It should be noted that the existence of investment plans does not entail the lack of regulatory follow-up on and control of the conditions defined in that plan. Verifying the result (achievement of the goal) is not enough. When faced with the concrete need for certain investments, particularly those which, if delayed or not carried out, will have irreversible consequences or those that are too large and entail a very long construction term, the regulator will not only have to control the result at the end of the period set in the plan but it will also have to perform oversight throughout said period.
Without follow up, the regulated party, acting independently, might go for other investment goals, other investment levels, extend the deadlines or even choose not to make the investments at all. If control is only performed at the end, then there is no turning back if something is not done as planned.
The point is that, where goals are set, controlling the results is critical. In turn, if there is a possibility of irreversible results or where the investments involved are too large and require a much extended construction term, in addition to controlling the results, following up on what is done is also essential. Moreover, where the consequence of non-compliance, whether on account of a delayed investment, an unperformed investment, etc., is only financial in nature, the penalty should be set in a manner such that the operator will always choose to fulfill its obligations. In addition to introducing the right incentive, this will also alleviate the task of controlling the operator.
Furthermore, non-compliance is not necessarily related to the operator's bad will. In many occasions, the reason behind the failure may be related to the lack of control and the impossibility to predict the various types of investments required in a plan. If the information on the initial condition of the assets is good, investments in replacement are more predictable and their timing is virtually entirely controlled by the operator. Conversely, expansion investments may depend on many factors that are independent of the operator's will, which make them impossible to control. They are also less easy to predict. Factors such as technological change turn certain forecasts useless, or unexpected demand shocks turn certain investment forecasts and requirements insufficient or excessive.
Once such monitoring is completed, the problem will be the proper regulatory course of action when actual investments do not match the contractual obligations, i.e. the estimated requirements specifically defined in the investment plans (for instance, the regulatory agency should be less tolerant of non-performance of highly-predictable investments). Accordingly, a control mechanism must be created to analyze the causes for non-compliance prior to the application of penalties.