Modelling the costs of energy regulation: evidence of human resource constraints in developing

Domah, P, Pollitt, M and Stern, J (2002) Modelling the costs of energy regulation: evidence of human resource constraints in developing. Working Paper. London Business School Regulation Initiative Working Paper Series.

Abstract

Successful electricity industry reform depends on the presence of an appropriate staffed regulatory agency for the liberalised sector. However developing countries can have resource constraints that make the establishment of an effective regulatory agency difficult. This paper attempts an econometric modelling of staff numbers in electricity regulatory institutions. We specify a model of the determits of staff numbers that reflects electricity systems complexity as well as national economic and regulatory environments. We empirically estimate a translog cost function specification of the model using data on 60 electricity regulators collected from an international questionnaire survey in 200001. We conclude that there are significant differences between the regulatory cost functions of developed and developing countries and that, in establishing independent regulatory agencies, developing countries face high fixed costs relative to market size.