
ENERGYREGULATORSREGIONAL ASSOCIATION Legal Regulation Working Group IssuePaper REGULATORYINDEPENDENCE PREPAREDBY KEMA International B.V. November 2008 ENERGY REGULATORS REGIONAL ASSOCIATION Köztársaság Tér 7 Budapest 1081, Hungary [email protected] www.erranet.org REGULATORY INDEPENDENCE ERRA Legal Regulation Working Group ERRA © i November 2008 Prepared by KEMA International B.V. November 2008 Team: Dr. Konstantin Petrov Mrs. Wai Sum Cheng Ms. Rosária Nunes This publication was made possible through support provided by the Energy and Infrastructure Division of the Bureau of Europe and Eurasia of the U.S. Agency for International Development. The opinions expressed herein are those of the authors and do not necessarily reflect the views of the U.S. Agency for International Development or the National Association of Regulatory Utility Commissioners. ERRA © ii November 2008 Table of Contents 1 Executive Summary ....................................................................................................... 1 2 Introduction .................................................................................................................... 3 3 General Introduction to Regulatory Independence ..................................................... 6 3.1 Background and the Role of the Regulator .............................................................. 6 3.2 Independent regulatory authority: an institutional model for regulation .................... 7 3.3 Importance of regulatory independence ................................................................... 8 3.4 Concept and dimensions of regulatory independence ........................................... 10 4 Political independence ................................................................................................ 13 4.1 Independence from government ............................................................................. 13 4.2 Independence from stakeholders ........................................................................... 16 5 Legal independence ..................................................................................................... 20 5.1 Regulatory objectives ............................................................................................. 20 5.2 Decision-making structure ...................................................................................... 22 5.3 Appointment of regulators ...................................................................................... 25 5.4 Appeals of regulatory decisions .............................................................................. 25 6 Sociological independence ......................................................................................... 27 6.1 Perception and reputation ...................................................................................... 27 6.2 Development of a public relations strategy ............................................................. 27 7 Financial independence ............................................................................................... 30 7.1 Financial resources ................................................................................................ 30 7.2 Human resources ................................................................................................... 31 8 Transparency issue ...................................................................................................... 34 8.1 Control and supervision circumstances .................................................................. 38 9 Summary of Questionnaire results ............................................................................. 41 9.1 Abu Dhabi ............................................................................................................... 41 9.2 Armenia .................................................................................................................. 42 9.3 Azerbaijan ............................................................................................................... 43 9.4 Bosnia and Herzegovina ........................................................................................ 44 9.5 Bulgaria .................................................................................................................. 45 9.6 Croatia .................................................................................................................... 46 ERRA © iii November 2008 9.7 Estonia .................................................................................................................... 47 9.8 Georgia ................................................................................................................... 48 9.9 Hungary .................................................................................................................. 49 9.10 Jordan ..................................................................................................................... 49 9.11 Kazakhstan ............................................................................................................. 50 9.12 Kyrgyz Republic ...................................................................................................... 52 9.13 Latvia ...................................................................................................................... 53 9.14 Lithuania ................................................................................................................. 54 9.15 Macedonia .............................................................................................................. 55 9.16 Moldova .................................................................................................................. 56 9.17 Mongolia ................................................................................................................. 57 9.18 Montenegro ............................................................................................................ 58 9.19 Poland .................................................................................................................... 59 9.20 Romania (ANRE) .................................................................................................... 60 9.21 Romania (ANRSC) ................................................................................................. 61 9.22 Russian Federation ................................................................................................ 62 9.23 Serbia ..................................................................................................................... 63 9.24 Turkey ..................................................................................................................... 63 9.25 UNMIK .................................................................................................................... 64 9.26 Ukraine ................................................................................................................... 65 10 Conclusions and Recommendations ......................................................................... 67 10.1 Independence in practice: questionnaire results .................................................... 67 10.2 Key findings from best practices ............................................................................. 70 10.3 Application in the ERRA countries .......................................................................... 72 11 Selected References .................................................................................................... 74 12 Appendix 1: “Regulatory Benchmarking Report for South East Europe” .............. 76 13 Appendix 2: “Regulatory Benchmarking Report for the CIS” .................................. 78 14 Appendix 3: Questionnaire on Regulatory Independence ....................................... 87 15 Appendix 4: Questionnaire Responses Graphs ........................................................ 91 16 Appendix 5: Questionnaire Responses (included in a separate document) .......... 96 List of Figures Figure 1: Relationship between the main players and the regulatory authority .................... 11 ERRA © iv November 2008 Figure 2: Example of organizational structure - І .................................................................. 24 Figure 3: Example of organizational structure - ІІ ................................................................ 24 Figure 4: Features of the regulatory process ........................................................................ 36 Figure 5: Questions 1 to 4 (Percent of responses) ............................................................... 91 Figure 6: Question 6 and 7 (Percent of responses) .............................................................. 91 Figure 7: Question 8 – how the regulator is perceived in the society (Percent of responses) ....................................................................................................................................... 92 Figure 8: Question 9 (Percent of responses) ........................................................................ 92 Figure 9: Question 10 – how is the regulator funded (Percent of responses) ....................... 93 Figure 10: Question 11 and 15 (Percent of responses) ........................................................ 93 Figure 11: Question 13 – salary level of regulator’s employees in comparison with other people working in the
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