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The Regulation of Investment in Utilities: Concepts and Applications

Author

Listed:
  • Ian Alexander
  • Clive Harris

Abstract

This paper reviews the common approaches adopted by regulators to the inclusion and valuation of investment in the regulatory asset base and the allocation of costs of investment between different users as well as between connection and usage charges. The former set of issues are key to the creation of incentives for companies to undertake efficient least-cost investment while the latter address the key concern of how revenues are recovered (and the associated risks for the operator). By understanding these issues and how they relate to the investments that are needed in a sector, regulators have an opportunity to design regimes better able to promote necessary investment. Drawing on a worldwide series of case studies from across the regulated sectors the paper illustrates the various approaches to regulating investment and some of the practical implementation problems that are faced. This allows some tentative suggestions for the design of practical investment regimes to be developed.

Suggested Citation

  • Ian Alexander & Clive Harris, 2005. "The Regulation of Investment in Utilities: Concepts and Applications," World Bank Publications - Books, The World Bank Group, number 7293.
    • Handle: RePEc:wbk:wbpubs:7293
    as

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    File URL: https://openknowledge.worldbank.org/bitstream/handle/10986/7293/343650PAPER0Re101OFFICIAL0USE0ONLY1.pdf?sequence=1
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    References listed on IDEAS

    as
    1. Tonci Bakovic & Bernard Tenenbaum & Fiona Woolf, 2003. "Regulation by Contract : A New Way to Privatize Electricity Distribution?," World Bank Publications - Books, The World Bank Group, number 15078.
    2. Sidak,J. Gregory & Spulber,Daniel F., 1998. "Deregulatory Takings and the Regulatory Contract," Cambridge Books, Cambridge University Press, number 9780521658713, September.
    3. Burns, Phil & Riechmann, Christoph, 2004. "Regulatory instruments and their effects on investment behavior," Policy Research Working Paper Series 3292, The World Bank.
    4. Preetum Domah & Pollitt, M.G. & Jon Stern, 2002. "Modelling the Costs of Electricity Regulation: Evidence of Human Resource Constraints in Developing Countries," Cambridge Working Papers in Economics 0229, Faculty of Economics, University of Cambridge.
    5. Levy,Brian & Spiller,Pablo T. (ed.), 1997. "Regulations, Institutions, and Commitment," Cambridge Books, Cambridge University Press, number 9780521550130, January.
    6. Levy,Brian & Spiller,Pablo T. (ed.), 1997. "Regulations, Institutions, and Commitment," Cambridge Books, Cambridge University Press, number 9780521559966, January.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Daniel Scholten & Rolf Künneke, 2016. "Towards the Comprehensive Design of Energy Infrastructures," Sustainability, MDPI, vol. 8(12), pages 1-24, December.
    2. Cossent, Rafael & Gómez, Tomás, 2013. "Implementing incentive compatible menus of contracts to regulate electricity distribution investments," Utilities Policy, Elsevier, vol. 27(C), pages 28-38.
    3. Alexander, Ian, 2006. "Capital efficiency, its measurements and its role in regulatory reviews of utility industries: Lessons from developed and developing countries," Utilities Policy, Elsevier, vol. 14(4), pages 245-250, December.

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