The Regulation of Investment in Utilities: Concepts and Applications (World Bank Working Papers)

Regulatory institutions and the regimes that they establish have a significant impact on the environment for new investment in utility and infrastructure industries. This is especially true when the investment is provided by the private sector. Although some aspects of the regulation of infrastructure utilities have been well covered relatively little has been written on techniques developed by regulators over the past decade to deal with how investment issues have been factored into regulatory price controls. The Regulation of Investment in Utilities examines the common approaches that have been adopted by regulators over the last 10 to 15 years and finds that the different techniques that were developed have had varying levels of success, and were often only developed to respond to a particular situation—large investments with uncertain timing, an uncertain volume of smaller investments, etc. This paper provides assessments of the various approaches which are complemented by a set of short case studies. It also provides some guidance on when to use the different approaches that will be beneficial for regulators in new agencies.