Why U.S. public utility commission-style ratemaking has becomes a hit overseas.
Gregory Aliff is vice chairman and national managing partner for energy and resources of Deloitte & Touche USA LLP. Contact him at firstname.lastname@example.org. Branko Terzic is a global and U.S. regulatory policy leader in energy and resources for Deloitte Services LP, and a former commissioner on the U.S Federal Energy Regulatory Commission and the Public Service Commission of Wisconsin. Contact him at email@example.com.
It appears that American-style public utility regulation has become a major “intellectual property” export to many of the world regions including most of Europe, Asia, Latin America, the Caribbean, and Far East. As these countries have turned to private investment to fund new infrastructure, or acquire existing electricity and natural-gas utility infrastructure, the need for a mechanism to regulate private investment was paramount. Outside of the European Union (EU), U.S.-style regulation was introduced as an attraction to private investment. Within the EU the establishment of independent regulatory agencies has been, in some cases, solely to meet EU requirements of mandatory liberalization, i.e., introduction of competition in electricity supply.
Where there has been privatization or liberalization, investors have moved to take advantage of these new investment opportunities. The existence of reasonable regulation is a principal pre-condition for this investment. Thus, both domestic and international electric and natural-gas infrastructure companies need to include a “regulatory strategy” as a required component of their corporate strategy.