Economic regulators oversee key network sectors that offer critical services. These regulatory authorities play a key role in market functioning and safeguarding the public interest, intervening at the interface between political authorities, businesses and citizens. Many governments choose to grant a degree of independence to economic regulators to limit political influence over their decision making. This independence, when combined with accountability and transparency measures, maintains their credibility and predictability for investors, operators and consumers. Even the perception of bias can hinder regulators’ capacity and credibility as referees mediating between stakeholders and their interests. Robust governance arrangements can safeguard their capacity for technical decision making free from undue influence. Countries can implement a range of such governance arrangements, including establishing legally independent regulators to signal a commitment to long-term goals beyond political cycles.
The OECD Indicators on the Governance of Sector Regulators map the governance arrangements of economic regulators in five network sectors. They show a degree of convergence in the arrangements safeguarding the independence of regulators in OECD countries. This reflects that these regulators have fewer good practice governance arrangements to guarantee their independence, such as rules within which regulators’ leadership is appointed and dismissed , limitations on input into certain decisions and processes, and measures to protect budgetary autonomy (Table 7.8).
Many OECD countries have established legally independent regulators. The OECD recommends that countries consider establishing independent regulators to maintain public confidence, competitive neutrality between public and private enterprises, and impartiality for significant decisions. Among OECD countries, 32 out of 37 regulatory bodies (86%) in the energy sector are independent, as are 30 out of 36 (83%) in the e-communications sector and 29 out of 35 (83%) in the rail sector. In the air transport and water sectors, the share of independent regulators is lower, with 15 out of 31 air transport regulators (48%) and 15 out of 20 water regulators (75%) qualifying as independent bodies. Ministerial regulators that are not at arms length from the government are only in the majority in the air transport sector (Figure 7.9).
