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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

(CRE). The commission has six members appointed to fixed terms of seven years. In this regard, the CRE follows U.S. practice. Unlike U.S. regulators, the CRE has limited supervisory and advisory powers and is principally charged with ensuring access to the grid by independent power producers. It does have authority for the setting of transmission and distribution tariffs. The CRE does not have authority over the approval of mergers in this sector. As in many other countries, the newly formed regulator shares authority, normally found in a U.S. regulator, with pre-existing government ministries. This probably is the single most significant difference to be found among all the newly created regulatory structures.

Spain: A Separation of Powers

The Spanish parliament implemented the EU’s electricity directive with the passage of its Electricity Sector Law 54/1997. An independent regulatory agency, the Comision Nacional de Energia (CNE), was established in 1998 to deal with issues of third-party access to transmission and distribution as required by the EU. Members of the CNE are appointed by the Ministry of Industry after discussion with parliament. The large size of nine members reflects concerns that all major political parties have some say in decisions in this important sector.

As in the case of other countries with recently established “independent” regulatory agencies, the CNE shares authority with the Ministry of Industry, which has primary authority over the electricity sector in Spain. Decisions of the CNE can be challenged at the Ministry of Economy, another governmental ministry, with the ministry’s decisions able to be challenged at a Spanish Tribunal. The CNE has merger authority when mergers affect the “regulated” sectors under CNE control. Thus, in a recent decision, the CNE blocked a proposed takeover by Gas Natural of Ibedrola. The Spanish electricity market has four major historic players and a number of new entrants. In 2006 the Spanish government produced a White Book advocating a higher degree of competition. This report currently is under discussion and debate.

Germany: Regulators and Government Mix

Up until 2005, Germany was alone in the EU in relying on negotiated third-party access and not having a designated regulated third-party access system. On July 13, 2005, Germany’s Energy Industry Act, in German called Energiewirtschaftgesetz (EnWG), came into force. It created an electricity regulatory authority, and placed it within the Federal Network Agency, which previously had regulated telephone and postal services (BNetzA). In this regard, its jurisdiction would be similar to the typical U.S. state public utility commission, which also included telephone regulation.

This federal agency has a president and two vice presidents and has established ruling chambers for its various responsibilities. The ruling chambers are unique to Germany and are responsible for the regulatory decisions of the BNetzA (the regulator) regarding electricity, gas, telecommunications, and postal services. Companies or industries (as in federations of enterprises, etc.) that are affected immediately by the decisions of a regulatory chamber can be involved in the chamber, but have no voting rights. The Ministry of Economics is responsible for setting up the ruling chambers, but has no right to overrule their decisions.