Advances in New Institutional Analysis series
Edited by Claude Ménard and Michel Ghertman
Chapter 6: Regulatory Governance and Sector Performance: Methodology and Evaluation for Electricity Distribution in Latin America
Luis Andres, José Luis Guasch and Sebastián Lopez Azumendi INTRODUCTION According to an increasing body of empirical evidence, institutions matter for growth and development (Aron, 2000; Rodrik, 2004). The infrastructure sector generally, and the electricity sector in particular, are not an exception to this finding. Research on the subject has associated better sector performance, represented by higher levels of electricity generation per capita, to the governance of institutions responsible for the conduct of regulatory decisions (Cubbin and Stern, 2006). Despite the different approaches in the design of regulatory institutions, a separate agency from the government with reasonable levels of autonomy and technical expertise has emerged as the model and paradigm of a regulatory institution. The Latin America and the Caribbean (LAC) region has adopted that regulatory model. Beginning with Chile’s National Energy Commission in 1978 and ending in 2001 with Barbados’ Fair Trading Commission, the region presents a diverse spectrum of regulatory authorities and practices, today 70 percent of countries in the region have a separate entity – with varying degrees of independence – to regulate electricity markets (LAC Electricity Regulatory Governance Database, The World Bank, 2007). Even though more than ten years have passed since the majority of LAC countries established independent agencies, the study of their governance and of its impact on sector performance has been limited and poorly focused. With some exceptions (Correa et al., 2006; Brown et al., 2006; Guasch and Spiller, 1999), the research on the subject has limited the assessment of regulatory agencies to a...