Regulatory Instruments and their Effects on Investment Behavior

Burns, Phil; Riechmann, Christoph

doi:10.1596/1813-9450-3292

Cited by 11 publications

(5 citation statements)

References 3 publications

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“…However, within developing countries, social regulatory policies that are geared to support election campaigns are often unpalatable to private investors. To protect investors, regulations can be implemented to protect the rate of return on investments (World Bank, 1994; Burns and Riechmann, 2004). Yet, despite the palpable benefits of PPPs, efforts to deregulate are often met with skepticism, derision and strong resistance (Balouga, 2012).…”

Section: Private Sector Investments and The Socio-political And Economic Environmentsmentioning

confidence: 99%

The impact of socio-political and economic environments on private sector participation in energy infrastructure delivery in Ghana

Owusu‐Manu

Edwards

Kutin-Mensah

et al. 2017

JEDT

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Purpose: Investment in power and electricity generation to replace aging infrastructure with new represents a major challenge for developing countries. This paper therefore seeks to examine infrastructure projects' characteristics and how socio-political and economic investment environments interplay to influence the degree of private sector participation (PPP) in infrastructure delivery in Ghana.

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Section: Private Sector Investments and The Socio-political And Economic Environmentsmentioning

confidence: 99%

The impact of socio-political and economic environments on private sector participation in energy infrastructure delivery in Ghana

Owusu‐Manu

Edwards

Kutin-Mensah

et al. 2017

JEDT

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“…Jensen and Wu (2017a) explore a hybrid regulatory approach in Manila based on commission regulation and regulation by contract. Finally, Burns and Riechmann (2004) discuss how factors of different regulatory schemes can induce over or under-investment and the inherent challenges of regulation under information asymmetries with utilities; they suggest a move towards outputbased regulation that focuses on enterprise relationships to drive efficient investments.…”

Section: The Legal Basis Theory and Mechanics Of Economic Regulation ...mentioning

confidence: 99%

Assessing the Governance of Water Utility Financial and Infrastructure Management

2023

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The following is a set of policy recommendations for stakeholders related to the key findings detailed above. Additional detail and supporting conclusions are available in Chapter 8. Wisconsin PSCIncorporate utility capital investment metrics into ratemaking decisions on rates of return using a performance-based approach. The PSC could reference a utility's recent and historical record of capital investment, asset depreciation levels, and near-term capital spending needs when deciding on the rate of return in conventional rate cases. These metrics could be compared to capital investment benchmarks such as metrics from utilities with similar characteristics in a performance-based manner.Reform the approach to contributed assets in PSC ratemaking policies to increase capital recovery cashflow for certain types of utilities. The PSC should reconsider its current ratemaking approach to contributed assets that disallows contributed asset depreciation and returns on rate base from the revenue requirement for all utilities and especially those with high levels of contributions. A revised approach could consider the extent of contributed assets in a utility's asset base or utility size as both are key determinants of the observed negative impact.Develop policies to address negative impacts of exogenous shocks. Policy approaches such as temporary revenue adjustment mechanisms, state insurance programs, utility reserve ix requirements, utility insurance policy requirements, or other financial instruments would help temporarily smooth income during abnormal operating conditions.Bifurcate the approach to construction authorizations. A streamlined review process for the vast majority of routine capital projects would alleviate one of the biggest complaints utility managers and other stakeholders have about the PSC. It would also create more bandwidth for the PSC to focus on reviewing large, complex, or contested projects where construction authorizations add significant regulatory value.Enhance the performance benchmarking system. The PSC could enhance its current benchmarking system by applying statistical analysis to clusters of utilities determined by economy of scale and density characteristics. This would allow utility managers to better assess performance against benchmarks of peers that resemble their own characteristics.Shift the payment-in-lieu-of-taxes (PILOT) to a sales tax. A portion of the PILOT property tax incidence is falling on the utility itself rather than the customers as intended. Shifting to a sales tax could alleviate the issue and could be designed in a way that doesn't compromise the fiscal contribution from PILOT to local governments. Regulatory Policy Organizations (AWWA, NARUC)Reform contributed asset and rate of return policy guidance for publicly-owned utilities. Ratemaking policy guidance documents like the AWWA M1 Manual generally disallow revenue generation from contributed assets based on theoretical reasoning for investorowned utilities that is poorly adapted to publicly-owned utilities. The...

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“…The issue of cost efficiency at the expense of investments or service quality has been discussed in the literature (see e.g., Giannakis et al, 2005;Rovizzi and Thompson, 1995;Markou and Waddams Price, 1999). In addition, when rewards and penalties are weak or uncertain, the incentives for cost reductions outweigh the inducement to maintain quality of service and investment (Burn, and Riechmann, 2004). Furthermore, implementing incentive regulation is complicated and an evaluation of the associated efficiency is more difficult than it is often implied (Joskow, 2008).…”

Section: Investment and Regulationmentioning

confidence: 99%

A New Perspective: Investment and Efficiency under Incentive Regulation

Poudineh¹,

Jamasb²

2016

The Energy Journal

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The full-text may be used and/or reproduced, and given to third parties in any format or medium, without prior permission or charge, for personal research or study, educational, or not-for-prot purposes provided that:• a full bibliographic reference is made to the original source • a link is made to the metadata record in DRO • the full-text is not changed in any way The full-text must not be sold in any format or medium without the formal permission of the copyright holders.Please consult the full DRO policy for further details. AbstractFollowing the liberalisation of the electricity industry since the early 1990s, many sector regulators have recognised the potential for cost efficiency improvement in the networks through incentive regulation aided by benchmarking and productivity analysis. This approach has often resulted in cost efficiency and quality of service improvement. However, there remains a growing concern as to whether the utilities invest sufficiently and efficiently in maintaining and modernising the networks to ensure long term reliability and to meet their future challenges. This paper studies the relationship between investments and cost efficiency in the context of incentive regulation with ex-post regulatory treatment of investments using a panel dataset of 129 Norwegian distribution companies from 2004 to 2010. We introduce the concept of "no impact efficiency" as a revenue-neutral efficiency effect of investment under incentive regulation that makes a firm "investment efficient" in cost benchmarking. Also, we estimate the observed efficiency effect of investments and compare these with the no impact efficiency. Finally, we discuss some implications of incentive regulation and cost benchmarking for investment behaviour of network companies.

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Regulatory Instruments and their Effects on Investment Behavior

Abstract: The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished.

Cited by 11 publications

References 3 publications

The impact of socio-political and economic environments on private sector participation in energy infrastructure delivery in Ghana

The impact of socio-political and economic environments on private sector participation in energy infrastructure delivery in Ghana

Assessing the Governance of Water Utility Financial and Infrastructure Management

A New Perspective: Investment and Efficiency under Incentive Regulation

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