Publication: The Regulation of Investment in Utilities: Concepts and Applications
Loading...
Published
2005
ISSN
Date
2012-06-06
Author(s)
Editor(s)
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.
Link to Data Set
Citation
“Alexander, Ian; Harris, Clive. 2005. The Regulation of Investment in Utilities: Concepts and Applications. World Bank Working Paper No. 52. © World Bank. http://hdl.handle.net/10986/7293 License: CC BY 3.0 IGO.”
Digital Object Identifier
Associated URLs
Associated content
Other publications in this report series
Publication Greening Digital in Korea(Washington, DC, 2022-02)Digital technologies are making a significant impact on societies, economies, and the physical world, presenting both opportunities and challenges for the green agenda. Applications of these technologies in sectors such as energy, urban, transport, and agriculture are creating new possibilities for climate change mitigation strategies. However, the rapid expansion of digital technologies increases energy usage too, and is therefore also increasing greenhouse gas (GHG) emissions. In seeking to address these challenges, the World Bank’s Digital Development Global Practice (DD) will publish a flagship report on Digital Development Opportunities for Climate Change, which will assess opportunities for greening with information communication technology (ICT), as well as opportunities for greening the ICT sector itself. To inspire and inform this flagship report, DD studied Korea’s experience in greening its ICT sector, with support from the Korean Green Growth Trust Fund. The Republic of Korea was selected for the case study due to its experience in both the digital and green sectors, and its status as a globally recognized ICT powerhouse. The country was also an early adopter of a green policy agenda, and is integrating DNA (data, network, and AI) into these policies. The government announced a national policy vision of “Low Carbon, Green Growth” in 2008 and has taken concrete steps to build a solid foundation for the green transition, through legislation, standardization, information-based instruments, economic instruments, research and development (R&D), and green procurement. More recently, the country has been aligning its green ICT strategy with the broader national GHG reduction target. Korea's experience can offer meaningful lessons to other countries looking to reduce the ICT sector’s climate impact. It shows that public policies have an important impact on the ICT market. The policy tools that can spur decarbonization of the ICT sector include green government procurement, information-based instruments, economic instruments, and provision of guidelines on green business practices. Keys to success in applying such tools include strong and early political commitment; long-term planning and comprehensive policies; prioritization; research and development (R&D) and investment; and a governance structure that allows a whole-of-government approach. Additionally, Korea’s experience shows that renewable energy will play an increasingly important role in reducing GHG emissions from the energy-intensive ICT industry. Korea’s experience also underscores the fact that more evidence and analysis are needed to measure and determine the effectiveness of policy and regulatory pathways for greening the ICT sector.Publication Environmental Implications of a Central Bank Digital Currency (CBDC)(Washington, DC : World Bank, 2022-07)Two-thirds of central banks in the East Asia and Pacific (EAP) region have started researching or testing the implementation of a Central Bank Digital Currency (CBDC). At the same time, the region accounts for one-third of world CO2 emissions and is vulnerable to climate risks. As the Group of 7 (G7), European Central Bank (ECB), and Bank of England (BoE) have stated in their public statements, it is increasingly important to consider environmental impact when designing CBDC. However, only a few brief studies have been done on this subject, which will be crucial for the region. This Note explores the environmental implications of CBDC by comparing technical mechanisms and energy consumption within its distributed structure. It also illustrates differences in ecological footprint between CBDC and other payment methods (cryptocurrency, cash, and card networks). As the legitimacy of CBDC is backed by the trust of central banks, CBDC does not need to prove its legitimacy through its technological structure. Therefore, CBDC does not require the energy-intensive consensus or mining mechanisms used by a cryptocurrency, so its energy consumption is lower (comparable to that of a credit card system). CBDC can be designed to use various systems, such as Real Time Gross Settlement (RTGS), Distributed Ledger Technology (DLT), or a mixture of both. Careful deliberation to meet the objectives and implications will be important as CBDC can be a catalyst for financial innovation.Publication Assessing Incentives to Increase Digital Payment Acceptance and Usage(World Bank, Washington, DC, 2022-01-18)An important step to achieve greater financial inclusion is to increase the acceptance and usage of digital payments. Although consumer adoption of digital payments has improved dramatically globally, the acceptance and usage of digital payments for micro, small, and medium-sized retailers (MSMRs) remain challenging. Using random forest estimation, The authors identify 14 key predictors out of 190 variables with the largest predictive power for MSMR adoption and usage of digital payments. Using conditional inference trees, they study the importance of sequencing and interactions of various factors such as public policy initiatives, technological advancements, and private sector incentives. The authors find that in countries with low point of sale (POS) terminal adoption, killer applications such as mobile phone payment apps increase the likelihood of P2B digital transactions. They also find the likelihood of digital P2B payments at MSMRs increases when MSMRs pay their employees and suppliers digitally. The level of ownership of basic financial accounts by consumers and the size of the shadow economy are also important predictors of greater adoption and usage of digital payments. Using causal forest estimation, they find a positive and economically significant marginal effect for merchant and consumer fiscal incentives on POS terminal adoption on average. When countries implement financial inclusion initiatives, POS terminal adoption increases significantly and MSMRs’ share of person-to-business (P2B) digital payments also increases. Merchant and consumer fiscal incentives also increase MSMRs’ share of P2B electronic payments.Publication The Behavioral Professional(Washington, DC : World Bank, 2022)Over the past decade, governments, multilateral organizations, and think tanks have been increasingly using behavioral science as an additional tool to understand and tackle complex policy challenges in several sectors. Yet despite this increase in the use of behavioral science for policy design, little attention has been given so far to those individuals responsible for designing and implementing public policies and programs: policy professionals. This note aims to achieve three objectives. first, it highlights recent examples building on work done by the eMBeD team and the World Bank at large on how behavioral bottlenecks can hinder key development goals, from ensuring inclusive and equitable education for all (SDG4) to ensuring good health and well-being (SDG3), among others. Second, the note presents a behavioral framework highlighting the individual, group and institutional contexts that affect policy professionals. Finally, it showcases the relevance of the behavioral approach to a broad range of areas - including public service design, corruption and accountability, service design, access and delivery, civil servants’ performance - by pinpointing common bottlenecks faced, and potential solutions to overcome them.Publication Assessment of the Labor Market Information System (LMIS) in the Lao People’s Democratic Republic PDR(Washington, DC, 2022)The Lao People’s Democratic Republic (PDR) has made substantial progress in poverty reduction even though its resource-based development pattern has historically limited the impact of growth on poverty reduction. The objective of the assessment is to support the Ministry of Labor and Social Welfare (MOLSW) in their planned reforms of labor market institutions and systems in Lao; in particular by supporting investments in a comprehensive Labor Market Information System (LMIS) for improved jobseeker data collection and analytics, jobseeker profiling, and assignment to various employment support programs such as vocational trainings and job search assistance. The target audience of this report is the technical staff and management at the department levels as well as the policy makers at the MOLSW, Ministry of Planning and Investment (MPI) as well as the Ministry of Finance (MOF).
Journal
Journal Volume
Journal Issue
Collections
Related items
Showing items related by metadata.
Publication A Primer on Energy Efficiency for Municipal Water and Wastewater Utilities(World Bank, Washington, DC, 2012-02)This primer is concerned with energy use and efficiency of network-based water supply and wastewater treatment in urban areas. It focuses on the supply side of the municipal water cycle, including the extraction, treatment, and distribution of water, and collection and treatment of wastewater-activities which are directly managed by Water and Wastewater Utilities (WWUs). The main challenges to scaling up Energy Efficiency (EE) in municipal water and wastewater services stem from sector governance issues, knowledge gaps, and financing hurdles. Utility governance affects the overall performance of individual WWUs and influences decision making, incentives and actions for energy management. This is likely the most significant barrier to WWU EE in many developing countries. Addressing knowledge gaps requires efforts to systematize data collection, training, and capacity building at utilities, supported by local and national governments. Financing hurdles can be reduced by introducing dedicated EE funds to address large but disaggregated investment needs and by promoting third-party financing through energy/water savings performance contracts. This primer is part of Energy Efficient Cities Initiative's (EECI's) knowledge clearinghouse function to inform World Bank (WB) staff working in urban water supply and wastewater management, as well as in energy, about the opportunities and good practices for improving EE and reducing energy cost in municipal WWUs.Publication Understanding Sector Performance : The Case of Utilities in Latin America and the Caribbean(World Bank, 2009-07-29)This report provides innovative approaches to better understand infrastructure sector performance by focusing on the links between key indicators for private and public utilities, and changes in ownership, regulatory agency governance, and corporate governance, among other dimensions. By linking inputs and outputs over the last 15 years, the analysis proposes key determinants that have impacted sector performance in infrastructure sectors in Latin America and the Caribbean (LAC). It is about understanding how and to what extent the effect of such elements result in significant changes in the performance of infrastructure service provision. This report focuses on the distribution segment of basic infrastructure services. It covers electricity distribution, water distribution and sewerage, and fixed telecommunications. More specifically, the report does: i) depict sector performance with a broad set of indicators that describes the current situation as well its evolution during the last 15 years; ii) propose analytical frameworks for themes less developed in the literature such as regulatory governance and corporate governance for state-owned enterprises (SOEs); iii) benchmark the institutional designs of the regulatory agencies in the region for the water and electricity sectors; and iv) analyze the relationship between sector performance and regulation, private sector participation, and corporate governance.Publication Revisiting Policy Options on the Market Structure in the Power Sector(Washington, DC, 2011-07)The objectives of this study are to develop a taxonomy of the existing power market structures, as shown by the extent of vertical and horizontal unbundling found among restructured power systems, across developing countries; to design an analytical framework for assessing the desirability of unbundling under the variety of economic conditions found among developing countries; and To propose insights for operational guidance on alternative market structures based on relevant criteria, in particular on the initial conditions of a country and its power sector. The study specifically examines whether power system size and country per capita income can be reliable indicators of initial conditions for guiding policy on power market structure. This guidance is needed to address issues such as whether there are solid foundations for recommending vertical unbundling for small power systems in low-income countries, particularly in the absence of short term privatization prospects. The policy recommendations therefore have to be tailored to the specific taxonomy of market structures that characterize the electricity sector in developing countries. The study reports the evidence from econometric analysis and case studies on the (relative) success of achieving the objectives of unbundling. These objectives may be to enhance transparency and governance, attract private sector investment, and/or to create a competitive market and ultimately its impact on performance. The study has an analytical approach to model market structure, together with ownership and regulation, controlling for several variables, as determinants of performance across several indicators of performance, including access, operational and financial performance and environmental sustainability.Publication Socialist Republic of Vietnam : Review of Urban Water and Wastewater Utility Reform and Regulation(Washington, DC, 2014-06-10)This Review, undertaken by the World Bank Water & Sanitation Program, is provided at the request of the Ministry of Construction of the Socialist Republic of Vietnam with the objectives of (a) Providing guidance/recommendations concerning the reform proposals of state owned enterprises operating in the field of water supply and urban sanitation and (b) Providing guidance/recommendations concerning economic management options for service providers. It will be important to ensure that these reforms are undertaken in an explicitly poor-inclusive manner. The Review achieves these objectives through a review of the current situation, are view of progress on the reform agenda and presentation of potential options for improvement of the urban water and waste sector in Vietnam.Publication The Potential of Regional Power Sector Integration : South East Europe Transmission and Trading Case Study(World Bank, Washington, DC, 2010-03)Developing countries are increasingly pursuing and benefitting from regional power system integration (RPSI) as an important strategy to help provide reliable, affordable electricity to their economies and citizens. Increased electricity cooperation and trade between countries can enhance energy security, bring economies-of-scale in investments, facilitate financing, enable greater renewable energy penetration, and allow synergistic sharing of complementary resources. This briefing note draws from the experiences of RPSI schemes around the world to present a set of findings to help address these challenges. It is based on case studies of 12 RPSI projects and how they are dealing with key aspects of RPSI, such as: (i) finding the right level of integration; (ii) optimizing investment on a regional basis; (iii) appropriate regional institutions (iv) technical and regulatory harmonization; (v) power sector reform and integration (vi) the role of donor agencies (vii) reducing emissions through RPSI; and (viii) RPSI and renewable energy.
Users also downloaded
Showing related downloaded files
Publication Lebanon Economic Monitor, Fall 2022(Washington, DC, 2022-11)The economy continues to contract, albeit at a somewhat slower pace. Public finances improved in 2021, but only because spending collapsed faster than revenue generation. Testament to the continued atrophy of Lebanon’s economy, the Lebanese Pound continues to depreciate sharply. The sharp deterioration in the currency continues to drive surging inflation, in triple digits since July 2020, impacting the poor and vulnerable the most. An unprecedented institutional vacuum will likely further delay any agreement on crisis resolution and much needed reforms; this includes prior actions as part of the April 2022 International Monetary Fund (IMF) staff-level agreement (SLA). Divergent views among key stakeholders on how to distribute the financial losses remains the main bottleneck for reaching an agreement on a comprehensive reform agenda. Lebanon needs to urgently adopt a domestic, equitable, and comprehensive solution that is predicated on: (i) addressing upfront the balance sheet impairments, (ii) restoring liquidity, and (iii) adhering to sound global practices of bail-in solutions based on a hierarchy of creditors (starting with banks’ shareholders) that protects small depositors.Publication Classroom Assessment to Support Foundational Literacy(Washington, DC: World Bank, 2025-03-21)This document focuses primarily on how classroom assessment activities can measure students’ literacy skills as they progress along a learning trajectory towards reading fluently and with comprehension by the end of primary school grades. The document addresses considerations regarding the design and implementation of early grade reading classroom assessment, provides examples of assessment activities from a variety of countries and contexts, and discusses the importance of incorporating classroom assessment practices into teacher training and professional development opportunities for teachers. The structure of the document is as follows. The first section presents definitions and addresses basic questions on classroom assessment. Section 2 covers the intersection between assessment and early grade reading by discussing how learning assessment can measure early grade reading skills following the reading learning trajectory. Section 3 compares some of the most common early grade literacy assessment tools with respect to the early grade reading skills and developmental phases. Section 4 of the document addresses teacher training considerations in developing, scoring, and using early grade reading assessment. Additional issues in assessing reading skills in the classroom and using assessment results to improve teaching and learning are reviewed in section 5. Throughout the document, country cases are presented to demonstrate how assessment activities can be implemented in the classroom in different contexts.Publication World Development Report 2006(Washington, DC, 2005)This year’s Word Development Report (WDR), the twenty-eighth, looks at the role of equity in the development process. It defines equity in terms of two basic principles. The first is equal opportunities: that a person’s chances in life should be determined by his or her talents and efforts, rather than by pre-determined circumstances such as race, gender, social or family background. The second principle is the avoidance of extreme deprivation in outcomes, particularly in health, education and consumption levels. This principle thus includes the objective of poverty reduction. The report’s main message is that, in the long run, the pursuit of equity and the pursuit of economic prosperity are complementary. In addition to detailed chapters exploring these and related issues, the Report contains selected data from the World Development Indicators 2005‹an appendix of economic and social data for over 200 countries. This Report offers practical insights for policymakers, executives, scholars, and all those with an interest in economic development.Publication Digital Africa(Washington, DC: World Bank, 2023-03-13)All African countries need better and more jobs for their growing populations. "Digital Africa: Technological Transformation for Jobs" shows that broader use of productivity-enhancing, digital technologies by enterprises and households is imperative to generate such jobs, including for lower-skilled people. At the same time, it can support not only countries’ short-term objective of postpandemic economic recovery but also their vision of economic transformation with more inclusive growth. These outcomes are not automatic, however. Mobile internet availability has increased throughout the continent in recent years, but Africa’s uptake gap is the highest in the world. Areas with at least 3G mobile internet service now cover 84 percent of Africa’s population, but only 22 percent uses such services. And the average African business lags in the use of smartphones and computers as well as more sophisticated digital technologies that catalyze further productivity gains. Two issues explain the usage gap: affordability of these new technologies and willingness to use them. For the 40 percent of Africans below the extreme poverty line, mobile data plans alone would cost one-third of their incomes—in addition to the price of access devices, apps, and electricity. Data plans for small- and medium-size businesses are also more expensive than in other regions. Moreover, shortcomings in the quality of internet services—and in the supply of attractive, skills-appropriate apps that promote entrepreneurship and raise earnings—dampen people’s willingness to use them. For those countries already using these technologies, the development payoffs are significant. New empirical studies for this report add to the rapidly growing evidence that mobile internet availability directly raises enterprise productivity, increases jobs, and reduces poverty throughout Africa. To realize these and other benefits more widely, Africa’s countries must implement complementary and mutually reinforcing policies to strengthen both consumers’ ability to pay and willingness to use digital technologies. These interventions must prioritize productive use to generate large numbers of inclusive jobs in a region poised to benefit from a massive, youthful workforce—one projected to become the world’s largest by the end of this century.Publication Argentina Country Climate and Development Report(World Bank, Washington, DC, 2022-11)The Argentina Country Climate and Development Report (CCDR) explores opportunities and identifies trade-offs for aligning Argentina’s growth and poverty reduction policies with its commitments on, and its ability to withstand, climate change. It assesses how the country can: reduce its vulnerability to climate shocks through targeted public and private investments and adequation of social protection. The report also shows how Argentina can seize the benefits of a global decarbonization path to sustain a more robust economic growth through further development of Argentina’s potential for renewable energy, energy efficiency actions, the lithium value chain, as well as climate-smart agriculture (and land use) options. Given Argentina’s context, this CCDR focuses on win-win policies and investments, which have large co-benefits or can contribute to raising the country’s growth while helping to adapt the economy, also considering how human capital actions can accompany a just transition.