Research Update

Greetings! We bring you research news from the Public Utility Research Center (PURC) at the University of Florida. Our electronic newsletter is designed to keep utility regulators, policymakers, and infrastructure managers informed of our research activities. We invite you to join our mailing list and receive our bulletins by email.

Do Elected Public Utility Commissioners Behave More Politically Than Appointed Ones?

What will the elections mean for utility regulation? Which matters more, a utility commissioner's political affiliation, or whether the commissioner is elected or appointed? According to this research, these issues interact. The effect of commissioner selection processes depends on whether the commissioner is Democrat or Republican. And the effect of party affiliation depends on the selection process. Using telecommunications prices as indicators, this paper shows that the political economy of regulation is never simple. For example, elected Democrat commissioners tend to be associated with higher prices for unbundled network elements (UNEs), but appointed Democrat commissioners tend to be associated with lower retail prices. Based on a hypothetical one seat change in a three member elected commission, the statistical results suggest that replacing an elected Republican with an elected Democrat is correlated with a $1.80 increase in the UNE price. The same approximate difference holds if an elected Democrat were to replace an appointed commissioner of either party. Read the paper, "Do Elected Public Utility Commissioners Behave More Politically Than Appointed Ones?".

Towards a Cost-Reflective Tariff for Distribution Networks: The Effect of DG

What holds us back from using more renewable fuels in electricity generation? Sometimes the problem is how to connect a renewable energy source to the electric distribution system. This paper follows up on its companion paper on how to construct a tariff for distributed generation, which is one way that some renewable energy sources can plug into the electric system. The paper examines the effects of the transition from a traditional, fully average cost distribution tariff to a cost-reflective distribution tariff, in terms of time and location. The tariff would use nodal prices to recover losses and an "extent-of-use" method to recover network fixed costs. As in the companion paper, this paper applies the tariff transition and decomposition method to an example network with data from Uruguay to isolate the various effects including the influence of distributed generation. Read the paper, "Towards a Cost-Reflective Tariff for Distribution Networks: The Effect of DG".

Networks of Regulatory Agencies as Transnational Public Goods: Improving Infrastructure Performance

Networks of sectoral regulatory agencies provide valuable services. Often with seed money from international organizations and donor countries, regulatory leaders at newly created commissions seek to learn from neighboring countries. Regional networks now serve as vehicles for sharing data and best-practice techniques, developing studies, providing training, distributing regulatory materials, and organizing meetings. External donor funding and the mix of characteristics have influenced the pattern of network activities. This paper concludes with questions about the financial sustainability of regulatory associations and the impacts of collaborations (including AFUR, OOCUR, EAPIRF, SAFIR, ERRA, CEER, Regulatel, and ADERASA).

Good infrastructure regulation has an indirect demonstration effect within each nation, illustrating how transparency, citizen participation, and staff professionalism promote legitimacy and public confidence. In addition, there is a direct effect on infrastructure: the promotion of network expansion, cost containment, and improved service quality. If a few nations have benefited from the outputs of regulatory networks, the initial seed money has been worth it. The next question is how to make such organizations even more effective in improving infrastructure performance and contributing to economic and social development.

A related paper "OOCUR as a Network of Regulatory Agencies" was presented at the 5th OOCUR Annual Conference in Georgetown, Guyana. Read the paper, "Networks of Regulatory Agencies as Transnational Public Goods: Improving Infrastructure Performance".

Regulation in Vertically Related Industries: Myths, Facts, and Policy

Does vertical integration matter? Many regulators and policymakers are convinced that a vertically integrated telecom company will hinder downstream rivals. Many are also convinced that cost-based interconnection is always the best choice. This paper explains why conclusions that appear to be "facts" can truly be "myths" in areas like today's telecommunications industry, where key suppliers operate in multiple vertical stages of production. This paper explains, for example, why an entrant's decision to make or buy critical production inputs may be largely insensitive to the price of these inputs. It also reviews why a vertically integrated producer (VIP) may prefer to assist, rather than disadvantage, downstream rivals, and why a VIP may be disadvantaging rivals even when it provides them with the same wholesale service quality that it provides to its own retail affiliate. Read the paper, "Regulation in Vertically Related Industries: Myths, Facts, and Policy".

State-Owned Enterprises: NWSC's Turnaround in Uganda

Oversight agencies in the water sector emphasize performance monitoring based on outputs, such as customers served, volume delivered, and service quality. However, bureaucratic tendencies can curtail operational innovation and creativity. In situations where managers lack full operating knowledge and capacities, proactive and consultative monitoring and regulation can yield benefits. This paper reviews the results of Uganda's National Water and Sewerage Corporation's (NWSC) approach to performance monitoring and "self-regulation." The purpose of this study is to outline corrective actions undertaken by the NWSC management and staff to turn around performance, the sequencing of those steps, and the outcomes from this reform program.

The NWSC focuses on promoting improvements in technical processes and input selection. Improvements in service quality and network expansion resulted from aligning performance improvement initiatives with the organization's financial performance and team development. The program's success required managing organizational rigidities and moving towards full cost-recovery. In particular, organizational incentives and information flows encouraged managers to reduce rules and procedures that hindered strong performance. African Proverbs are interspersed throughout the article to underscore key themes and lessons for those designing, implementing, and evaluating infrastructure sector reform initiatives. Read the paper, "State-Owned Enterprises: NWSC's Turnaround in Uganda".

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