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Global Regulation: Exporting 'America' to the World

Why U.S. public utility commission-style ratemaking has becomes a hit overseas.

Fortnightly Magazine - February 2007

Should a company object to a chamber’s decision, it can challenge the decision in front of a civil court.

There also are multiple governmental ministries continuing to have authority over regulatory matters even though an independent regulator has been established. Much policy direction still will need to come from the various Ministries that retained residual authority after passage of the WnWG law. Similar to the United States, the German political structure includes federal states (Lander) that have their own regulatory agencies with authority over retail electricity, while the national government deals with transmission and wholesale market issues. The German Federal Cartel Office retains jurisdiction over competition issues.

In summary, the need for the establishment of new independent regulatory agencies has been created by the decisions of governments either to introduce competition in electricity supply or to privatize electric industry infrastructure. Few regulatory models have existed outside of that of the United States, which has the longest tradition of regulation of private investment in the provision of monopoly electric services. With origins in the late 18th century, the U.S. regulatory model called for regulatory agencies with appointed (or, in a few cases, elected) commissioners who were independent of the legislatures that created them and whose opinions were subject to only to judicial review. While many countries were able to establish such independent agencies, few have been able or willing to strip existing governmental ministries, tied to parliamentary majorities, of all their pre-existing regulatory authority over various aspects of the electricity supply chain. Thus, international investors in these jurisdictions face the same state-by-state (country-by-country) due diligence they should apply when looking at an investment opportunity in the electricity sector in the United States. While regulatory structures and even regulatory schemes can appear similar on the surface, the details do matter, as each specific regulatory agency and scheme follows it own unique regulatory strategy and approach.