What Future Economic Regulation Might Look Like – Lessons From Electricity, Gas And Airports

This paper considers how economic regulation is currently applied to New Zealand electricity, gas and airport businesses, and attempts to draw conclusions from these experiences as to how any potential future economic regulation of New Zealand water and wastewater providers could operate.

While New Zealand’s regulatory framework is similar to those in the UK and Australia, the way in which it is implemented differs in some important respects. In general, it is lower-cost and less intrusive than the corresponding frameworks in those countries. While some sectors are subject to price and quality regulation, others are subject to less intrusive monitoring frameworks. In each case, the regulatory framework is designed to have low-cost default settings, with more complex regulations applied in certain circumstances. The regulatory framework is also designed to be scalable and to apply across a large number of suppliers. 

While key objectives of economic regulation are to restrict monopoly pricing power and protect consumers’ quality of service, these are far from the only objectives. Economic regulation can ensure fair prices and returns, and provide incentives for long-term investment and for efficiency and innovation. It can also provide certainty around future returns, which helps with investment and pricing decisions.