What are different types of mistakes made by regulators when conducting price reviews?

[Response by Handbook for Evaluating Infrastructure Regulatory Systems, July 2009]

There are (at least) two types of mistakes, stemming from sins of omission and sins of commission. In the former case, agency activities (and associated decisions) tend to be mistakes that leave out important steps. In the latter, the regulatory agency takes action in ways that compound problems, leading to inefficiencies or lack of funds for network expansion. In both cases, best-practice regulatory procedures tend to be ignored. Here are examples of both types of bad decisions. The check lists (adapted from Brown, Stern, and Tenenbaum (2006)) below should help provide a helpful starting point for those evaluating regulatory frameworks and bodies.

Many of the specific points relate primarily to electricity but some examples are given for other infrastructure industries and, in general, the examples can readily be adapted to other contexts.

Resources

Handbook for Evaluating Infrastructure Regulatory Systems
Washington, DC: The World Bank Group, 2006.
Brown, Ashley C., Jon Stern, and Bernard Tenenbaum