the introduction of quality variables affects performance comparisons across utilities. The research presents different specifications of stochastic cost frontier models to illustrate how quality can be incorporated into benchmarking studies. Taken from Regulation Body of Knowledge Website. This consultation examines alternative performance measures for water utilities. It considers weighting of measures, performance ranges, funding of enhanced service levels, water supply measures, drinking water quality, sewerage service measures, customer service measures, and environmental performance measures. (Summary taken from the Regulation Body of Knowledge Website, 2004). This paper describes how price cap regulation affects service quality in telecommunications. (Summary taken from the Regulation Body of Knowledge Website, 2004) W

2 Updating the Overall Performance Assessment (OPA) A Consultation. OFWAT.

Mar-04

OFWAT

3 The Effects of Incentive Regulation on Retail Telephone Service Quality in the United States. Review of Network Economics.

Sappington, David

Dec-03

4 Setting water and sewerage price limits for 2005-10: Framework and Approach. Response to OFWAT's Consultation.

Mar-03

Review of Network Economics 2(4): 356375 Response to OFWAT's Consultation.

Taken from Regulation Body of Knowledge Website. National Consumer Council

This paper describes quality standards and how they are incorporated into the 2004 price review. (Summary taken from the Regulation Body of Knowledge Website, 2004)

5 Cities Awash: A Synthesis of the Country Cases. In "Thirsting for Efficiency" (2002).

Edited by: Mary M. Shirley

2002

Thirsting for World Bank, Efficiency Washington book. pp.1- DC. 41.

6 Electricity Service Quality Incentives Scoping Paper. Meyrick and Associates.

Meyrick and Associates

Jul-02

Prepared for: Queensland Competition Authority

Meyrick and Associates. Taken from Regulation Body of Knowledge Website.

This article discusses quality issues in the context of W yardstick competition, monitoring, performance targets, assignment of risks and rewards, incentives in tariff policies, and the roles of regulatory, judicial, and political institutions. (Summary taken from the Regulation Body of Knowledge Website, 2004) The authors explain that higher reliability can be achieved E for customers who choose such an option for a higher price by providing them with a primary selective service where they have access to multiple feeders so they are less susceptible to one feeder failing. They further explain that reliability guarantees are another variant on the price/service-offering concept. Information asymmetries and the resulting free-rider problem create problems. (Summary taken from Regulation Body of Knowledge Website, 2004). .

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7 Linking service levels to prices. OFWAT.

Feb-02

OFWAT

Taken from Regulation Body of Knowledge Website.

8 Quality of Electricity Supply: Initial Benchmarking on Actual Levels, Standards and Regulatory Strategies. Council of European Energy Regulators.

2001

Council of European Energy Regulators

This paper examines policies for linking service levels to W prices. It considers incentives that regulation creates for service (formal linkages and regulatory lag), weighting measures, differentiating between operators, and parameters for water supply, sewage, customer service, and environmental. (Summary taken from the Regulation Body of Knowledge Website, 2004). The authors state that quality of service regulation should E relate to transactions between companies and customers (for example, accuracy of estimated bills and actual meter readings), continuity of supply (for example, planned or unplanned service, their duration, and low voltage levels), and voltage quality. (Summary taken from the Regulation Body of Knowledge Website, 2004). This article shows that companies subject to competition invest in quality to differentiate products. (Summary taken from Regulation Body of Knowledge Website, 2004). T

9 Trouble Reports as an Indicator of Service Quality: The Influence of Competition, Technology, and Regulation. Telecommunications Policy 24, pp. 947967. b. Adaptation of Standards to Local Characteristics (See section 9) 9. SERVICES FOR THE POOR AND FOR RURAL/PERI-URBAN AREAS 1 The Challenge of Rural Energy. Chapter 6 in "Energy sector reform: strategies for growth, equity and sustainability" (2007). SIDA Studies No. 20. 2 New Models for Universal Access to Telecommunication Services in Latin America (Available in Spanish). Working Paper No. 40829 Ch 6

Roycroft, Trevor R. and Martha Garcia-Murrilo

2000

Telecommun Elsevier ications Policy 24, pp. 947-967.

Ljung, Per

Aug-07

SIDA Studies SIDA, Sweden No. 20 . Working Paper No. 40829

Stern, Peter A. and David N. Townsend

Jul-07

3 Challenge of Rural Electrification: Strategies for Developing Countries

Barnes, Douglas Mar-07 F.

This chapter addresses the following challenges of rural E&G N energy: Access to electricity, costs and subsidies, small scale off-grid electricity, and energy for rural households without electricity. Joint study by The goal of this study is to assist members of Regulatel to T P Regulatel, develop and implement effective, targeted and sustainable PPIAF, GPOBA, universal access programs, including OBA programs, in UN, EU, CEPAL order to increase private sector investment in and the World telecommunications and information infrastructure in rural Bank and low-income areas. An important outcome from the study is to propose new models for universal access programs and projects Resources for This book describes how to develop effective institutions, E the Future provide efficient and enabling subsidies, and keep distribution utilities afloat financially during a period of rapid expansion, all in ways that are politically acceptable to a wide range of constituents. The contributors to this volume document how a diverse set of countries in the developing world has met and conquered these challenges. This book can serve as a guide for countries embarking on the road toward implementing programs that provide electricity to difficult-to-reach populations.

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4 Pro-poor regulation: time for utility managers to engage. Water Utility Management International.

Schaub-Jones, David

Oct-06

Water Utility Management International

5 Getting the Assumptions Right: Private Sector Participation Transaction Design and the Poor in Southwest Sri Lanka. Water Supply and Sanitation Board Discussion Paper Series. Paper No. 7.

van den Berg, Caroline, Subhrendu Pattanayak, JuiChen Yang and Herath Gunatilake.

Oct-06

Water World Bank, Supply and Washington, Sanitation DC Board Discussion Paper Series. Paper No. 7.

Work with regulators in East Africa provides an early W indication to water utility managers about how regulatory frameworks can be shaped to ensure poor communities are served. This article outlines five key areas where regulatory frameworks can have an impact. Many sector reform programs are often decided with scant W& knowledge of the demand for piped water services in the S service area. This often results in too optimistic assumptions on the actual revenues that such a sector reform program can generate. In the case of private sector participation (PSP) transactions, renegotiations often become necessary when demand lags behind expectations. Such renegotiations can result in tariff increases or other changes in the contract that increase the costs to consumers and/or taxpayers. The authors illustrate these features through a case study of water, sanitation, hygiene, and poverty from coastal towns of Southwest Sri Lanka, where about 1,800 households were surveyed to gain a better understanding of the demand for piped water services by poor and non-poor households. The results of the study showed that many of the standard assumptions that are used when determining the viability of sector reform programs do not always accord with consumer preferences. Power market reform entails a number of important social MS dimensions for the poor. These dimensions include the prices of electricity services, access to electricity services, and quality of electricity services. The higher power prices that have followed power market reform in many developing countries raise concerns about affordability for low-income households and the role of subsidies in the new power markets. Topics relating to pricing for the poor that can be found in this chapter include: Institutional reforms for supporting access and affordability, financial viability and affordability, and designing appropriate tariffs. Regulatory frameworks can have a decisive influence on W& making water and sanitation services more accessible to the S poor and on giving service providers the right incentives to serve them. In some cases, however, existing regulatory frameworks may introduce obstacles to serving the poor rather than provide an environment conducive to extending service. This note seeks to provide practical guidance on how regulatory frameworks can be designed and implemented in a way that is more conducive to expanding access and improving service to poor customers. N

6 Financial Viability and Affordability. Chapter 7 in "Reforming Power Markets in Developing Countries: What have we learned?" (2006). Energy and Mining Sector Board Discussion Paper No. 19.

Ch 7

Besant-Jones, John.

Sep-06

Energy and World Bank, Mining Washington DC Sector Board Discussion Paper No. 19

7 Taking Account of the Poor in Water Sector Regulation. Water Supply & Sanitation Working Notes, Note No. 11.

Trmolet, Sophie Aug-06 and Catherine Hunt

Water Supply & Sanitation Working Notes, Note No. 11

World Bank. Washington DC.

N&P

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8 Electrification and Regulation: Principles and a model law. Energy and Mining Sector Board Discussion Paper No. 18.

Reiche, Kilian, Jul-06 Bernard Tenenbaum, Clemencia Torres de Mstle

Energy and World Bank, Mining Washington DC Sector Board Discussion Paper No. 18

9 Is cost recovery a feasible objective for water and electricity ? The Latin American experience. World Bank Policy Research Working Paper No. 3943.

Foster, Vivien and Tito Yepes

Jun-06

World Bank Policy Research Working Paper No. 3943.

This paper proposes some general principles for creating E regulatory systems that will help rather hurt electrification, with emphasis on off-grid electrification. A helpful regulatory system is based on two golden rules of regulation: 1) regulation is a means to an end. What ultimately matters are outcomes - not regulatory rules; and 2) the benefits of regulation must exceed the costs of regulation. The paper's main conclusion is that successful electrification often requires that the traditional functions of regulation must be performed in non-traditional ways. World Bank, Given the relatively small segment of the population that W& Washington DC faces genuine affordability problems in Latin America, there E appears to be a promising case for using targeted subsidies to reconcile the cost recovery objective with social protection concerns. Social tariff schemes of various kinds are already widespread in Latin America, but they suffer from a number of design flaws. Increasing block tariff (IBT) structures are the most prevalent form of social tariffs in the region. These are likely to be more successful in the electricity sector than in the water sector because the correlation between consumption and income is much stronger in the case of electricity than water. A number of more sophisticated social tariff schemes are also being applied that combine consumption criteria with some form of socioeconomic screening. These are generally found to perform better than IBTs, although they also present significant room for improvement. Global Partnership on Output Based Aid, World Bank, Washington DC This paper aims to provide practical guidance on how to W& evaluate regulatory arrangements and adapt them to be S more conducive to expanding access and improving service to poor customers.

10 Regulation of water and sanitation services: getting better service to poor people. OBA Working Paper Series Paper No. 8

Trmolet, Sophie Jun-06 and Jonathan Halpern

OBA Working Paper Series Paper No. 8

11 Adapting regulation to the needs of the poor: Experience in 4 East African countries. BPD Water and Sanitation.

Trmolet, Sophie.

May-06

BPD Water and Sanitation

GTZ and World Pro-poor regulation is not a well-established discipline and Bank Institute. findings from empirical research on the subject have only marginally trickled down to influence regulatory practice on the ground. Only recently has the notion that regulation should benefit the poor come to the fore and become more widely accepted. The objectives of this note are to suggest an approach that lays bare the critical challenges of propoor regulation and discuss what this has revealed in four different regulatory settings. The note aims to provide a platform for future cross-learning and benchmarking of propoor regulatory activities in the four countries and beyond.

W& S

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12 Expanding the Frontiers of Telecom Markets Through PPP in Peru: Lessons for Pro-Poor Initiatives. Gridlines No. 5.

Stephens, May-06 Robert, Jorge Bossio, and JeanChristophe Ngo

Gridlines No. PPIAF, World To help bring telephone service closer to Peru's poorest and T 5 Bank, most isolated areas, a pioneering fund offered subsidies to Washington DC attract investment by private operators. Initial efforts led to impressive achievements, though slow implementation left room for improvement. A Public-Private Infrastructure Advisory Facility (PPIAF)-funded assessment of the first projects helped design the next generation of initiatives-and pointed to lessons for other developing countries. This paper lists and describes the lessons from this pro-poor initiative. The WB Group Transport Papers TP10 Transport Sector Board, World Bank, Washington, DC This paper describes the Rural Access Index (RAI), a Tr headline transport indicator which highlights the critical role of access and mobility in reducing poverty in poor countries. The Index is part of the Results Measurement System for IDA 14. It is defined together with the official method of measurement which is on the basis of locally representative household surveys. The challenges for extending and updating the Index are described, together with the resources which have been developed to tackle these. Links are provided to those resources. World Bank, Access to communication and information services exhibits ICT Washington DC major inequalities among and within countries. These disparities matter insofar as they constrain economic development and poverty reduction. This chapter highlights five principles that guide good practices for extending these services in changing technological and market environments. World Bank, Washington DC. This report emphasizes the role of public-private ICT partnerships in ensuring that more people in the developing world can access modern tools of communication. The report calls on governments to utilize their roles as consumer of information and communications services as well as providers of other utility services to leverage rollout. It also discusses a number of innovative subsidy and investment models that have extended access to the previously unserved. The report notes the relatively small role of the donor community in terms of overall financing, but describes a number of cases where donors have leveraged and catalyzed private flows to meet rollout objectives. Widespread access to ICTs creates new income T&I opportunities and contributes to the social and economic CT transformation of entire countries. Yet access to ICTs in rural areas and poor urban neighborhoods of many developing countries is still today several orders of magnitude lower than in metropolitan urban areas. To address this problem, policymakers are devising universal access policies to ensure that ICTs reach all segments of society. This note discusses a best practice approach to universal access involving policies aimed at addressing both supply and demand-side constraints, in particular outputbased aid schemes that promote extension of telecommunication networks to rural areas.

13 Rural Access Index: A Key Development Indicator. The WB Group Transport Papers TP-10.

Roberts, Peter, Shyam KC, Cordula Rastogi

Mar-06

14 Extending Communication and Information Services: Principles and Practical Solutions. Chapter 3 in "Global trends and policies - 2006 information and communications for development" (2006).

Ch 3

Wellenius, Bjrn

Jan-06

15 Financing Information and Communication Infrastructure Needs in the Developing World: Public and Private Roles. World Bank Working Paper No. 65.

Sections 8-11

Global ICT Department

Nov-05

World Bank Working Paper No. 65.

N&P

16 Universal access and output-based aid in telecommunications and ICT. Newsletter No. 36233

Navas-Sabater, Juan

Jun-05

Newsletter No. 36233.

GICT, World Bank, Washington DC.

N&P

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17 Making the contract work for the poor. Chapter 4 in "New designs for water and sanitation transactions" (2002). Water and Sanitation Program.

Ch 4

Jun-05

Water and Sanitation Program

PPIAF, World This chapter explores the range of forms and designs of W& Bank, contracts, and how they can be used to guide and direct the S Washington DC private sector. It argues that careful contract design is vital for realizing the potential of the private sector to serve the poor. The following topics are examined: Types of contract, allocation of responsibility for key service characteristics, incentives for service to the poor of different contract types, issues in choosing the type of contract, and specific contract design issues (contracting for expansion, multiple providers, and multiple service levels). World Bank, Washington, DC. The objective of this note was to examine how well the W& schemes in West Africa (Cte dIvoire and Senegal) for S making social and ordinary connections are working. A social connection, aimed at the poor, is free, whereas an ordinary connection, aimed at wealthier households, must be paid for. A well-designed subsidy needs to meet four criteria: (a) it must respond to a genuine need, (b) it should serve the poor, (c) it should have low administrative costs, and (d) it should avoid perverse incentives. Study tasks included (a) examining the institutions, policies, and procedures for providing subsidized connections; (b) evaluating how well the schemes meet their objectives; and (c) identifying negative outcomes. Compared with the non-poor, just how inadequately are the W urban poor served by the public utilities and small-scale private water providers? Based on a survey of 674 households, this paper examines current water use and unit costs in three Kenyan cities and also tests the willingness of the unconnected to pay for piped water, yard connections, or an improved water kiosk (standpipe) service. By examining water-use behavior of poor and non-poor households, this study brings into question a long-standing notion in the literaturethat the poor are underserved, use small quantities of water, and pay a higher unit price for it. It also indicates that the standard prescription to price water and create water markets is in itself insufficient to improve service delivery and that without appropriate institutional arrangements, technical solutions such as water kiosks may not succeed in delivering an affordable service to the poor.

18 Pro-Poor Subsidies for Water Connections in West Africa: A Preliminary Study. Water Supply and Sanitation Working Notes. Note No. 3.

Lauria, Donald T., Omar S. Hopkins, and Sylvie Debomy

Jan-05

Water Supply and Sanitation Working Notes. Note No. 3.

19 Water for the Urban Poor: Water Markets, Household Demand, and Service Preferences in Kenya. Water Supply and Sanitation Sector Board Discussion Paper Series. Paper No. 5.

Gulyani, Sumila, Jan-05 Debabrata Talukdar, and R. Mukami Kariuki.

Water World Bank, Supply and Washington, Sanitation DC. Sector Board Discussion Paper Series. Paper No. 5.

20 Urban vs. Rural Infrastructure Needs. Chapter 4 in "Emerging Infrastructure Policy Issues in Developing Countries: A Survey of the Recent Economic Literature" (2004). World Bank Policy Research Working Paper 3442.

Ch 4

Estache, Antonio Oct-04

World Bank World Bank, Short explanation of why urban and rural infrastructure MS Policy Washington DC needs are different, and of recent developments in the area. Research Working Paper 3442.

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21 Does infrastructure reform work for the poor? A case study from Guatemala. World Bank Policy Research Working Paper 3185.

Foster, Vivien and Maria Caridad Araujo

Jan-04

World Bank World Bank, Policy Washington Research DC. Working Paper 3185.

Guatemala embarked on a major program of infrastructure E& reform and a substantial increase in infrastructure W& investments partially financed by privatization proceeds. As S a result, the pace of new connections to electricity, water, and sanitation services increased by more than 40 percent. Although real electricity tariffs increased, residential consumers have been shielded by a "social tariff" policy that has kept charges at pre-reform levels. This policy does little to benefit poor households, because 60 percent of poor households are not connected to the electricity. The resources used to finance the "social tariff" would therefore be better used in further accelerating the pace of new connections for currently underserved households. Small-scale providers are recognized as important actors in W expanding access to water and sanitation. Based on a review of experiences in Latin America, this paper highlights their large market share and identifies policy constraints, such as tariff restrictions or service standards, as key determinants of their relative success in different countries.

22 Independent Water Entrepreneurs in Latin America The Other Private Sector in Water Services. World Bank, Department of Finance and Infrastructure Latin America Region and Energy and Water Department Private Sector Development and Infrastructure. 23 Urban Transport and Poverty Reduction. Chapter 3 in "Cities on the Move: A World Bank Urban Transport Strategy Review" (Available in French, Portuguese, Russian, Spanish). Ch 3

Solo, Tova Maria May-03

World Bank, Washington, DC.

Aug-02

24 Improving Rural Mobility: Options for Developing Motorized and Nonmotorized Transport in Rural Areas (available in Spanish). TWU-48.

Starkey, Paul, Jun-02 Simon Ellis, John Hine, and Anna Ternell

25 Promoting Access. Chapter 3 in "Accounting for Poverty in Infrastructure Reform: Learning from Latin America's Experience" (2002). WBI Development Studies.

Estache, Antonio, Feb-02 Vivien Foster, and Quentin Wodon.

World Bank, This volume links the urban development and transport UT Washington DC sector strategies with a strong poverty focus. Its objectives are (a) to develop a better understanding of urban transport problems in developing and transitional economies, (b) to articulate an urban transport strategy framework for national and city governments, and (c) to identify the role of the World Bank in supporting governments. It concentrates on the problems of people who are very poor, not only in terms of income but also in terms of the broader dimensions of social exclusion associated with inaccessibility: inaccessibility to jobs, schools, health facilities, and social activities. TWU-48 World Bank, The section on regulation of rural mobility examines Tr Washington DC regulatory considerations to be taken into account in the area of rural transportation. It includes a section on "regulating transport operations" with an example of "regulation of animal-powered and cycle-based transport services in Cuba." WBI World Bank When designing infrastructure reforms aimed at the needs MS Development Institute, of the poor, a government must first assess their degree of Studies. Washington DC access to infrastructure services. This can sometimes be a challenge, because the necessary data sets are not always available. This chapter reviews the information available, proposes new indicators of access, and discusses the policy instruments that reformers could consider to improve access where and when needed in the context of increased private sector participation.

Ch 3

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26 Regulating quality - let competing firms offer a mix of price and quality options. Viewpoint Note No. 21481.

Baker, Bill, and Oct-00 Sophie Tremolet

Viewpoint Note No. 21481

World Bank, Washington DC.

27 Utility reform - regulating quality standards to improve access for the poor. Viewpoint Note No. 21479.

Baker, Bill, and Oct-00 Sophie Trmolet

Viewpoint Note No. 21479

World Bank, Washington DC.

In many developing countries, the regulation of MS infrastructure service standards is rigid, and makes services too expensive for the poor. The current wave of liberalization of infrastructure, is an opportunity to address this problem. Debate on expanding access under such reform, has so far centered on price, not quality. This note proposes a new regulatory framework, where large, and small providers compete to supply a range of services at prices that better reflect consumer willingness to pay. Privatization of infrastructure services is often followed by MS stricter enforcement of quality standards, which raises costs, maintaining, or worsening the exclusion of the poor. The poor would get easier access to service, if the main provider was permitted to deviate from this uniform standard, offering poor consumers a service in which an acceptable relaxation in quality, led to a lower price. This note reviews the legal, and technical challenges for quality diversification by utilities, and early results from efforts by some to diversify. N

28 Regulating Infrastructure for the Poor: Perspectives on Regulatory System Design

Smith, Warrick

Jun-00

29 Key drivers of improved access - off-grid service. Chapter 6 in "Energy Services for the World's Poor" (2000). Energy Development Report 2000.

Villagran, Eduardo

Apr-00

Governments around the world are transforming their MS infrastructure sectors to better meet the needs of their people, and regulatory reform is an essential part of this process. The design of regulatory systems in developing countries draws heavily on developed country models and experience. The author concludes that regulators need to become effective advocates of the needs of the poor, and by doing so effective regulatory processes can become a critical element of sustaining and developing the regulatory system. Energy ESMAP, World In recent years, there has been much experimentation with E Development Bank, methods of delivering off-grid service, particularly in the Report 2000 Washington DC electricity sector. These experiments cast light on the key . factors that could drive service improvements in rural areas . in the future: technological advances that reduce costs and increase ease of use and maintenance of small-scale electricity systems by households and communities; organizational innovations that help communities choose, implement, and maintain improved systems; and innovations in financing with or without the aid of subsidies that help poor households over the hurdle of high capital costs for new services. This chapter describes some of these innovations, and the role they could play in extending access to electricity beyond the reach of grids. Energy ESMAP, World This chapter analyzes the fundamental costs of generating E Development Bank, electricity and distributing it though a grid to rural and poor Report 2000 Washington DC populations. It describes how electricity reform and technological developments have reduced these costs in recent years and discusses institutional arrangements to ensure that lower costs are passed to customers. It also examines whether reform will increase access to electricity for poor households and comments on policies to further the interests of the poor in the context of electricity reform.

World Bank, Washington, DC.

30 Key drivers of improved access - service through networks. Chapter 5 in "Energy Services for the World's Poor" (2000). Energy Development Report 2000 .

Powell, Stephen and Mary Starks

Apr-00

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31 Independent Water and Sanitation Providers in African Cities. WB Report.

Collignon, Bernard and Marc Vzina

Apr-00

WB Report

World Bank, Water and Sanitation Program, GTZ, BADC.

Over 75 percent of the urban poor get water directly from a W& range of private but small and independent providers S (vendors, water truckers and network providers). This tencountry study from Africa looks at how the small-scale provider sector responds to market niches and meets the needs of both the poor and other unserviced communities. It addresses how services are provided and funded, the nature of relationships between small-scale providers, local authorities, and larger-scale water providers, and policy issues for improving service delivery.

32 A case study on subsidizing rural electrification in Chile. Energy and Development Report 2000.

Jadresic, Alejandro

Apr-00

33 Economic Analysis of a Rural Basic Access Road Project: The Case of Andhra Pradesh, India. RT-5.

Liu, Zhi

Jan-00

Energy and ESMAP, World Examines a rural subsidization electrification program that E Development Bank, was implemented in Chile that showed that it is possible to Report 2000 Washington DC create market incentives that lead to efficient private solutions to rural electrification. This specific program increased coverage of electricity systems in rural areas from 53% in 1992 to 76% at the end of 1999. RT-5 World Bank, Rural basic access road projects are expected to yield Tr Washington DC substantial social benefits, which cannot be properly evaluated using conventional cost-benefit analysis methodology. This note describes the application of cost effectiveness analysis to supplement cost-benefit analysis in the evaluation and selection of road works for financing under a Bank rural road project in the State of Andhra Pradesh, India.

10. EX-POST MANAGEMENT/ENFORCEM ENT OF CONTRACTS 1 Political accountability and regulatory performance in infrastructure industries : an empirical analysis. World Bank Policy Research Working Paper No. 4101. Gasmi, Farid, Paul Noumba, and Laura Recuero Virto Dec-06 World Bank Policy Research Working Paper 4101 World Bank, Washington DC. The aim of this paper is to empirically explore the ICT relationship between the quality of political institutions and the performance of regulation, an issue that has recently occupied much of the policy debate on the effectiveness of infrastructure industry reforms. Taking the view that political accountability is a key factor that links political structures and regulatory processes, the authors investigate, for the case of telecommunications, its impact on the performance of regulation in two time-series-cross-sectional data sets on 29 developing countries and 23 industrial countries covering the period 1985-99. The analysis of the data sets shows that the (positive) effect of political accountability on the performance of regulation is stronger in developing countries. An important policy implication of this finding is that future reforms in these countries should give due attention to the development of politically accountable systems. This paper provides an examination of the Ugandan National Water & Sewerage company, giving fresh perspectives on steps for healing organizations that have become fragmented, un-focused, and unproductive. W P

2 Healing an Organization: High Performance Lessons from Africa. PURC Draft.

Berg, S. and W.T. Muhairwe

Dec-06

Draft

PURC, University of Florida, Gainesville, FL

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3 Telecommunications performance, reforms, and governance. World Bank Policy Research Working Paper 3822.

Estache, Antonio, Jan-06 Ana Goicoechea and Marco Manacorda

World Bank Policy Research Working Paper 3822

World Bank, Washington DC.

The authors assess the effects of private capital and T independent regulatory agencies on telecommunications performance by using cross-country panel data from 1990 to 2003. In general, they find that having independent regulatory agencies positively affects affordability and labor productivity, but negatively affects quality. Having private capital positively affects access, quality, and labor productivity, but negatively affects affordability. However, reform policies affect industrial and developing countries differently in some cases. The authors also find that governance plays an important role as it affects performance and interacts with reform policies .

4 From Crisis to Stability in the Armenian Power Sector. World Bank Working Paper 74.

Sargsyan, Gevorg, Ani Balabanyan and Denzel Hankinson

Jan-06

World Bank Working Paper 74

World Bank, Washington DC.

The last fifteen years have seen Armenia emerge from E&G P Soviet rule and a severe economic and energy crisis, both complicated by its newfound political surroundings. The last ten years have seen significant reform and progress in the power sector which, when compared to the progress made by its neighbors, is all the more remarkable. The benefits of reform have not been easily won, however, and Armenia's success is a tribute to its ability to learn from mistakes and persevere. A combination of improper planning and bad fortune forced the Government of Armenia to go through three separate tenders for its privatization assets. A combination of good planning and good fortune ultimately allowed for what has turned out to be one of the region's most successful infrastructure privatizations so far. The authors review a number of studies on the E&I effectiveness of utility regulatory agency and governance CT arrangements for the electricity industry, particularly for developing countries. They discuss governance criteria and their measurement, both legal frameworks and surveys of regulatory practice. They also discuss the results from econometric studies of effectiveness for regulatory agencies in the electricity and telecommunications industries and compare these with the results from econometric studies of independent central banks and their governance. The authors conclude with a discussion of policy implications and of priorities for information collection to improve understanding of these issues. N&P

5 Regulatory effectiveness : the impact of regulation and regulatory governance arrangements on electricity industry outcomes. World Bank Policy Research Working Paper 3536.

Stern, Jon and John Cubbin

Mar-05

World Bank Policy Research Working Paper 3536

World Bank, Washington DC.

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6 The Delhi Electricity Discom Privatizations: Some Observations and Recommendations for Future Privatizations in India and Elsewhere. Energy and Mining Sector Board Discussion Paper No. 8.

Agarwal, Manish, 2003 Ian Alexander, and Bernard Tenenbaum.

Energy and World Bank, Mining Washington Sector Board DC. Discussion Paper No. 8

This is an ex-post assessment of the privatization of 3 state- E owned distribution companies in Delhi. In addition to the components of the privatization process, such as bidding and asset valuation the paper provides an in-depth analysis of the regulatory governance and substance features of the multiyear tariff system that were applied following privatization. It analyzes and makes recommendations on the roles of the government and the regulator, the governments policy directive to the regulator, and the specifics of the regulatory framework that were applied after the transaction. The principal conclusion of this paper is that privatization of the Delhi distribution is a major improvement over the one in Orissa, which was the very first privatization of distribution in India. The authors stress that a series of technical and regulatory improvements is not likely to produce sustainable privatizations, unless there is serious political support and unless the distribution companies can become economically viable after an initial transition period. (Summary adapted from Brown et al. 2006 ).

7 Sector Organization, Governance, and the Inefficiency of African Water Utilities. World Bank Policy Research Working Paper No. 2890.

Estache, Antonio, Sep-02 and Eugene Kouassi

World Bank Policy Research Working Paper No. 2890.

World Bank, Using a benchmarking approach, the authors analyze the W Washington DC determinants of the efficiency levels of African water utilities. (Summary taken from the Regulation Body of Knowledge Website, 2004).

a. Monitoring contract performance 1 Governance of competitive transmission investment in weak institutional systems. Energy Economics 30 (2008) 1306-1320. Abdala. Manuel A. Jul-08 Energy Economics 30 (2008) 1306-1320 Elsevier Despite progress in economic analysis in recent years, E transmission investment governance still poses policy design challenges in competitive electricity systems. The degree of regulatory intervention in allocating investment costs is a central issue. Scholars tend to agree that centralized solutions are almost inevitable, mainly due to free riding and coordination problems. In systems with weak institutional endowments and pressures of distributive politics, however, there is an increased likelihood of regulators acting opportunistically or imposing arbitrary changes to the cost allocation rules, which makes centralized solutions less desirable. The authors provide some examples from Argentina, El Salvador and Peru and suggest that a two-tier governance scheme composed of a self-governing Forum of transmission stakeholders, with regulation as a subsidiary measure, may be a more adequate design to restraint undue government interference. The expected outcome is twofold: a better match with users' preferences and a restraint to government opportunism and arbitrariness.

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2 Regulatory governance and sector performance : methodology and evaluation for Electricity distribution in Latin America. Policy Research Working Paper 4494.

Andres, Luis, Jan-08 Jose Luis Guasch, and Sebastian Lopez Azumendi

Policy Research Working Paper 4494

World Bank, This paper contributes to the literature that explores the link E Washington DC between regulatory governance and sector performance. The paper develops an index of regulatory governance and estimates its impact on sector performance, showing that indeed regulation and its governance matter. The authors use two unique databases: (i) the WB Performance Database and (ii) the Electricity Regulatory Governance Database. The authors run different models to explain the impacts of change in ownership and different characteristics of the regulatory agency on the performance of the utilities. The results suggest that the mere existence of a regulatory agency, regardless of the utilities' ownership, has a significant impact on performance. The authors propose an experience measure in order to identify the gradual impact of the regulatory agency on utility performance. The results confirm this hypothesis. In addition, the paper explores two different measures of governance. The findings show that the governance of regulatory agencies matters and has significant effects on performance.

3 Evaluating Regulatory Decisions and Sector Outcomes in Infrastructure Industries. Working Paper No. 3.

Stern, Jon

2007

Working PPIAF, World The Handbook discusses the issues arising from ex post MS Paper No. 3 Bank, evaluations of infrastructure regulatory agencies, including Washington DC the following: the type of evaluation, who should carry it out and how, the purpose and uses of regulatory evaluations, evaluation tools (including model terms of reference and questionnaires), an annotated bibliography and a summary of previous evaluation work in this area. The authors also summarize key aspects of the Handbook for its use in developing countries, particularly the member states of the African Forum for Utility Regulation. The Handbook covers three main topics: (1) A full statement of the three MetaPrinciples and 10 Principles for best practice regulatory governance, and a set of around 100 Detailed Standards derived from the principles (2) An evaluation of regulatory agencies impact on the performance of the regulated industries and how this relates to regulatory decisions (3) An analysis of intermediate and transitional regulators" (how best to make progress with infrastructure regulation in difficult institutional environments) World Bank World Bank, Policy Washington DC Research Working Paper 4081. This paper shows empirically that "privatization" in the MS energy, telecommunications, and water sectors, and the introduction of independent regulators in those sectors, have not always had the expected effects on access, affordability, or quality of services. It also shows that corruption leads to adjustments in the quantity, quality, and price of services consistent with the profit-maximizing behavior that one would expect from monopolies in the sector. The results suggest that privatization and the introduction of independent regulators have, at best, only partial effects on the consequences of corruption for access, affordability, and quality of utility services.

4 Utilities reforms and corruption in developing countries. World Bank Policy Research Working Paper 4081.

Estache, Antonio Dec-06 and Ana Goicoecha

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5 Keeping the Lights On.

Millan, J. (Editor) Jan-04

IADB

Power sector reforms across Latin America in the 1990s E based on privatization, liberalization and market forces were largely unavoidable. This book argues that while there is no turning back from this process, many reforms may not prove sustainable without further efforts to build a stronger institutional platform to support them. The analytical framework presented in Keeping the Lights On: Power Sector Reform in Latin America establishes a baseline for the sustainability of reforms and identifies additional areas for exploration, analysis and inquiry. This analysis is critical to setting the stage for the next generation of reforms -- or mid-course corrections -- that will be necessary to enhance the sustainability of changes in progress. The book includes case studies of power sector reforms in Colombia, Honduras and Guatemala, as well as a timely section on the security of supply. N&P

6 Managing the Regulatory Process: Design, Concepts, Issues, and the Latin America and Caribbean Story. World Bank Latin American and Caribbean Studies: Viewpoints.

Guasch, J. Luis, Jul-99 and Pablo Spiller

World Bank Latin American and Caribbean Studies: Viewpoints.

World Bank, The study analyzes the impact of economic regulation on MS Washington DC productivity, and, efficiency among the Latin American and Caribbean developing countries, assessing their gains from regulatory reforms. Basic choices for regulation engineering are examined, both successful contract practices, such as in Jamaica, or specific legislation in Chile, to disastrous regulation decrees in Argentina, and shows contract practices, to be the salient choice for most Latin American countries.

b. Mechanisms for Enforcement c. Interface Between Regulator/Judicial System 1 Policy, Legal, and Regulatory Framework. Chapter 2.2 in "Trade in Information and Communication Services: Opportunities for East and Southern Africa" (2008). Report. 2008 Report Telecommunica tions Management Group Inc. (Commissioned by GICT, World Bank) A countrys legal and regulatory framework impacts its ICT- ICT competitiveness. A comprehensive and transparent legal regime offers confidence to operators and users of ICT services. Streamlined and forward thinking regulations with unrestricted market entry and reasonable licensing fees encourage investment in the sector. This chapter describes the policy, legal, and regulatory framework of 3 African countries: Kenya, Tanzania, and Uganda. These three Case Study Countries have adopted national policies to further liberalize their telecommunications markets and enhance their telecommunications frameworks. Ch 2.2 P

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2 Regulatory Frameworks for Water Resources Management: A Comparative Study. World Bank Law, Justice and Development Series paper 36216.

Salman, Salman Jun-06 M. A. and Daniel D. Bradlow

World Bank World Bank, Law, Justice Washington DC and Development Series paper 36216

3 Legal and Institutional Framework. Module 6 in Telecommunications Regulation Toolkit (2005).

2005

infodev

Chapter 1 traces the relevance and importance assigned to W water legislation by the different international conferences and forums, and the guidance provided by those conferences for preparing such legislation. Chapter 2 surveys the regulatory frameworks for water resources management in sixteen jurisdictions that were selected based on the availability and accessibility of a water law, as well as on the need to represent different regions and legal systems of the world. Chapter 3 presents a comparative analysis of these regulatory frameworks. Chapter 4 highlights essential elements that need to be addressed in any regulatory framework for water resources management and identifies emerging trends in water legislation. Finally, Chapter 5 underscores the relevance and importance of the regulatory framework and specifies conditions supporting its utility and efficacy. This module's section on Legal and institutional frameworks T covers the following topics: laws and regulations, international treaties and agreements, WTO, national legislation and regulations, institutional arrangements for telecommunications regulation; Regulatory processes, relationships with judiciary and competition authorities, governance, realistic design options, human resources and capacity building.

Module 6

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d. Renegotiations 1 Multidimensionality and renegotiation : evidence from transport-sector public-private-partnership transactions in Latin America. Policy Research Working Paper No. 4665. Estache, Antonio, Jul-08 Jose Luis Guasch, Atsushi Iimi, and Lourdes Trujillo Policy Research Working Paper No. 4665 World Bank, Multidimensional auctions are a natural and practical Tr Washington DC solution when auctioneers pursue more than one objective in their public-private-partnership transactions. However, it is difficult to achieve auction efficiency with multiple award criteria. Using auction data from road and railway concessions in Latin America, this paper estimates the probability of renegotiation by a two-stage least squares technique with a binary selection in the first-stage regression. The findings show that auctioneers tend to adopt the multidimensional format when the need for social considerations, such as alleviation of unemployment, is high. This implies that such political considerations could hinder efficiency and transparency in auctions. The analysis also shows that the renegotiation risk in infrastructure concessions increases when multidimensional auctions are used. Rather, good governance, particularly anti-corruption policies, can mitigate the renegotiation problem. PPIAF, World This section discusses two of the central instruments in the W Bank, renegotiation of water and sewerage concessions in Buenos Washington DC Aires, Argentina: a fideicommissum for activities and a social tariff program. P

2 Instrumentos financieros y de tarifas usados en la renegociacion de la concesion de aguas Argentinas. Chapter 2 in "Esquemas de Financiamiento del Sector Agua" (2005).

Ch 2

Seillant, Horacio

Nov-05

3 Infrastructure concessions in Latin America : government-led renegotiations. World Bank Policy Research Working Paper 3749.

Guasch, J. Luis, Oct-05 Jean-Jacques Laffont and Stephane Straub

World Bank Policy Research Working Paper 3749

4 Granting and Renegotiating Infrastructure Concessions: Doing it right. WBI Development Studies.

Guasch, J.L.

Jan-04

World Bank, The authors complement the existing knowledge in the MS Washington DC renegotiation literature on infrastructure concessions by analyzing government-led renegotiations. While some of the main insights from the previous literature are unchanged, for example concerning the importance of having a regulator in place when awarding concessions and the fragility of price cap regulatory schemes, there are also significant differences as predicted by the model, in particular with respect to the effect of investment and financing, as well as the corruption variables. WBI World Bank, This paper provides an overview of concessions, including MS Development Washington DC how they work, benefits, drawbacks, and experiences. Studies (Summary taken from the Regulation Body of Knowledge Website, 2004).

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5 Price Caps, Efficiency Payoffs, and Infrastructure Contract Renegotiation in Latin America. World Bank Policy Research Working Paper 3129.

Estache, Antonio, Aug-03 Jose-Luis Guasch and Lourdes Trujillo

World Bank Policy Research Working Paper 3129

World Bank, Twenty years ago, Professor Littlechild developed and MS Washington DC operationalized the concept of price caps as a regulatory regime to control for residual monopoly conditions in those services. Ten years later, Latin American countries also adopted the price cap regulatory model. Relying on a large data base on the factors driving contract renegotiation in the region and a survey of the literature on efficiency gains, the authors assess the impact of this regulatory regime in Latin America. They show that while the expected efficiency gains were amply achieved, these gains were seldom passed on to the users. Instead they were shared by the government and the firms. Moreover, the adoption of price caps implied higher costs of capital and hence, tariffs, and brought down levels of investment.

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11. OTHER TOPICS a. Regulation in Countries Under Stress 1 Transforming telecoms in Afghanistan: Expanding affordable access by introducing competition. Gridlines No. 1.

Bhatia, Bhavna and Neeraj Gupta . .

Apr-06

Gridlines No. PPIAF, World 1 Bank, Washington, DC

2 The Private Sector's Role in the Provision of Infrastructure in Post-Conflict Countries. Trends and Policy Options No. 1.

Schwartz, Jordan, Shelly Hahn, Ian Bannon

Aug-04

Trends and Policy Options No. 1

PPIAF, World Bank, Washington, DC

Afghanistan has transformed its telecommunications from a T fragmented system serving few people to a modern one putting Afghans in touch with one another and with the global economy. The government moved quickly to approve a Telecommunications and Internet Policy in 2003, and identified telecommunications as one of the two lead sectors for attracting private and foreign investment. The experience in Afghanistan shows that wireless communications can play a critical role as the primary telecommunications infrastructure in a post-conflict country. The key factors in Afghanistan's success in developing its telecommunications sector have been strong government commitment, a procompetitive reform agenda, early focus on regulatory reforms and capacity building, and a transparent bidding process. This paper examines private investment patterns in postMS conflict countries based on the Banks Private Participation in Infrastructure database, and looks at some success stories that may offer useful policy lessons for other postconflict countries. It briefly describes regulation as it relates to country risk.

b. Regulating across sector activities 1 Expanding broadband access in rural India: the role of alternative telecommunications networks. Newsletter No. 36231. 2 Multi-Utilities: Policy - Promotion, Tolerance, or Control? World Bank Group Viewpoint 228.

Hay, Keith A.J.

Jun-05

Newsletter No. 36231.

Sommer, Dirk

Mar-01

World Bank Group Viewpoint 228.

GICT, World This note examines the potential for alternative ICT Bank, telecommunications networks (ATNs) to help provide a Washington DC range of opportunities for social and economic growth to rural areas of India. World Bank, Some utilities have responded to recent changes in MS Washington DC technology and market liberalization by turning themselves into "multi-utilities" that bundle traditionally distinct services. A companion Note reviews recent trends in horizontal integration of utilities. This Note looks at the policy and regulatory implications of those trends for developing countries. The question facing policymakers is whether the emergence of multi-utilities should be encouraged as a means of improving access and quality of utility services -or subjected to closer control to guard against potential dangers arising from less competition, greater regulatory complexity, and more concentrated political power in the utilities. Oxera The proposed creation of the European Electronic T Communications Market Authority, as part of the latest review of the EU telecoms regulatory regime, is currently high on the European regulatory agenda. The net benefits from its introduction have been estimated at between 250m and 800m. This article examines the following questions: Are these benefits overstated? Have the risks and costs of centralisation been fully taken into account?

c. Regional Regulation 1 Watch out for the super-regulators! Centralising oversight of EU telecoms. Oxera, Agenda. Neil Marshall (Contact) Apr-08 Agenda

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2 Regulation and Accountability. Topic in CrossBorder Infrastructure Toolkit (2007).

2007

Toolkit

3 World Bank Framework for Development of a Power Market in South East Europe. Energy and Mining Sector Board Discussion Paper No. 15.

Kennedy, David

Mar-06

4 Telecommunications reform in the OECS: impacts on prices and services. Newsletter No. 36232.

Global ICT Department

Jun-05

5 Accelerating Regional Integration and Connectivity. Chapter 6 in "Connecting Sub-Saharan Africa: A World Bank Group Strategy for Information and Communication Technology Sector Development" (2005). World Bank Working Paper No. 51.

Guislain, Pierre, Jun-05 Mavis A. Ampah, Laurent Besancon, Cecile Niang, and Alexandre Serot Commissioned by Dec-04 the Global ICT Department

PPIAF, World This toolkit has 7 presentations in the regulation and Bank, accountability grid. These are: Do we need regulation?, Washington DC tariff (price) and rate regulation, universal service, competition basics, policy harmonization for cross-border infrastructure, barriers to cross-border infrastructure development, and governance and accountability. Energy and World Bank, This paper updates the Banks Framework for Development Mining Washington DC of Regional Energy Trade in South East Europe published Sector Board in March 2004. It focuses on the power sector where Discussion significant reform has been undertaken in the context of the Paper No. Athens process, and where previous Bank advice has been 15 incorporated in the evolving legal and institutional framework. Newsletter GICT, World In 1998, five members of the Organisation of Eastern No. 36232. Bank, Caribbean States (OECS) Dominica, St. Kitts & Nevis, Washington DC Grenada, St. Lucia, and St. Vincent established a common regulatory framework for the telecommunications sector. They created the Eastern Caribbean Telecommunications Authority (ECTEL), the first regional telecommunications regulatory authority in the world, to facilitate the harmonization of the regulatory regime. The authority was established under treaty with the support of the OECS Telecommunications Reform Project, financed by the World Bank. This note examines how this reform agenda has affected telecommunications services and prices in the region. World Bank World Bank, In this chapter, the following topics are examined: Promoting Working Washington DC regional harmonization, Increasing regional connectivity, Paper No. Developing Regional Fiber Optic Projects, Supporting 51 Roaming Initiatives, and Building a Network of National Exchange Points.

Ch 6

ICT

6 Identifying key regulatory and policy issues to ensure open access to regional backbone infrastructure initiatives in Africa. ICI Policy and Regulatory Study - Africa.

ICI Policy and Regulatory Study Africa

This report deals with key policy and regulatory ICT impediments, restrictions and bottlenecks that need to be addressed in order to ensure open, fair and pro-competitive access to the proposed infrastructure in East African countries. The report is complemented by a set of country case studies, including examinations of Ghana, Kenya, Nigeria, Senegal, South Africa, Tanzania and Uganda.

N&P

d. Regulation in small states 1 Big Challenges, Small States: Regulatory Options to Overcome Infrastructure Constraints (2007). Gridlines No. 24. Ehrhardt, David May-07 and Chlo Oliver Gridlines No. PPIAF, World Small island economies face special challenges in providing MS 24 Bank, affordable infrastructure services. Effective regulation can Washington DC help, by encouraging providers to seek innovative solutions better suited for small and remote islands. But conventional regulation may be out of reach for small islands, requiring more money, competence, and independence than they have. Low-discretion rules and light or regional regulatory bodies may be good alternatives. N

Legend:

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W: Water S: Sanitation E: Electricity G: Gas T: Telecom ICT: Information Communications Technology Tr: Transportation (various modes) AL: Airlines AP: Airports P: Sea and Fluvial Ports Rd: Roads and Highways Rw: Railways UT: Urban Transport (Bus, Metro, MRT, taxis, etc)

E&G

Energy