PPP Development Stage – Regulating the PPP
15.1 What is the process of regulation?
Regulation is a necessary component of any public-private
partnership in monopoly (and non-monopoly) service provision
as it aims to secure:
- the proper performance of obligations
(on all sides);
- fair play; and
- protection of customers in general.
Customers of basic services comprise a wide spectrum of
economic and social groups, each with differing needs, expectations
and financial circumstances. Poor and other vulnerable customers might
represent a small proportion of the customer base yet warrant a disproportionately
large amount of regulatory attention, if they are not
to be marginalised.
Regulatory intervention is based on the following regulatory
- customer protection;
- price controls; and
- service standards.
The regulatory framework may also include:
- controlling abuse of monopoly power;
- preventing unfair discrimination between customers; and
- encouraging efficiency.
Underpinning regulatory effectiveness (irrespective of the sector)
ensures independence of action of the regulator and the absolute
separation of the roles of service provider and regulator – along
with the separation of both of these from political processes.
Whilst it is generally recognised that wide-ranging regulation
is essential for the proper administration of a PPP contract,
the early regulatory regime invariably focuses on price-sensitive
contract deliverables such as investment activity, enforcing
service standards and payments to the PPP company. Only when
these fundamentals are satisfactorily in balance can regulatory
attention turn to protection of poor and other vulnerable customers,
both in terms of standards and prices.
Unless the regulatory framework contemplates issues properly
in relation to services to the poor and confers on the regulator
authority for acting, it is unlikely that pro-poor policies
can be implemented in the early stages of a PPP contract.