Indirect Regulatory Capture, Regulator and the Utility in Electricity Sector

This paper discussed the two cases of the regulatory decisions of the electricity sector regulator of Sri Lanka on renewable energy tariff calculation and approval of long term generation Expansion plan. The objectives of the analysis of the case studies are to examine how does utility can react on the regulatory decisions in the monopolistic market and whether it leads to a situation of Indirect Regulatory Capture. The regulatory process is examined from the perspective of various interest groups over the time, using Public Interest theory and Interest Group theory. The two cases are shown to have been strongly influenced by the interests of the different stakeholders of the electricity sector themselves, indicating a degree of 'regulatory capture'. The relationship of the utility and the regulator has been increasingly challenged by external pressures, interests of the stakeholders, and by, the level of resistance of the monopolistic utility. The paper concludes that in the monopolistic electricity market regulators decision can be reversed if the Utility is strong enough to resist the regulators decision if not favorable for the public or the utilities’ interest.