Emergence of an innovative regulation mode in water utilities in France: between commission regulation and franchise bidding

Abstract

Academic debate on public utility regulation has considerably evolved over the past 50 years. The conflict between the supporters of franchise regulation and commission regulation has given way to much more balanced in-depth analyses. Regulation is defined on the basis of its structure but also its scope and regulation incentives. A regulation mode must above all be evaluated with regard to the institutional environment. We propose a neo-institutionally-inspired analysis framework and show how the dynamic relationship between regulation and the institutional environment can lead to reforms and ultimately to more efficient regulation. The findings of a French water utility sector analysis underline how a series of national normative reforms and local exploratory reforms can give rise to innovations in the regulation mode. This new hybrid regulation, between commission regulation and franchise bidding, could be more effective than previous regulation mode, i.e. more stable and in line with stakeholders’ expectations.