What Makes an Independent Regulator Independent?

Abstract

As private capital is increasingly invested in utilities across the globe, the issue of regulation and its inferace with different types of government, culture and society has become every more complex. This article focuses on the design of regulatory systems outside the US and the UK. With references to current practice in many countries, the author argues that formal regulatory independence and accountability is not always a necessary condition for effective regulation (though where feasible and effective it carries potential economic benefits). On the other hand, he also argues that an informal or advisory regulatory system may work better in some situations. In all circumstances, informal accountability and a clear understanding of the “rules of the game” are crucial for effective regulation.

Network regulation and regulatory institutional reform: Revisiting the case of Australia

“…Independent agencies also have a long-term focus (Landis, 1938). Stern (1997) and Stern and Holder (1999) define regulatory independence in terms of the distance between the government and the regulatory bodies measured against factors such as the appointment and dismissal of the regulatory bodies; financing of the regulatory bodies and the relationship between the regulatory body and the government (such as separate office independent of any ministries, a body independent of government, etc.). The appointment and dismissal procedures (or the security of the tenure members); source of finance and the relationship of the regulatory body with the government are crucial in governing the regulatory framework aspects such as the level of discretion and the burden of proof of the regulator (see also Mountain and Littlechild, 2010).…”

Between commitment and control: varieties of delegation in the European postal sector

“…Given the intermediary position of the agency between the political principal and the regulated business in its day-to-day practice (Braun 1993;Coen 2005), the risk for the regulator of being captured by private interests (Stigler 1971: 3) deserves consideration. Various studies on agency independence have illustrated that the relationship between formal and informal aspects is complex and far from being coherent (Maggetti 2007;Stern 1997;Thatcher and Héritier 2002). Table 1 summarizes the relevant elements for regulatory competencies and independence, differentiating between the initial institutional design and the post-delegation phase.…”

Effective Regulatory Institutions for Air Transport

“…The central problem is to create discretionary commitment -a point summarized by Gomez-Ibanez (2003, p.3): "The expensive, durable and immobile investments help make all parties -the company, its customers, and the government -vulnerable to opportunism and desirous of stability and commitment". In particular Levy and Spiller (1994), Stern (1997) and Stern and Holder (1999) argue stability and commitment can be best achieved by an independent regulator , an institution with limited discretionary power which provides long term creditability and trust, expertise and flexibility without arbitrariness. Such an independent regulator should be part of a well designed and functioning legal system and it should prevent regulatory capture by either the regulated firm (Stigler, 1971) and/or consumer groups (Posner, 1971).…”