| Several risks are involved in the absence of a regulatory system. The main risks are: | Risks of not regulating |
| • Excessive tariff • Inadequate service level and quality • Non compliance of contractual obligations to users, government or other parties • Low efficiency in production and in the provision of goods and services • Inadequate level of investment in the sector • Frequent discontent between the parties involved |
In order to eliminate or minimise these risks, a regulatory system needs to be in place. The regulatory system consists of a set of legal instruments and rules (laws, contract agreements, statutory rules framed by the government, etc.); procedures and processes (for obtaining required approvals, licences and permits, etc.); and regulatory authorities (ministry, regulatory agency, judiciary, competition commission, etc.) with the delegated power.
The actual functions of individual regulatory authorities in a country would depend on the overall structure of the regulatory regime, empowerment of authorities as provided in the relevant legal instruments and rules, administrative arrangements and autonomy, and technical capacity. However, some of the essential functions of regulators include:
| • Protection of public interest • Monitoring compliance with contractual obligations to the government and users, and other legal and regulatory requirements | Function of a regulator |
| • Establishing technical, safety and quality standards (if not defined in the contract agreements) and monitoring their compliance • Imposing penalties for non compliance • Administering tariff adjustments and periodic reviews • Establishing accounting standards and undertaking operator’s cost and performance analysis • Facilitating dispute resolution between parties • Providing advice and counsel to government on policy matters and other related matters to private sector involvement in the sector |