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Role of regulators and regulation in a (typical) restructured electricity industry - page 4 / 21

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The Italian Authority for Electricity and Gas – September 20034

Regulatory institution and independence

Regulators can be independent in two ways:

politically independent: regulators are shielded from short-term political influence;

independent from stakeholders interests: regulated parties have limited influence on regulatory decision.

Political independence serves different goals:

it reduces the influence of short-term political influences on regulation (there is general agreement that regulatory policies should not generally depend on short-term politically circumstances);

it may reinforce the independence of the regulator from special interest groups;

when the electricity companies are state-owned, political independence is required to avoid conflicts of interests between the state as owner and as regulator.

Complete political independence is difficult to achieve in practice. Although many approaches have been adopted around the world and although the situation is still in strong evolution, regulatory independence seems to be a mean that must be pursued.

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