International
Journal of Regulation and Governance
From the editor The structural transformations and independent regulatory regimes, which form the basis of the reforms process, started in several developing countries were modelled after those that existed in the developed world, typically in the United Kingdom and the United States of America. Reform consultants were flown into the countries with standard prescriptions for the way the economy should function, with little deliberation on the special requirements of these countries. In retrospect, it seems that decision-makers in the developing countries were not fully aware of the experimental nature of developments in the developed countries nor were they sufficiently exposed to the kinds of objective analyses that can be put forward by academic and research communities. This does not mean to say that all that has happened in the reforming developing countries thus far is wrong or surreptitious. Knowledge of the transitionary status of developments and the uncertainty of outcomes, however, could have stimulated a greater analysis and consultation possibly leading to reform models better tailored to the contexts of these countries. This journal is fortunate to have a distinguished board of editors representing a diverse range of interests and geographical expertise. This first issue of the journal has five interesting papers – two of them covering electricity sector issues from India and the United Kingdom, two addressing developments in the broader area of energy, and one dealing with environmental issues. The paper by Steve Thomas provides an interesting documentation of the institutional and regulatory processes that the British electricity sector has been subjected to since 1990. He has also challenged the basic premises of the reforms process and its achievements as they relate to the creation of competition, the efficacy of the famous RPI-X formula, and the degree of regulatory intervention required. The paper does not provide any solutions or directions, but attempts to expose what the author sees as some of the myths about the success of the British electricity reform model. The paper by Alexander and Harris attempts to address the vexed problems of tariff rationalization and the encouragement of T&D (transmission and distribution) efficiency improvements. The electricity reforms process in India, on hindsight, started at the wrong end with private participation in generation being encouraged first. There are now serious efforts on to improve the distribution end of the business, with the recognition that unless revenue flows increase – with an increase in T&D efficiencies and better metering and billing processes – the sector cannot become financially viable. The authors explore the parameters, in the Indian context, that would make the RPI-X formula relevant for the country. In arriving at this proposed approach, the authors hope that Indian regulatory commissions may be able to move towards a multi-year tariff setting. This approach can serve the dual purpose of freeing up some time to devote to non-tariff issues and easing the pressure arising from political processes associated with tariff setting. The paper by dos Reis and others provides a critical analysis of the restructuring of the energy industry in Brazil. They present the legal provisions that have led to a restructuring of the energy industry in Brazil and describe the resultant market and regulatory structure and challenges. The authors also clearly highlight the gaps and uncertainties that remain to be addressed while emphasizing the need to have complete stakeholder participation in the further developments in this vital sector of the economy. Earlier this year, India recognized the contributions of TERI’s Director-General, Dr R K Pachauri, to the cause of resource efficiency and environmental amelioration in India by awarding him the Padma Bhushan – one of the highest civilian awards in the country. True to his sensibilities, his paper, addressing the issue of energy sector transformations, brings out the special challenges of attracting private participation in this sector in developing countries such as India. Independent regulatory processes in developing countries, although deriving from the experience of the developed countries, would necessarily have to model their functioning and relationships uniquely to their socio-cultural contexts. The focus of such a model, he says, should be on reaching desired outcomes rather than on methods or processes. Midttun and Koefoed address the effectiveness of environmental regulation as it applies to the rapidly transforming energy industry—set as it is in a situation of international competitiveness. Highlighting the challenges of international environmental negotiations in a globalizing world, the authors argue that weaker regulatory regimes – that allow national governments greater flexibility in determining mechanisms to comply with international agreements – may provide a better balance between meeting competitive economic challenges and environmental responsibility. In doing so, the authors seem to recommend a gradualistic approach to a ‘greening’of the economy—both locally and globally. The case of the European Union provides an excellent example of such an interplay between competitive market forces and environmental pressures even when there is a convergence of interests at the political level! This inaugural issue of the journal hopes to set a trend for open and enlightened discussions on regulatory developments and associated changes in governance structures. We welcome any feedback from you on the scope and content of the journal as well as any viewpoints that you may have on articles published in the journal or at a general level. I hope, with your active participation, we will succeed in making this journal a product that will guide and inform reforms processes around the world and definitely in the developing countries.
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