14.00-15.30 The Israeli Experience of Utility Regulation

Prof. Chaim Elata, Chair Person, Public Utilities Authority-Electricity

Roundtable: Presentations by: Mr. David Assous (Head of the Energy and Service

Division), Dr. Moshe Tsur (Head of the Economic Division),

Mr. Nissim Ben-Aderet (In charge of Methodology), Mr. Ilan Suliman

(The Commission's Administrator).

10.05-10.50 Prof. Stephen Wilks, Deputy Vice-Chancellor, University of Exeter, Consolidation of the British Regime of Utility Regulation

Chair: Dr. David Levi-Faur, The Political Science Department, University of Haifa.

11.00-11.50 Prof. Gerd Junne, Political Science Department, University of Amsterdam, Regulatory Reforms at the European Water Industry.

Chair: Ms. Keren Borenshtein, The Political Science Department, University of Haifa.

12.00-12.45 Dr. Gila Menahem and Ms. Frederique Kadosh, Public Policy Program, University of Tel Aviv, The Deregulation and Internationalization of the Israeli Higher Education System: The Paradox of a State Sponsored Private Market

Chair: Dr. Howard Frant, The Political Science Department, University of Haifa

14.00-14.45 Dr. Markus Haverland, University of Nijmegen, Compatible with Europe?: Adapting National Environmental Regulation to the European Union.

Chair: Dr. Eran Vigoda, The Political Science Department, University of Haifa.

15.00-15.45.00 Ms. Margit Cohn, The Faculty of Law, Hebrew University, Legal Regulatory Models: The Case of the Israeli Oil Sector

Chair: Ms. Aya Shavit, The Political Science Department, University of Haifa

16.00-16.45 Dr. Yoav Shechter, Pharma Israel and The University of Haifa, Regulatory Policy Making in the European Union: an Institutional Analysis of Lobbying in the Pharmaceutical Sector

Chair: Dr. Robert Schwartz, The Political Science Department, University of Haifa.

17.00-17.45 Prof. Daniel Czamanski, The Technion, Deregulation and Incentive Regulation of Electricity Provision in Israel

Chair: Prof. Aaron Kfir, The Political Science Department, University of Haifa.

18.00-18.45 Dr. David Levi-Faur, From the "Service-Provision State" to the "Regulatory State": The Dynamics of Change and Continuity in the Israeli Telecom and Electricity Regimes

Chair: Dr. Guy Seidman, School of Law, The Interdisciplinary Center, Herzlia

The paper charts the development of the British regime of utility regulation from its highly experimental beginnings in the early 1980s to its maturity in the late 1990s. It contrasts the various experiences of the major regulated sectors (electricity, gas, water, telecommunications and railways) and reviews the theoretical and political debates over the operation of the regime. It places emphasis on the acceptance and mild reform of the regime under the Labour Government from 1997 and reviews the prospects for new legislation on utility regulation which is anticipated for 2000.

The paper takes the British regime as an influential model within Europe and points to its influence on the evolution of utility regulation at the European level. It also touches on the relationship firstly, between utility regulation and the development of competition policy and secondly, between utility regulation and the debate over reform of corporate governance.

The regulatory framework is more important for the performance of an industry than the question of ownership. But the discussion about ownership has very much stimulated the debate about the regulatory framework. As long as utilities remained in the public realm, it was assumed that they were working for the public good, - without defining what the public good was. Once it is no longer certain that they are in public hands, the meaning of the "public good" has to be articulated in much more detail (which could lead to much new 'red tape').

The water sector is the last utility sector to be regulated by the European Union. Telecommunication, Electricity and Gas have been regulated earlier. Their importance for competitiveness and international trade is more obvious. The constituency for a European regulation of the water industry is relatively weak. But once the premises for regulating some utilities are pronounced, they have also to be applied to other utilities. The European Commission is more hesitating than in other fields, though, because there are political or economic gains to be achieved by becoming active in this sector.

The institutional setting of the European water sector, however, is strongly influenced by two areas of regulation where the Commission has become quite active, namely (a) environmental regulations and (b) regulations of the electricity sector.

a) Where high quality norms for drinking water are set, the question rises how the sector has to be organised in order to finance the investment necessary to achieve these norms. Environmental norms therefore initiate institutional reforms. The European quality norms were the most important trigger for the British privatisation of the water industry, since the government did not want to increase its spending.

b) When the electricity sector became liberalised, this had an immediate impact on the water sector because of the existence of many multi-utilities. Liberalisation of the electricity sector (and increasing privatisation in some countries) has immediately strengthened the constituency for institutional change in the water sector.

European regulation does not necessarily mean convergence of the institutional settings in the member countries, since European regulations can be applied in nationally specific ways. In the water sector, however, chances for convergence are high, since the water sector is very atypically organised in France. Whereas the State plays a dominant role in other utilities, this is not the case in the water sector. On the contrary, the world's two largest private water companies both are French. So we do not find any contradiction between "Anglo-Saxon capitalism" and "Rhineland capitalism" in this sector.

In Israel, the water sector is much more politically sensitive than in Europe, given the structural conflict with neighbouring countries over water resources (which are also much scarcer than in most European countries). Privatising water supplies may have the positive side-effect of de-politicising access to water. If supply remains in the public sphere, it remains a sovereignty issue. If privatised, it could be operated in the form of a joint venture, without giving rise to the same fundamental political issues.

The study analyzes the privatization and deregulation of Israel's higher education system in 1990s in a context where the government is the largest employer and the public sector comprises a very substantial portion of the labor market.

Focusing on the policy formulation phase the factors that accounted for the adoption of the policy of deregulation, privatization and internationalization of higher education are examined. Regarding the implementation phase, the study examines how the public sector labor market affected the transformation of the higher education system and how the new privatized and unregulated sectors were constructed, and operate. Three theoretical approaches are incorporated: The agenda setting multiple streams approach (Kingdon 1984; Durant and Diehl 1989; Zahariadis and Allen 1995) is used to account for the agenda setting and alternatives specification processes of the privatization of higher education. The theoretical framework of regulation and deregulation approaches (Majone 1990,1994; Moran and Wood 1993) is employed to analyze alterations in regulatory regimes in higher education in Israel. Finally, we conceptualize the transformation of higher education in terms of the relationship between the civil society and the state and use policy networks approach to analyze the changes that were introduced in the higher education policy network as a result of privatization, deregulation, and internationalization. Implications for comparative study are offered.

European Union policies are a powerful source of national regulatory reform. Taking the case of the European Directive on Packaging and Packaging Waste, the paper explores the adaptation of the German, Dutch and British packaging policies to European requirements. Three stages of the adaptation process are distinguished: legal adaptation (transposing European requirements into national legislation), administrative adaptation (creating regulatory arrangements and governance mechanisms) and practical adaptation (operation, enforcement, goal achievement). The focus is on the interaction between European policies and existing national practices and traditions.

The paper argues that the 'goodness of fit' between European requirements and national practices is not of decisive importance for explaining the degree of legal and administrative adaptation to European requirements. The dynamics and outcomes of these stages are rather shaped by the degree of centralisation of the adaptation processes (number and nature of veto points for domestic opposition). The compatibility between European policies and national traditions is crucial, however, in regard to practical adaptation: the smooth, efficient and effective operation of the regulatory arrangements. Moreover, while the centralisation of policymaking is beneficial for timely and proper legal and administrative adaptation, it has a negative effect on practical adaptation since the target group (e.g. industry) has not participated to an extent that it would feel committed to fulfil its obligations.

Why are certain sectors legally regulated by a specific and extensive statute, whereas other regimes remain legally undefined and elusive? In this paper I discuss the legal regulation of the oil sector in Israel, which is a classic example of a regime of the latter type.

Legal regulation can be effected through informal or contractual arrangements, made without statutory guidance, as well as by different types of statute. The optimal model, best fulfilling the aims of legal arrangement, would be a specific and detailed statute. This model has not been completely incorporated into Israeli regulatory law, and is notably absent in the Israeli oil sector. Regulation of this sector has always been mainly contractual. Agreements with the oil companies were buttressed by a selective usage of secondary legislation, made under wide empowering statutes that were originally enacted as emergency laws.

Different periods exhibit different variants of the model, yet it has continued despite the creation by law of the National Energy Authority in 1977, an agency that was effectively marginalized by central government officials at the Ministry of Energy's Fuel Authority. The model was reapplied in the 1988 reform of the sector, and the sector still lacks today a clear and comprehensive regulatory framework. Several reasons for the continuing dominance of this model - historical, economic and institutional - are proposed. In addition, I discuss the implication of recent plans to end the state-of-emergency declaration, on which the formal existing legal regulation is still based.

The paper explores the utility of an institutional approach in explaining the formulation and execution of lobbying strategies that affect EU health policy. It argues that in order to understand why firms employ a particular strategy to influence EU public policy, we must investigate institutions at different levels of analysis. Based on a survey of 160 pharmaceutical firms, and on an analysis of two lobbying campaigns, it emerges that the legal environment, the balance of power between EU institutions, the sector characteristics and the nature of the policy community are the most important institutions affecting lobbying in the pharmaceutical sector. These institutions influence lobbying by setting the boundaries within which political action is allowed, by determining the saliency of different types of resources, by providing lobbyists with information about the lobbying options open to their rivals, and by imposing a learning process on lobbyists.

Economic regulation rewards performance. Any framework for cost recovery through a regulatory process provides a set of incentives to which the regulated entities will respond. Sliding scale incentives were applied as early as 1906. Recent experiments with PBR in the electricity industry attempt to align the incentives to shareholders with the interests of the customers, and to make them to some extent automatic.

Through performance-based regulation, regulators seek to encourage economic efficiency and conduct that furthers competition, enhances the environment, and improves customer services. PBR reshapes regulatory oversight of monopolies without eliminating the need for it. It is one tool in the regulatory repertoire for providing incentives for privat, regulated companies to behave in ways that promote the public interest. The goals of performance-based regulation should be derived from and consistent with the state's public policy objectives. PBR mechanisms should be tailored to the unique industry structure in any state or region.

Ever since the establishment of the electricity regulatory authority in Israel a professional debate is being waged concerning the regulatory doctrine to be adopted for the country. The highly subsided structure of tariffs and the absence of experience make the examination of the alternatives difficult®

This paper examines the dynamics of change and continuity in the internal organization of the Israeli State and in its role in the Israeli economy. The paper follows Majone's notion of change (the rise of the regulatory state) but qualifies it in several important respects. Change is presented as a dynamics from a "Services-provision State" to a "Regulatory state". The regulatory state is characterized as a positive and interventionist state rather than a night-watch state. The empirical analysis rests on comparative analysis of two sectors - telecom and electricity. The first and the second parts of the paper examine the processes of reform and liberalization in the Israeli telecom and electricity sectors. The third part reveals the paradox of liberalization without regulatory regime in telecom and of a regulatory regime without liberalization in electricity. Several possible explanations for this paradox and for the particular trajectory of liberalization in Israel - which are grounded in the fields of public policy and public administration - are examined in this part. The fourth and final part of the paper points to continuity amid change - its scope and extent is observed and defined in order to determine the limits of and on change.