Regulatory Process : Regulatory Challenges - Frequently Asked Questions (Body of Knowledge on Infrastructure Regulation) - What are some common mistakes of omission by regulators?

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[Response by Ashley Brown, Jon Stern and Bernard Tenenbaum, July 2009]

Mistakes (Sins) of regulatory omission

No uniform system of regulatory accounts;
No regulatory methodologies in place;
No quality-of-service standards, or seriously ineffective monitoring of regulatory standards;
No monitoring of competitive behavior or market abuse in electricity generation or telecom markets which are intended to operate competitively;
Absence of access charges and rules for industries where there is competition over networks (primarily telecom, electricity and natural gas, but also to a lesser extent, water and railways);
Failure to adequately address consumer complaints and monitor performance;
Failure to monitor costs;
Failure to provide effective competitive tendering procedures for new capacity;
Failure to take action to raise retail tariffs that are far too low to support financial viability and justifiably necessary levels of investment;
No clear standards for tariff setting for future tariff periods (eg, absence of clear standards for power purchase costs or distribution costs; no definition of the regulatory asset base);
No mechanism to relate payment or non-payment of government subsidies into tariffs;
No attempt to make transparent cross-subsidies between customer classes even when the law supports it;
Failure to efficiently target cross-subsidies;
Failure to deal with non-payment issues.

Regulatory Process