COMPARING REGULATORY DECISION-MAKING IN THE ENERGY SECTOR

Abstract

Both the economic literature and international organizations like the World Bank and
OECD have devoted many efforts to the assessment of the relationship between the quality
of the regulatory framework and the performance of markets. The prevailing wisdom relies
on the construction of synthetic indicators, which should descri be the main institutional
variables. These indicators are then employed to run econometric regressions and rank each
national regulatory system according to their results.
In this paper I argue that the currently available synthetic indicators do not capture the
institutional complexity of regulatory systems. While there is an urgent need to measure the
quality of rules and institutions, this task cannot be accomplished without first developing
a better understanding of their origins, complementarities and implementation mechanisms.
To advance this goal, I propose to use regulatory decision-making processes as the unit of
analysis and as a common ground for the dialogue between legal scholars, economists and
political scientists. How such processes are organised direct ly affect s the relationship
between markets and institutions.
Two theoretical approaches offer a more realistic explanation of regulatory decision-making.
Firstly, comparative law helps detect those institutions, sources of law or legal ideas most relevant
for the workings of each national or supranational regulatory system. Secondly, Behavioral Law
and Economics helps understand the decision costs regulators must face and provides a standard
of reference to set forth concrete proposals for improving the regulatory design.
After a general description of this new approach, the paper applies it to a specific
regulatory problem, namely the development of network ru les which support the t ransition
of energy systems to large-scale deployment of renewable energy sources. The European and
American regulatory systems are compared to find out how each legal tradition dea ls with
the conflicts between tra ditional and new energy players and copes with technological and
institutional uncertainty.