Modelling the Costs of Energy Regulation : Evidence of Human Resource Constraints in Developing Countries

Successful electricity industry reform depends on the presence of an appropriately staffed regulatory agency for the liberalised sector. However developing countries can have resource contraints that make the establishment of an effective regulatory agency difficult. This paper attempts an econometric modelling of staff numbers in electricity regulatory institutions. We specfy a model of the determinants of staff numbers that reflects electricity systems complexity as well as national eceonomic and regulatory environments. We empirically estimate a translog cost function specfication of the model using data on 60 electricity regulators collected from an international questionnaire survey in 2000-01. We conclude that there are significant differences between the regulatory cost functions of developed and developing countries and that, in establishing independent regulatory agencies, developing countries face high fixed costs relative to market size