Independence is a critical attribute for a regulator to be effective. However, effectiveness has additional dimensions (see Figure 5-A). In a broad sense, an effective regulator is structurally and financially independent, but the real effectiveness of the regulator will lie in how it achieves successful functionality, ideally in an independent and autonomous manner.
Figure 5-A: Dimensions of Effectiveness
On the one hand, in a structural sense, independence means guaranteeing that the regulator maintains an arms-length relationship with private industry and the other branches of the government.1 On the other hand, successful functionality is achieved when the regulator establishes clear rules that will govern such matters as its mandate and functions, its funding, and the implementation of its authorities, and then is able to execute those rules fairly and in a timely fashion.
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Box 5-1 : General Safeguards Essential for Effectiveness 2
• Providing the regulator with a distinct legal mandate, free of ministerial control.
• Prescribing professional criteria for appointment.
• Involving both the executive and the legislative branches in the appointment process.
• Appointing regulators for fixed terms and protecting them from arbitrary removal.
• For a board or commission, staggering the terms of the members to ensure continuity within the top ranks of the agency.
• Exempting the agency from civil service salary and employment rules that make it difficult to attract and retain well-qualified staff, as well as to terminate poorly performing staff, as necessary where the civil service system and salaries do not seem to work.
• Providing the agency with a reliable and adequate source of funding. |
Table 5-1 contains a summary of the aspects for an effective regulator as discussed in this Chapter.
ENDNOTES
1 However, as shown in Chapter 6, the regulator typically has some kind of relationship with other government authorities, which is often a strong one that includes some kind of oversight mechanism. In Article 5(2) of the Revised ONP Framework Directive, the EU guarantees the independence of national regulatory authorities by ensuring that “national regulatory authorities shall be legally distinct from and functionally independent of all organizations providing telecommunications networks, equipment or services,” and further affirms that “Member States that retain ownership or a significant degree of control of organizations providing telecommunications networks and/or services shall ensure effective structural separation of the regulatory function from activities associated with ownership or control.” EU Revised ONP Framework Directive 90/387/EC, 10 June 1997, available at http://europa.eu.int/ISPO/infosoc/legreg/telecom.html#Directives%20Lib.
2 Warrick Smith, Utility Regulators – The Independence Debate , Public Policy for the Private Sector, The World Bank Group, Public Policy Journal, Issue 127, October 1997.