In order to protect consumers and ensure that key infrastructure is operated to a standard consistent with modern industry practice, the grantor may want to establish a progressive and reasonable regulatory structure, giving the regulator sufficient latitude to supervise the activities of the project company without unreasonably restricting competitiveness or the ability of the project company to operate or finance its activities within the context of the market. Creating a regulatory structure can involve a substantial investment of resources by the grantor or the government.
Equally, in view of the political, health and safety sensitivities triggered by infrastructure services, the grantor or some other public sector entity will need to monitor carefully the sector and therefore the project company's operations. This may involve regulating, for example, the level of tariffs to be charged to customers, the performance of the project company's operations, or the standard of services to be delivered for public consumption.
Regulation is of particular interest for the operation function as the regulator is likely to need to work closely with the project company, and to impose record keeping, reporting, application and other procedural requirements on the project company as part of the regulatory function. This will complicate the project company's management task.