Joskow, Paul. “Incentive Regulation in Theory and Practice: Electricity Distribution and Transmission Networks.” In, 2006.Abstract

    Modern theoretical principles to govern the design of incentive regulation mechanisms are reviewed and discussed. General issues associated with applying these principles in practice are identified. Examples of the actual application of incentive regulation mechanisms to the regulation of prices and service quality for “unbundled” transmission and distribution networks are presented and discussed. Evidence regarding the performance of incentive regulation in practice for electric distribution and transmission networks is reviewed. Issues for future research are identified.

    Brown, Ashley. “Developing Sustainable Regulatory Institutions in Developing Countries: Some Long Term Considerations for Investors.” In, 1998.Abstract
    A discernible, and potentially destabilizing, irony has emerged in the pattern of infrastructure
    privatizations and establishment of regulatory regimes in developing countries. Investor and
    lender fears of political and regulatory risk may well be leading to risk mitigation strategies that
    may, in the medium to long term, exacerbate the very risks to which investors were adverse in
    the first place. While there are clearly risks besides political and regulatory matters with which
    investors need to concern themselves, it is in seeking to protect themselves against those two
    categories of potential problems that investors may do more harm than good to themselves and
    the framework within which they operate in the long run.
    The context of the irony is two fold, conceptual and historical. The conceptual aspect is the
    appropriate equilibrium between investor, consumer, and public interests. The historical aspect
    is the spectrum of past events within which the current wave of infrastructure privatizations are
    The first, and the most obvious, step to take is to provide a high level of service, a higher level
    than had heretofore existed in the predecessor, publicly owned enterprise. One of the arguments
    that proponents of privatization almost always make is that private ownership is more efficient
    and more responsive to consumers than parastatal companies. It is simply foolhardy to behave in
    ways that disprove those arguments. That is particularly the case where privatization has been
    accompanied by reductions in staff and/or increases in rates. The private investor is well advised
    to view itself as having a fiduciary obligation to increase efficiency. Merely cutting costs may be
    good for the bottom line in the short run, but it is a perilous course politically and regulatorily if
    it is not part of an overall program to increase efficiency in delivering a higher quality of service
    to consumers. It is very difficult, if not impossible, to establish a pricing regime for newly
    privatized entities that makes the subtle distinction between incentivising efficiency and
    incentivising mere cost cutting. It is incumbent, therefore, on the investor to see the “big picture”
    and produce a better product at lower cost rather than simply reducing its own costs regardless of
    the consequences. In short, the investor needs to see the overall public interest in high quality service as being its own enlightened self interest.