<b>Bijsluiter</b>. De hyperlink naar het originele document werkt niet meer. Daarom laat Woogle de tekst zien die in dat document stond. Deze tekst kan vreemde foutieve woorden of zinnen bevatten en de opmaak kan verdwenen of veranderd zijn. Dit komt door het zwartlakken van vertrouwelijke informatie of doordat de tekst niet digitaal beschikbaar was en dus ingescand en vervolgens via OCR weer ingelezen is. Voor het originele document, neem contact op met de Woo-contactpersoon van het bestuursorgaan.<br><br>====================================================================== Pagina 1 ======================================================================

<pre>Infrastructures
time to invest
               AMSTERDAM UNIVERSITY PRESS
</pre>

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<pre>Infrastructures</pre>

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<pre>The Netherlands Scientific Council for Government Policy (wrr) was
established on a provisional basis in 1972. It was given a formal legal basis
under the Act of Establishment of June 30, 1976. The present term of
office runs up to December 31, 2007.
According to the Act of Establishment, it is the Council’s task to supply,
on behalf of government policy, scientifically sound information on
developments which may affect society in the long term, and to draw
timely attention to likely anomalies and obstacles, to define major policy
problems and to indicate policy alternatives.
The Council draws up its own programme of work, after consultation
with the Prime Minister, who also takes cognisance of the cabinet’s view
on the proposed programme.
This report was completed under the responsibility of the seventh
Council (2003-2007), which at the time had the following composition:
prof. dr. W.B.H.J. van de Donk (chairman)
prof. mr. dr. L. Hancher
prof. dr. P.A.H. van Lieshout
prof. dr. P.L. Meurs
prof. dr. B. Nooteboom
prof. dr. ir. G.H. de Vries
prof. dr. P. Winsemius
Executive director: prof. dr. A.C. Hemerijck
Deputy-director: dr. R.J. Mulder
Lange Vijverberg 4-5
P.O. Box 20004
2500 EA ’s-Gravenhage
Tel. +31 70 356 46 00
Fax +31 70 356 46 85
E-mail: info@wrr.nl
Internet: http://www.wrr.nl
</pre>

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<pre>               SCI EN T I FIC COUNCI L FOR GOVERNMEN T P OLIC Y
Infrastructures
time to invest
                Amsterdam University Press, Amsterdam 2008
</pre>

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<pre>Front cover illustration: © AP / Reporters
Cover design: Studio Daniëls, Den Haag
Layout: Het Steen Typografie, Maarssen
isbn        978 90 5356 605 3
e- isbn 978 90 4850 131 1
nur         741 / 754
© wrr / Amsterdam University Press, The Hague / Amsterdam 2008
All rights reserved. Without limiting the rights under copyright reserved above, no part of
this book may be reproduced, stored in or introduced into a retrieval system, or transmit-
ted, in any form or by any means (electronic, mechanical, photocopying, recording or
otherwise) without the written permission of both the copyright owner and the author of
the book.
</pre>

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<pre>VORR

WETENSCHAPPELIJKE RAAD VOOR HET REGERINGSBELEID

Aan de Minister-president
Voorzitter van de Ministerraad
De heer mr.dr. J.P. Balkenende
Postbus 20001

2500 EA Den Haag

ons kenmerk doorkiesnummer telefax
2008056/wvdd/mn 070-356 4691 070-356 4685
onderwerp email datum
WRR-rapport nr. 81 Sturen op voorzitter@wrr.nl 29 juli 2008
infrastructuren

Gelieve hierbij aan te treffen een door de WRR verricht onderzoek naar de borging van lange termijn
investeringen in vitale infrastructuren in de nieuwe institutionele context waarbinnen die infrastructuren
functioneren. Infrastructuren zoals (drink)waterleidingen, dijken, wegen, elektriciteitsnetten, spoorwegen
en gasleidingen zijn van levensbelang voor samenlevingen. Niet alleen voor het vervoeren en leveren van
de diensten, maar ook voor de bredere en toekomstige economische, ecologische en culture kwaliteit van
de samenleving. Om de kwaliteit van deze infrastructuren ook voor de toekomst te borgen moet er
worden geïnvesteerd. Voor enkele infrastructuren is de investeringsopgave juist nu heel urgent, aangezien
klimaatverandering en het opraken van fossiele brandstoffen systeeminnovaties vergen die grote
investeringen met zich meebrengen.

Het onderhavige rapport is vooral een signalerend rapport geworden. Uit het onderzoek blijkt dat alle
infrastructuren te maken hebben gekregen met meer of minder ingrijpende vormen van
regimeverandering (als gevolg van bijvoorbeeld liberalisering, privatisering, commercialisering). Dit heeft
de bestuurlijke en strategische context van infrastructuren aanzienlijk veranderd. Er zijn meer en ook
andersoortige spelers bijgekomen. Bovendien speelt de besluitvorming zich af op meer niveaus: lokaal,
regionaal, nationaal en Europees.

Het rapport signaleert in alle infrastructuren een potentieel risico voor de realisatie van lange termijn
publieke waarden. Deze risico’s hangen samen met de gerealiseerde regimeverandering, maar ook met de
nieuwe uitdagingen waarvoor de infrastructuren staan. Die regimeverandering is tot nu toe vooral gericht
op het vergroten van de efficiëntie en op het verbeteren van de dienstverlening. Er zijn ook belangrijke
resultaten geboekt ten aanzien van deze belangen. Maar andere, meer toekomstgerichte publieke
belangen, zoals innovatie, duurzaamheid en lange termijn beschikbaarheid en toegankelijkheid dreigen
ondergesneeuwd te raken door deze nadruk op de korte termijn belangen. De raad doet op basis van het
verrichte onderzoek suggesties voor een nieuwe strategische beleidsoriëntatie die, rekening houdend met
de verschillende aard en situatie van deze infrastructuren, voorziet in mogelijkheden die lange termijn
belangen beter in beeld brengen c.q. borgen,

Volgens de procedure van de instellingswet WRR ziet de raad graag de bevindingen van de ministerraad
tegemoet.

De voorzitter De secretaris

Ai

Prof.dr. W.B.H.J. van de Donk Prof.dr. A.C. Hemerijck
</pre>

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<pre>6</pre>

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<pre>                                                                                        contents
contents
Summary in Dutch                                                                     11
Executive summary                                                                   35
Preface                                                                             47
1       Introduction                                                                49
1.1     Why this report?                                                            49
        1.1.1   The vital (but often neglected) role of infrastructures             49
        1.1.2   The effects of integration and interdependence                      51
1.2     Regime change in infrastructures                                            51
        1.2.1   Five modes of regime change                                         52
        1.2.2   Two stages of regime change: ‘Type I’ and ‘Type II’ market failures 53
        1.2.3   The changing interaction between the public and the private         54
        1.2.4   Changing actors, various levels                                     55
1.3     The fundamental dilemma: The mission paradox?                               55
        1.3.1   Definition of the problem                                           56           7
1.4     Investment in infrastructures – a necessary focus                           57
        1.4.1   Critical investment decisions                                       58
        1.4.2   A sector-wide focus on investment                                   59
        1.4.3   Public values                                                       61
1.5     Challenges on investment decisions in infrastructures                       62
        1.5.1   Technological change                                                62
        1.5.2   New sources of investment gaining ground and diminishing public
                ownership/control                                                   63
        1.5.3   Climate change                                                      64
        1.5.4   The European dimension                                              64
1.6     Approach                                                                    65
1.7     Conclusion                                                                  67
2       Regime change and investment in infrastructures                              71
2.1     Introduction                                                                 71
2.2     The role of infrastructures                                                  71
2.3     The specifics of investment in infrastructures                              73
2.4     Regime change: An incomplete process                                        74
2.5     Defining liberalisation, privatisation, unbundling, corporatisisation and
        internationalisation                                                        77
        2.5.1   Liberalisation                                                      77
        2.5.2   Privatisation                                                       78
        2.5.3   Unbundling                                                          78
        2.5.4   Corporatisation                                                     79
        2.5.5   Internationalisation                                                79
</pre>

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<pre>  infr ast ruc t ures
               2.6    Continuous regime change and hybrid arrangements                           79
                      2.6.1   Intended and unintended consequences                                81
                      2.6.2   Direct and indirect consequences                                   82
               2.7    Function and governance                                                    83
               2.8    Results of regime change: Numerous and heterogeneous actors and
                      multi-levels                                                               84
               2.9    Conclusion                                                                 85
               3      A new constellation of actors                                              89
               3.1    Introduction                                                               89
                      3.1.1   Regime change: Rival actors, multiple principals and splintered
                              arenas                                                             89
               3.2    Splintered arenas                                                          91
               3.3    New actors                                                                 93
               3.4    Multiple principals and multiple agents                                    95
               3.5    Hybrids                                                                    96
                      3.5.1   Hybrid organisations                                               96
                      3.5.2   Public-private partnerships                                        97
                      3.5.3   Key observations with regard to hybrids                            98
8                     3.5.4   Changing role of government in multiple actor/multiple principal
                              settings                                                         100
               3.6    Conclusion                                                               102
               4      Infrastructures in a multi-level arena                                   105
               4.1    Introduction                                                             105
               4.2    Functional internationalisation of infrastructures                       106
               4.3    The European Union facilitating investment decisions in infrastructures  108
                      4.3.1   Internal market-related policies                                 108
                      4.3.2   Trans-European Networks (tens)                                   109
                      4.3.3   Critical infrastructures policies                                  111
               4.4    The eu constraining investment decisions in infrastructures                111
               4.5    New types of governance at the eu level: Governance through networks
                      and agencies                                                              114
                      4.5.1   Introduction                                                      114
                      4.5.2   Different types and developments                                  115
                      4.5.3   Accountability issues                                             118
               4.6    Conclusion                                                                119
               5      Regime change and public values in infrastructures                        123
               5.1    Introduction                                                              123
               5.2    What are public values in infrastructures?                               124
                      5.2.1   Public values or public interests?                               124
                      5.2.2   The debate in the early stages of regime change                  124
                      5.2.3   Public values and investment in infrastructures                  126
                      5.2.4   The dynamics of public values                                    126
                      5.2.5   Concluding remarks: Approach towards public values                128
</pre>

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<pre>                                                                                   contents
5.3 Institutional arrangements to realise public values                       128
    5.3.1    Independent economic regulation and public values                129
    5.3.2    Contracts and concessions and public values                       131
    5.3.3    Self-regulation and public values                                 132
    5.3.4    Concluding remarks: The need for review of the initial responses  133
5.4 Options for the review of the institutional arrangements                  134
    5.4.1    Review of the independent regulator                              134
    5.4.2    Bringing the state back in                                       136
    5.4.3    The two options combined                                          137
5.5 Conclusion                                                                138
6   Regime change and the investment in energy infrastructure                 141
6.1 Introduction                                                              141
6.2 Energy infrastructure and public values                                   142
6.3 Regime change in the Dutch energy sector                                  143
    6.3.1    The past                                                         143
    6.3.2    Regime change: New primary actors, new interest groups           145
    6.3.3    Regime change: Policy, public values and supervision             146
    6.3.4 Regime change: New markets and new transactions                     148
6.4 The regulatory regime in the energy sector: Static efficiencies and                     9
    unforeseen consequences                                                    151
    6.4.1    Regulation of tariffs and networks investment                     151
6.5 Future energy sector challenges                                            153
    6.5.1    Changing supply patterns                                          153
    6.5.2    The challenge of climate change                                  154
6.6 Examples                                                                   155
    6.6.1    The gas sector                                                    155
    6.6.2 Conflicting policy and regulatory objectives                         155
    6.6.3    Underground storage and transport: Where natural gas and carbon
             meet                                                             158
    6.6.4 The development of co2 sequestration facilities                      161
6.7 Experiences from abroad: Australia                                        165
6.8 Conclusion                                                                168
7   Conclusions and recommendations                                            175
7.1 Introduction – The challenges ahead                                        175
7.2 Regime change                                                             176
    7.2.1    The changing role of government under regime change               177
    7.2.2    Regime change: From a ‘Type I’ to a ‘Type II’ strategy           178
7.3 Public values in infrastructures                                          179
7.4 A new actor and a multiple level constellation: Consequences of the
    diagnosis                                                                 180
    7.4.1    Heterogeneous actors and multiple levels                         180
    7.4.2    Distrust and uncertainty, risks and rewards                       181
    7.4.3    Investment and its functions                                     182
    7.4.4 Different effects in different infrastructures                      183
</pre>

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<pre>   infr ast ruc t ures
                7.5    Towards a strategic policy framework: Redefine, realign and recalibrate    185
                7.6    Pillar I – Defining and redefining roles and responsibilities              185
                       7.6.1     The role of government                                          186
                       7.6.2     The role of ministers in evolving sectoral road maps             187
                       7.6.3     The role of independent regulators                               187
                       7.6.4     New roles for regulators?                                       188
                       7.6.5     New roles in system coordination                                189
                       7.6.6     Avoiding blurring of roles and interests                        190
                7.7    Pillar II – Realigning goals and resources: Exploring ways to join-up and
                       connect actors and levels                                                  191
                       7.7.1     Joined-up action at the political level                          191
                       7.7.2     Joined-up action at the regulatory level                         192
                       7.7.3     Conferral of concurrent powers                                   193
                       7.7.4     Multi-level joining up                                           193
                       7.7.5     Learning from Brussels?                                          193
                7.8    Pillar III – Recalibrating checks and balances                            194
                       7.8.1     A national super fund for infrastructures?                      195
                       7.8.2     Strategic public shareholdings                                  196
                       7.8.3     Procedural checks and balances                                   197
10                     7.8.4 Multilevel checks and balances                                      198
                7.9    Time to invest                                                            198
                Annex Characteristics of the physical infrastructures: An indicative
                       inventory                                                                 201
                Abbreviations                                                                    205
                Bibliography                                                                     209
</pre>

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<pre>                                                                                      summary in dutch
summary in dutch
inleiding
      In het politieke debat, in de kranten en op straat zijn heel wat zorgen te beluiste-
      ren over de staat van de Nederlandse infrastructuren. Het zijn zorgen over trei-
      nen die niet op tijd rijden, prijzen die alsmaar stijgen, energievoorziening die
      uitvalt en dijken die het dreigen te begeven. Al gauw wordt dan een verband
      gelegd met de liberalisering en privatisering die in de afgelopen vijftien tot twin-
      tig jaar hun intrede hebben gedaan in al onze infrastructuren. De marktwerking,
      zo valt overal, ook onder parlementariërs, te beluisteren, moet worden terugge-
      draaid en de overheid zou weer volledige zeggenschap moeten hebben over wat
      ‘van ons allemaal’ is. Met infrastructuren doelen we hier op de fysieke, onroe-
      rende voorzieningen die ons economisch leven onderbouwen: wegen en spoor-
      wegen, dijken en drinkwater, vliegvelden, riolering en afvalverwerking, elektri-
      citeit, gas en elektronische communicatie.
      De Wetenschappelijke Raad voor het Regeringsbeleid deelt deze conclusie niet,
      maar wel de onderliggende zorg om de huidige en toekomstige staat van de                         11
      Nederlandse infrastructuur. In de eerste fase van de introductie van de markt-
      werking is vooral gekoerst op vergroting van de efficiëntie en vergroting van de
      keuzevrijheid van consumenten. In vrijwel alle sectoren is daarbij winst behaald,
      doorgaans in het voordeel van de consument. Maar langetermijnwaarden, zoals
      innovatie, onderhoud, beschikbaarheid en duurzaamheid, zijn binnen het nieu-
      we regime zelden expliciet aan de orde gesteld. Ze dreigen daardoor minder
      aandacht te krijgen, waardoor kortetermijnwaarden (gericht op de individuele
      consument) bevoordeeld worden boven deze langetermijnwaarden (waarden
      die het individu overstijgen). In het wrr-rapport worden de eerstgenoemde
      waarden aangeduid als ‘Type i’-belangen en spreken we van ‘Type ii’-waarden
      als het gaat om de laatstgenoemde.
      Ervaringen uit het buitenland en wetenschappelijk onderzoek ondersteunen het
      vermoeden dat de huidige institutionele arrangementen onvoldoende in staat
      zijn om op de lange termijn dergelijke publieke waarden te realiseren. De vrees
      hiervoor wordt niet weggenomen als infrastructuren, en de dienstverlening die
      zij moeten garanderen, weer worden ondergebracht in een publiek monopolie:
      daartegen pleiten de daarmee verbonden risico’s van politiek opportunisme,
      verkokering en een te gering innoverend vermogen. Daarbij komt dat de fysieke
      netwerken van onze infrastructuren nauwelijks meer nationale netwerken zijn:
      ze zijn geïnternationaliseerd, ze zijn netwerken van netwerken geworden. In
      veel sectoren bestaat er gedetailleerde technische afstemming op internationaal
      niveau, maar ontbreekt de bestuurlijke en politieke besluitvorming op systeem-
      niveau van de infrastructuren. Een terugkeer naar nationale publieke monopolies
      vult dit democratisch hiaat niet.
</pre>

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<pre>   infr ast ruc t ures
                       Het is noodzakelijk voor het realiseren van ‘Type ii’-waarden dat voldoende
                       geïnvesteerd wordt in de toekomst. Sommige infrastructuren kampen met
                       achterstallig onderhoud, dat dringend ter hand moet worden genomen. In andere
                       sectoren vereisen uitputting van natuurlijke hulpbronnen en dreigende klimaat-
                       verandering een ingrijpende systeeminnovatie. In beide gevallen moet een over-
                       stap worden gemaakt naar een benadering waarbij investeren op lange termijn
                       voldoende aandacht krijgt. Daarbij gaat het om de vraag, of daarvoor in de situa-
                       tie van het nieuwe regime de garanties en voorwaarden aanwezig zijn, en zo niet,
                       hoe die gerealiseerd en georganiseerd kunnen worden.
                       Naar het oordeel van de Raad bieden investeringen in infrastructuur een helder
                       aanknopingspunt voor de vormgeving van een op de lange termijn gerichte stra-
                       tegische beleidsoriëntatie op deze problematiek. Van daaruit kunnen institutio-
                       nele arrangementen voor de infrastructuren worden ontworpen die recht doen
                       aan zowel doelen als efficiëntie en dienstverlening, alsook aan leveringszekerheid
                       op de lange termijn, innovatie en duurzaamheid. Lagere prijzen en consumen-
                       tenvrijheid zijn wezenlijk, maar nu gaat het ook om de lange termijn. In het
                       rapport Infrastructures: Time to Invest worden drie pijlers gegeven voor een
                       strategische heroriëntatie: nieuwe rollen en verantwoordelijkheden voor alle
12                     betrokken publieke en private partijen; nieuwe ‘checks and balances’ om de rollen
                       en verantwoordelijkheden van al die partijen te stimuleren en daarin tot een
                       nieuw evenwicht te komen, mede door de transparantie te vergroten; en nieuwe
                       verbindingen tussen de nu veelal versplinterde niveaus, zodat een gezamenlijke,
                       strategisch sterke visie op de toekomst tot stand kan komen.
                 infr astructuren in de schijnwerpers
                       Voorzieningen als drinkwater, mobiliteit, communicatie en energie zijn van
                       levensbelang voor het functioneren van de hedendaagse samenleving. Zonder
                       deze voorzieningen zou elke moderne samenleving instorten. Stroomstoringen
                       en treinongelukken drukken ons wat dat betreft regelmatig met de neus op de
                       feiten. Van even wezenlijk belang zijn de infrastructuren die ons beschermen
                       tegen overstromingen, evenals de elektronische communicatiemiddelen en het
                       transport over wegen en spoorwegen en door de lucht.
                       De slagvaardigheid van onze economie en de kwaliteit van onze samenleving
                       worden sterk beïnvloed door de doelmatigheid, kwaliteit en universaliteit van
                       deze voorzieningen. De aanwezige infrastructuur behoort tot de wezenlijke
                       randvoorwaarden als bedrijven beslissen om al dan niet op een bepaalde plaats te
                       investeren, hetgeen de weerslag van een efficiënte infrastructuur op economie en
                       samenleving nog vele malen vergroot. Vanwege hun kernfunctie, hun structuur
                       en het vereiste van gegarandeerde beschikbaarheid, heeft de overheid zich op een
                       andere manier beziggehouden met deze openbare voorzieningen dan met de
                       overige sectoren van economische bedrijvigheid. Ze zijn niet onvoorwaardelijk
                       aan de werking van de markt overgelaten.
</pre>

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<pre>                                                                               summary in dutch
De totale infrastructuur is ook van cruciaal belang voor het behoud van veilig-
heid en welzijn in een samenleving en een economie die in toenemende mate
van buitenaf onder druk worden gezet – zowel door een groeiende afhankelijk-
heid van externe natuurlijke hulpbronnen als door terroristische dreigingen.
Daarbij komt dat bepaalde infrastructuren een sleutelrol spelen in een succes-
volle overgang naar een duurzame, co2-vrije toekomst voor de wereldecono-
mie. Nederland, met zijn sterke afhankelijkheid van (steeds vaker geïmporteerd)
gas en kolen, zijn overbevolkte wegen, spoorwegen en luchthavens, en zijn
ambitie om een kennisintensieve samenleving te zijn, vormt hierop geen
uitzondering. Bovendien is er de noodzaak tot aanpassing van de Nederlandse
dijken, het watermanagement en de ruimtelijke ordening aan het stijgende
zeewaterpeil en de groter wordende druk op de rivieren. De kosten van een
overgang naar een duurzame toekomst zijn niet met zekerheid vast te stellen,
maar dat substantiële investeringen noodzakelijk zullen zijn, is zeker.
Wereldwijd zijn er voldoende illustraties te vinden van de cruciale rol die in-
frastructuren in ons dagelijkse leven spelen, maar ook van hun kwetsbaarheid.
De overstromingen in het zuiden van Engeland in juli 2007 stelden de elek-
triciteits- en drinkwatervoorziening tot het uiterste op de proef. Een belang-
rijke waterzuiveringsinstallatie begaf het en een groot tussenstation in het                    13
landelijke elektriciteitsnetwerk bleef met moeite overeind. De Russisch-
Oekraïense gascrisis in december 2005 onderstreepte eens te meer hoe kwets-
baar de Europese Unie is door haar groeiende afhankelijkheid van externe
energiebronnen. De dramatische stijging van de olieprijzen maakt dat beeld
nog grimmiger.
In Nederland hebben problemen in de elektronische communicatie en de
stroomvoorziening duidelijk gemaakt hoe belangrijk een betrouwbare infra-
structuur is. Softwareproblemen bij ProRail veroorzaakten in februari 2007 een
etmaal lang ernstige vertragingen in het spoorverkeer en in 2005 bleef Haaks-
bergen drie dagen lang van elektriciteit verstoken als gevolg van een netwerk-
storing. Grote stroomstoringen, bijvoorbeeld in 2001 in Californië en in 2003
in Londen, Rome en Noord-Italië, vestigden de aandacht op het belang van een
betrouwbare energievoorziening. Deze gebeurtenissen tonen niet alleen het
vitale belang van de infrastructuren voor onze samenleving aan, maar evenzeer
de dringende noodzaak van investeringen in het onderhouden ervan.
Omdat infrastructuren in toenemende mate geïntegreerd en vervlochten zijn,
kan een investeringsbeslissing (of het uitblijven daarvan) in een land ook een
directe invloed uitoefenen op de levensvatbaarheid van de infrastructuur in een
buurland. Zo hebben aanzienlijke investeringen in windenergie in Duitsland
geresulteerd in de noodzaak het Nederlandse hoogspanningsnet te versterken.
Het uitblijven van investeringen in hogesnelheidsspoorwegen in Duitsland
heeft daarentegen een zeer negatief effect gehad op de enorme investeringen in
de aanleg van de Betuwelijn. Vergelijkbare samenhangen en wederzijdse afhan-
kelijkheden zien we in de mobiele communicatie, waar de aarzeling van een
</pre>

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<pre>   infr ast ruc t ures
                       nationale regering om in te grijpen in hoge ‘roaming’ prijzen verijdelde dat
                       consumenten in andere landen konden profiteren van prijsverlagingen, en in de
                       afvalverwerking, waar een beleidswijziging in Duitsland belangrijke consequen-
                       ties had voor de organisatie van de afvalverwerking in Nederland.
                       Maar ondanks de cruciale rol die infrastructuren spelen in de hedendaagse
                       samenleving hebben de rails, de kabels en de buizen meer dan een eeuw lang
                       nauwelijks publieke belangstelling getrokken. Minder dan dertig jaar geleden
                       konden water-, telecommunicatie- en elektriciteitsmaatschappijen hun werk in
                       relatieve anonimiteit verrichten. Hoewel ze een sleutelrol hadden, stond hun
                       functioneren in het realiseren van bredere economische en maatschappelijke
                       doelen nauwelijks ter discussie; dit terwijl deze doelen toch uiteenliepen van
                       het verstrekken van goedkope energie aan grootverbruikers en het breed aanbie-
                       den van aardgas of kabeldiensten aan de Nederlandse huishoudens, tot universele
                       telefoondiensten voor alle consumenten in ons land. Paradoxaal als het wellicht
                       klinkt, was het de onzichtbare hand van de marktwerking die deze verwaarloosde
                       sectoren in de schijnwerper heeft geplaatst.
14
                 regimever andering in infr astructuren
                       Na de lange periode waarin infrastructuren zich in relatieve anonimiteit konden
                       ontwikkelen en hun diensten op een bijna vanzelfsprekende wijze aan de man
                       werden gebracht, is twintig jaar geleden een regimeverandering ingezet. Dit pro-
                       ces van regimeverandering is nog steeds gaande in vrijwel alle Nederlandse infra-
                       structuren. Het kan in grote lijnen worden omschreven als een overgang van een
                       publiek monopolie op het eigendom en het beheer van deze infrastructuren en
                       dienstverlening, naar een nieuwe situatie waarin meerdere publieke en private
                       partijen het eigendom en de verantwoordelijkheid delen op grond van uiteen-
                       lopende institutionele arrangementen.
                       De belangrijkste doelstelling van de regimeverandering was om een zekere mate
                       van concurrentie te introduceren, als een middel om de efficiëntie te verhogen
                       en om klantgerichtheid en keuzemogelijkheid te bevorderen. De regimeveran-
                       dering was mede gemotiveerd door de wens om politieke interventie en oppor-
                       tunisme binnen de infrastructuren terug te dringen door de ondernemingen
                       meer vrijheid toe te staan om commerciële in plaats van politieke doelen na te
                       streven. Het beleid was aldus meer op dienstverlening dan op de infrastructu-
                       ren zelf gericht.
                       De regimeverandering in de organisatie van de infrastructuren heeft uiteen-
                       lopende vormen aangenomen, die op verschillende momenten zijn geïntro-
                       duceerd. Deze vormen hebben gemeen dat ze worden gekenmerkt door een
                       onderstroom van institutionele liberalisering. Deze onderstroom kan op ver-
                       schillende manieren uitpakken. Het is van belang erop te wijzen dat regime-
                       verandering een voortdurend proces is, dat echter niet noodzakelijk in alle
                       sectoren tot dezelfde uitkomst leidt. De sectoren verschillen onderling immers
</pre>

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<pre>                                                                                                    summary in dutch
         substantieel. Zo is de manier waarop regimeverandering in de verschillende
         sectoren heeft plaatsgevonden afhankelijk van specifieke technische, institutio-
         nele en economische omstandigheden, eigenschappen en karakteristieken. De
         mogelijke keuzes kunnen dus sterk variëren, afhankelijk van context en beleids-
         voorkeur.
Vijf verschillende, elkaar soms overlappende vormen van regimeverandering kunnen worden
onderscheiden.
Liberalisering – In een sector worden concurrentiebeperkingen weggenomen, zodat meerdere
bedrijven kunnen concurreren in het aanbieden van goederen en diensten aan de consument. De
achterliggende gedachte is dat concurrentie leidt tot efficiëntere productie en derhalve tot lagere
prijzen. Voorbeelden van liberalisering treffen we aan in de energiesector, waar de exclusieve rech-
ten van GasUnie en regionale elektriciteitsbedrijven zijn afgeschaft en de netwerken zijn open-
gesteld voor concurrerende aanbieders (de introductie van benchmarks in bijvoorbeeld de water-
sector is ook een vorm van concurrentie, namelijk maatstafconcurrentie).
Privatisering – Het eigendom van een infrastructuur wordt overgedragen van de publieke aan de
private sector. Liberalisering en privatisering kunnen hand in hand gaan, maar dat hoeft niet.
Staatsbedrijven kunnen geliberaliseerd worden (zoals gas- en elektriciteitssectoren) en privatise-                   15
ring kan plaatsvinden zonder concurrentie te introduceren – het publiek monopolie wordt dan
vervangen door een privaat monopolie.
Splitsing – Verticaal geïntegreerde onderdelen van een activiteit worden opgesplitst in afzonderlijke
eenheden en overeenkomstig hun functie. Potentieel commerciële activiteiten kunnen zo geschei-
den worden van essentiële netwerkvoorzieningen. De opsplitsing van de voormalige geïntegreerde
Nederlandse Spoorwegen in een dienstverlener (ns) en onafhankelijke beheerder van het spoor-
netwerk (ProRail) is een goed voorbeeld.
Commercialisering – De trend om een infrastructuur die publiek eigendom is, te gaan beheren op
basis van commerciële managementprincipes. Voorbeelden zijn de afsplitsing van kpn uit het
ministerie van Verkeer en Waterstaat en de concentratie van gemeentelijke energiebedrijven in
regionale bedrijven in de jaren tachtig en negentig.
Internationalisering – De internationale handel, de fysieke verbinding van netwerken tussen
landen, internationale wetgeving en internationale samenwerking tussen landen, toezichthouders
en bedrijven.
         De verschillende modi van regimeverandering hebben, zoals gezegd, verschil-
         lende vormen aangenomen in de fysieke infrastructuren. De onderstaande tabel
         geeft hiervan een overzicht.
</pre>

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<pre>   infr ast ruc t ures
                   Tabel 1
                   Infra-                  Liberali-      Privati-                      Commer-       Internatio-
                   structuur               sering         sering         Splitsing      cialisering   nalisering
                   Riolering
                   Drinkwater                                                            
                   Afval                                                                             
                   Dijken                                                                
                   Wegen                                                                
                   Spoorwegen                                                                        
                   Vliegvelden                                                                        
                   Elektriciteit                                                                     
                   Gas                                                                               
                   Elektronische
                      communicatie                                                                   
                             De modus van regimeverandering is ten dele een politieke beslissing geweest: de
16                           spoorwegen en de energiesectoren zijn gesplitst, terwijl riolering en waterbedrij-
                             ven geïntegreerd zijn gebleven. In technisch opzicht hadden de laatstgenoemden
                             ook opgesplitst kunnen worden, maar de negatieve gevolgen daarvan, met name
                             de hoge transactiekosten, wogen zwaarder dan de veronderstelde voordelen van
                             splitsing. Daarnaast is de gekozen vorm van regimeverandering afhankelijk van
                             zekere technische kenmerken. Het kan bijvoorbeeld de vraag zijn of het mogelijk
                             is een tweede, concurrerend netwerk te creëren – met andere woorden: is een
                             netwerk een natuurlijk monopolie? In het geval van een natuurlijk monopolie
                             vereist de introductie van liberalisering of privatisering altijd een onafhankelijke
                             regelgeving. Op deze wijze beïnvloeden de technische kenmerken altijd het geko-
                             zen institutionele arrangement.
                             Een belangrijk gevolg van de regimeverandering is dat er nu meerdere en ander-
                             soortige partijen betrokken zijn bij de besluitvorming rond de infrastructuren.
                             Zo zijn er nieuwe partijen ontstaan en hebben oude partijen nieuwe rollen gekre-
                             gen. Er zijn zowel publieke als private partijen, er zijn partijen die verantwoorde-
                             lijk zijn voor de exploitatie van een netwerk, partijen met verantwoordelijkheid
                             voor de financiering en toezichthoudende partijen. De vroeger in dit terrein zo
                             dominante overheid is nu één speler te midden van al die andere. Beslissingen
                             aangaande infrastructuren worden nu ook op meerdere niveaus genomen: inter-
                             nationaal, Europees, regionaal, nationaal en zelfs lokaal. Dat geldt niet alleen met
                             betrekking tot supervisie en regelgeving, maar ook met betrekking tot de finan-
                             ciering van de infrastructuur.
                             Dit alles heeft geleid tot een versplintering in de transactieketen in de infrastruc-
                             turen. De keten is opgesplitst in afzonderlijke transacties, en verschillende
                             partijen met uiteenlopende belangen zijn nu betrokken bij verschillende delen
</pre>

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<pre>                                                                                           summary in dutch
       van de keten. De infrastructuur is gescheiden van de dienstverlening, regelgeving
       is gescheiden van de uitvoering, kortetermijntransacties zijn gescheiden van de
       langetermijntransacties en technische zaken zijn gescheiden van politieke zaken.
       Verschillende delen van de transactieketen worden dus uitonderhandeld tussen
       specifieke partijen die actief zijn in dat deel van de keten.
       Figuur 1 schetst de posities van de infrastructuren aan de hand van het aantal
       betrokken overheidsniveaus en aan de hand van het aantal betrokken partijen.
       De x-as loopt van sectoren waar partijen actief zijn die veel op elkaar lijken
       (bijvoorbeeld geïntegreerde drinkwaterbedrijven) naar de infrastructuren waar
       veel verschillende partijen actief zijn (bijvoorbeeld aannemers, onderaannemers,
       publieke dienstverleners, private dienstverleners, toezichthouders, private-
       equityfondsen, consumentenorganisaties). De y-as loopt van sectoren waar
       slechts sprake is van één (bestuurs)niveau naar de sectoren waar meerdere
       niveaus relevant zijn.
       Deze twee assen (mate van diversiteit van de partijen en het aantal lagen van
       bestuursniveaus) spelen in het wrr-rapport Infrastructures: Time to Invest een
       cruciale rol bij de analyse, omdat het twee belangrijke wijzigingen in de context
       van infrastructuren zijn als gevolg van de regimeverandering.                                          17
Figuur 1
                              meerdere niveaus
                                                                           elektronische
                                                                 energie
                                                                           communicatie
                                    wegen      vliegvelden
                         dijken
                                            spoorwegen
gelijksoortige                                                                     meerdere
   partijen,                         I                   afval                         en
  beperkt in                                                                      heterogene
    aantal             drinkwater     I                                             partijen
                                      I
                                      I
                          I
                            I
                      riolering   I I
                                  één niveau
</pre>

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<pre>   infr ast ruc t ures
                 efficiëntie en publieke waarden
                       In de eerste fase van regimeverandering in de Nederlandse infrastructuren heeft
                       sterk de nadruk gelegen op het afslanken van de voormalige staatsmonopolisten
                       en op bevordering van de keuzevrijheid voor de consument. In dit opzicht is de
                       regimeverandering in de meeste sectoren ook redelijk succesvol verlopen. Het
                       ministerie van Economische Zaken heeft eerder dit jaar geconcludeerd dat deze
                       inderdaad tot grotere keuzevrijheid en lagere prijzen heeft geleid in de elektro-
                       nische communicatiesector en dat er in de energiesector een duidelijke efficiën-
                       tiewinst is geboekt, die eveneens tot lagere prijzen voor de consument heeft
                       geleid.
                       Tegelijkertijd zijn echter ook de beperkingen van de introductie van marktwer-
                       king aan het licht gekomen. De grote nadruk op efficiëntieverhoging heeft de
                       institutionele en wettelijke kaders zozeer gedomineerd dat de inspanningen
                       vooral gericht zijn gebleven op statische effecten die op korte termijn zichtbaar,
                       meetbaar en geoperationaliseerd kunnen worden. De vraag is echter of de markt
                       in het huidige regime in staat is om adequaat in te spelen op publieke waarden
                       die relevant zijn voor de langere termijn. Bestaat niet het risico dat de markt
18                     zal falen waar het gaat om vraagstukken met betrekking tot innovatie en duur-
                       zaamheid, maar ook volksgezondheid en milieubescherming? Moet er, om
                       deze onzekerheden en risico’s af te dekken, op grote schaal worden geïnves-
                       teerd in onze infrastructuren? Er zijn, kortom, meer waarden in het geding
                       dan alleen consumentenbelangen op de korte termijn en de vraag is, of ook
                       die andere waarden met de huidige arrangementen voldoende gewaarborgd
                       zijn.
                       Dergelijke punten vragen doorgaans om dynamischer arrangementen, omdat
                       ze moeilijker te omschrijven zijn, nauwelijks meetbaar zijn en, anders dan
                       efficiëntievraagstukken, ook veel minder zichtbaar worden. Een publieke
                       waarde als ‘bescherming van de consument’ kan voor een deel nog gerealiseerd
                       worden via een maximumprijs die deze consument moet betalen voor een
                       dienst. Hoe staat het echter met de betrouwbaarheid van de netwerken op
                       langere termijn, de toegankelijkheid op langere termijn, innovatie, mobiliteit
                       en duurzaamheid? Deze waarden kunnen moeilijk in contracten en overeen-
                       komsten worden vastgelegd, omdat ze talloze dimensies omvatten die op
                       talloos verschillende manieren kunnen worden geïnterpreteerd.
                       Het proces van regimeverandering heeft zo de interactie tussen het publieke en
                       het private domein ingrijpend gewijzigd. De overheid kan niet langer voor-
                       schrijven dat bepaalde investeringen worden gedaan, omdat deze beslissing in
                       toenemende mate in handen is van commercieel georiënteerde (publieke of
                       private) ondernemingen en gebaseerd is op commerciële criteria. En deze
                       commercieel gemotiveerde partijen kijken met wantrouwen naar een overheid
                       die mogelijk zal interveniëren. Aanvullende of nieuwe regelgeving kan een
                       directe invloed hebben op het rendement van hun investeringen en op hun
</pre>

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<pre>                                                                                     summary in dutch
     commerciële vrijheid om te bepalen waar en wanneer er wordt geïnvesteerd.
     Private partijen die andere prioriteiten en ook andere mogelijkheden hebben,
     kunnen dan immers eieren voor hun geld kiezen.
     De belangrijkste vraag waar beleidsmakers in infrastructurele sectoren mee
     geconfronteerd worden, is dan ook hoe bredere publieke waarden gerealiseerd
     kunnen worden zonder dat ze een bedreiging vormen voor private investeringen.
     Een opportunistische, ad hoc politieke interventie zal nieuwe investeerders
     eerder afschrikken, omdat daarmee risico’s en onzekerheden gepaard gaan.
     Aandacht voor investeringen betekent het aanpakken van het probleem van een
     langeretermijndynamiek bij zijn wortels. Geenszins is het daarbij de bedoeling de
     huidige benadering met zijn nadruk op efficiëntie overboord te gooien, maar juist
     om deze aanzienlijk uit te breiden.
de noodzaak van investeringen
     Er is een cruciale fase ingetreden in het hiervoor beschreven proces van regime-
     wijziging. Over de gehele linie worden de infrastructuren in ons land (en daar-
     buiten) voor uitdagingen gesteld, die ingrijpende beslissingen vergen met betrek-
     king tot de toekomstige richting ervan. In aanvulling op de kortetermijnstrategie                19
     – de efficiëntieverhoging die centraal stond in de achter ons liggende periode –
     dient de aandacht nu onverwijld te worden gericht op de lange termijn. Hoe
     urgent dat is, is op uiteenlopende wijze in de verschillende infrastructuren zicht-
     baar geworden.
     In de energiesector is als gevolg van de uitputting van fossiele hulpbronnen en
     klimaatverandering behoefte aan een grote systeeminnovatie, in feite aan een
     geheel nieuwe infrastructuur. Bij de waterkering zijn nieuwe oplossingsrich-
     tingen geboden als gevolg van stijgende zeespiegels, heviger stormen en tur-
     bulenter stromende rivieren. In de Nederlandse rioleringssystemen zijn grote
     investeringen nodig om achterstallig onderhoud alsnog te verrichten. Bij de
     spoorwegen zijn investeringen geboden in veiligheid en beveiliging. Wegen en
     openbaar vervoer kampen met enorme files die dringend aangepakt moeten
     worden. In al deze gevallen zijn langetermijninvesteringen geboden, waarbij de
     strategie gericht moet zijn op het borgen van gemeenschappelijke waarden.
     Het realiseren van deze kritieke investeringen in infrastructuren is een
     complex proces waarin netwerkplanning, milieuplanning, ruimtelijke ordening,
     financiële beslissingen en soms ook regelgeving en overheidsgoedkeuring
     samenkomen. De verantwoordelijkheid voor de initiële besluitvorming over
     het type investeringen, over uitbreiding, onderhoud en bedrijfsvoering van de
     infrastructuren en over de financiering zullen van sector tot sector variëren.
     Waar het bijvoorbeeld het wegennet, de spoorwegen en de dijken betreft, is de
     toewijzing van budgetten een politiek besluit. In sectoren als gas, elektriciteit,
     water en elektronische communicatie zal een dergelijke beslissing eerder
     commercieel gemotiveerd zijn.
</pre>

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<pre>   infr ast ruc t ures
                       We kunnen een onderscheid maken tussen twee soorten investeringsbeslissin-
                       gen die nu urgent zijn. De eerste categorie betreft het grootscheepse onderhoud
                       en de nieuwe aanleg van infrastructuren waarbij bestaande technologieën
                       worden gebruikt – bijvoorbeeld de aanleg van wegen of de uitbreiding van het
                       spoorwegnet. De tweede categorie betreft investeringen in systeeminnovatie –
                       bijvoorbeeld de overschakeling op schone energiebronnen. Hiervoor zijn nieuwe
                       infrastructuren en nieuwe technologieën nodig. Het zijn de uitdagingen in
                       deze tweede categorie die, gezien het risico van marktfalen in de realisatie van
                       publieke waarden, vragen om een heroverweging van de publiek-private inter-
                       actie en de rol van de staat.
                       Investeringen in infrastructuur zijn een voorwaarde voor een adequate dienst-
                       verlening, nu, maar zeker ook in de toekomst. Als de huidige regimes die de
                       verschillende systemen beheren geen investeringen op lange termijn kunnen
                       realiseren, kan de levering van goederen en diensten die van levensbelang zijn
                       voor onze samenleving niet worden veiliggesteld voor de toekomst. De aandacht
                       moet nu worden verlegd naar het creëren van een stabiel en stimulerend kader
                       voor investeringen in infrastructuren op de lange termijn, waarbij kosten en
                       risico’s evenals beloningen en verantwoordelijkheden op de juiste wijze aan de
20                     betrokken partijen worden toebedeeld. Dit kan betekenen dat er nieuwe
                       bevoegdheden en taken worden toegekend aan toezichthouders die de realisatie
                       van publieke doelen moeten waarborgen.
                       Investeren in infrastructuur is een voorwaarde voor de realisatie van de publieke
                       waarden die met de infrastructuren geassocieerd worden. Infrastructuren
                       dienen ook bredere maatschappelijke doelen, waaronder de algemene economi-
                       sche ontwikkeling en duurzaamheid. Investeringen zijn, kortom, een belang-
                       rijk instrument om zowel publieke waarden op de korte termijn als op de lange
                       termijn veilig te stellen.
                 uitdagingen voor de toekomst
                       De dynamiek van het proces van regimeverandering in de Nederlandse infrastruc-
                       turen creëert fundamenteel nieuwe voorwaarden voor de te nemen investerings-
                       beslissingen. Er zijn verscheidene spelers op het toneel verschenen en het spel
                       wordt in meerdere arena’s gespeeld – soms over de landsgrenzen heen. Er zijn tal
                       van nieuwe uitdagingen, die de noodzaak van investeringen in infrastructuur
                       onderstrepen. Ook deze uitdagingen hebben een directe invloed op de kaders
                       waarbinnen regelgeving en toezicht zijn georganiseerd. Er is grote behoefte aan
                       structuren die de benodigde investeringen in de toekomst kunnen veiligstellen.
                       De wrr heeft drie nieuwe, inhoudelijke uitdagingen onderscheiden: technolo-
                       gische vernieuwingen, nieuwe investeringsbronnen en klimaatverandering.
                       Deze uitdagingen worden nog verder versterkt door de Europese dimensie, die
                       de laatste jaren een steeds grotere rol speelt in de besluitvorming rond de infra-
                       structuren.
</pre>

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<pre>                                                                              summary in dutch
Technologische ontwikkelingen zijn een belangrijke factor bij investeringsbeslis-
singen. Nieuwe technologische ontwikkelingen vereisen nieuwe arrangementen
voor toezicht. De toenemende verbondenheid van nationale elektriciteitsnetwer-
ken als gevolg van een groeiende handel over de landsgrenzen heen, vergt herzie-
ning van de strikt nationaal georganiseerde institutionele arrangementen. De
toenemende afhankelijkheid van buitenlandse aardgasbronnen vereist de aanleg
van ondergrondse opslagcapaciteit. Anderzijds kunnen technologische ontwik-
kelingen juist nieuwe vormen van bestuur en beheer mogelijk maken. Telefonie
en kabel waren aanvankelijk een natuurlijk monopolie vanwege de enorme
kosten van het dupliceren van de netwerken. Maar de opkomst van de elektro-
nische communicatie heeft het landschap ingrijpend gewijzigd: tegenwoordig
kunnen concurrerende netwerken diensten voor televisie, internet en telefonie
aan de consument aanbieden.
In sommige sectoren verloopt de technologische ontwikkeling razendsnel, zoals
in de elektronische communicatiesector. In andere sectoren gaat het veel trager.
Maar zelfs in de meer stabiele sectoren verandert de technologie en dat kan van
invloed zijn op het bestuur en beheer ervan. Zelfs in een ogenschijnlijk inerte
sector als de waterkering doen zich technologische vernieuwingen voor: in plaats
van het bouwen van steeds hogere en sterkere dijken, is het beleid nu gericht op               21
het geven van ruimte aan rivieren.
Na een periode van consolidatie en vaak internationale overnames, worden de
geprivatiseerde infrastructuren steeds vaker gezien als een aantrekkelijk doelwit
voor private vermogensinvesteerders. Deze nieuwe investeringsbronnen kunnen
pensioenfondsen zijn of andere institutionele investeerders, die voornamelijk
geïnteresseerd zijn in stabiele inkomsten uit gereguleerde infrastructurele secto-
ren. In bijvoorbeeld het Verenigd Koninkrijk is een aanzienlijk deel van de infra-
structurele sector al in handen van private-equityfondsen.
Wat is de betekenis van de internationaal opererende kapitaalmarkt voor beleids-
beslissingen om investeringen in Nederlandse infrastructuren veilig te stellen? Is
het voor ons nationaal beleid relevant dat de eigenaar van een Nederlandse infra-
structuur zijn hoofdkwartier in Australië, de Verenigde Staten of Koeweit heeft?
Vooralsnog zijn de meningen hierover verdeeld. Er zijn echter steeds vaker teke-
nen van bezorgdheid te bespeuren, zowel bij de overheid als in sommige sectoren
van de financiële gemeenschap, dat het groeiende aandeel private-equityfondsen
een bedreiging zou vormen voor de toekomst van infrastructuren. In het bijzon-
der worden vraagtekens geplaatst bij de bereidheid van dergelijke fondsen om
zich aan een langetermijninvesteringsstrategie te committeren. Bij het realiseren
van langetermijnstrategieën ondervinden zowel overheden als private partijen
dus nadelen. Een robuust regime zal om die reden zowel markt- als overheids-
falen moeten aanpakken. Daarmee komt de vraag naar voren of publieke waarden
en doelen wel realiseerbaar zijn binnen een infrastructuur die in handen is van
private-equityfondsen.
</pre>

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<pre>   infr ast ruc t ures
                       Ten slotte is er wereldwijd een klimaatverandering gaande. De schaal waarop
                       deze zich zal voltrekken en de gevolgen ervan zijn nog in belangrijke mate onze-
                       ker. Infrastructuren zijn echter kwetsbaar voor allerlei natuurlijke of door de
                       mens teweeggebrachte verstoringen. Klimaatverandering zou de productiviteit
                       van infrastructuren kunnen beïnvloeden, of de betrouwbaarheid ervan of zelfs
                       de vraag naar de diensten op basis van infrastructuren. Daarom kan de behoefte
                       ontstaan aan meer onderhoud of vernieuwing van wegen, start- en landings-
                       banen op luchthavens, spoorwegen, dijken en buizenstelsels, naarmate deze
                       bijvoorbeeld met grotere temperatuurfluctuaties worden geconfronteerd.
                       Anderzijds zijn de infrastructuren zelf juist nodig om het hoofd te bieden aan de
                       uitdagingen van klimaatverandering. Infrastructuren spelen bijvoorbeeld een
                       sleutelrol in de overgang naar een schone, co2-vrije economie. In ons land is de
                       infrastructuur ook nodig om de gevolgen van een klimaatverandering op te
                       vangen – een stijgende zeespiegel kan een bedreiging vormen voor onze dijken.
                       Zo heeft klimaatverandering dus een dubbel effect: er zijn veranderingen (lees:
                       investeringen) nodig om de infrastructuren zelf te beveiligen tegen klimaatver-
                       andering en tegelijkertijd zijn infrastructuren noodzakelijk voor het beveiligen
                       van de samenleving tegen de gevolgen van klimaatverandering.
22
                 de europese dimensie
                       De inhoudelijke uitdagingen die hiervoor zijn aangeduid, worden alledrie geïn-
                       tensifieerd door een Europese dimensie die aan het besluitvormingsproces rond
                       de infrastructuren is toegevoegd. In wezen is het een dubbele dimensie: de Euro-
                       pese Unie is enerzijds de aanjager van nieuwe ontwikkelingen in de infrastruc-
                       turen die ons voor de huidige problematiek stellen, anderzijds kunnen juist op
                       Europees niveau maatregelen worden genomen die helpen bij het vinden van de
                       juiste oplossingen.
                       Als een van de grootste drijvende krachten achter de regimeverandering in de in-
                       frastructuren heeft Europese regelgeving een grote invloed op het nationale beleid
                       uitgeoefend. Europese richtlijnen hadden voornamelijk tot doel nationale gren-
                       zen te doorbreken, zodat open en concurrerende Europese markten voor elektri-
                       citeit, gas en elektronische communicatie konden worden gerealiseerd. Ze moes-
                       ten nationale monopolies en exclusieve rechten en privileges uit de weg ruimen
                       om nieuwe, competitieve partijen toegang te verschaffen en de markt te openen
                       voor geïmporteerde goederen en diensten. En, wat even belangrijk is, ze moesten
                       nationale partijen de kans geven om een grotere, Europese markt aan te boren.
                       Aanvankelijk heeft de Europese interventie in infrastructuren de vorm aangeno-
                       men van richtlijnen die aanzienlijke ruimte lieten aan de lidstaten. Maatregelen
                       ter bevordering van de liberalisering hebben niet per se nationale regelgeving en
                       nationale publieke waarden overstemd. Onder bepaalde voorwaarden kunnen
                       nationale publieke waarden zelfs aangewend worden om het liberaliserings-
                       proces te temperen. De nationale infrastructurele regimes kunnen dus nog steeds
</pre>

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<pre>                                                                                         summary in dutch
          een afspiegeling zijn van nationaal beleid en nationale publieke waarden. Ander-
          zijds zijn infrastructuren zélf steeds minder nationaal van karakter.
          Maar deze relatief indirecte benadering is in vele infrastructuren langzaam aan
          het veranderen. Europese wetgeving en beleid worden steeds meer interventio-
          nistisch van aard. De ontwikkelingen op Europees niveau hebben niet alleen
          geleid tot de opkomst van nieuwe spelers en tot nieuwe rollen voor bestaande
          spelers, maar ook tot nieuwe podiums en niveaus waarop potentiële conflicten
          tussen nationale beleidsdoelen en commerciële doelen kunnen worden uitonder-
          handeld. Europese toezichthouders nemen meer en meer de plaats in van natio-
          nale institutionele arrangementen. Het wordt daardoor lastiger om nationale
          publieke belangen te waarborgen.
          Al met al hebben de ontwikkelingen op Europees niveau een belangrijke nieuwe
          en externe dynamische factor geïntroduceerd in het nationale besluitvormings-
          proces inzake investeringen in infrastructuren. Deze factor werkt op uiteen-
          lopende manieren door in de verschillende infrastructuren. Bij de spoorwegen
          heeft de Europese standaardisering en coördinatie al geleid tot de noodzaak van
          aanzienlijke nieuwe investeringen. Van andere infrastructuren, zoals de energie-
          sector, wordt verdergaande coördinatie en integratie verlangd om tegemoet te                    23
          kunnen komen aan nieuwe vraagpatronen.
          De rol van de nationale overheid is dus aan ingrijpende veranderingen onder-
          hevig. Deels wordt de overheidsrol meer en meer op Europees niveau ingevuld.
          Voor een ander deel blijft er echter een substantiële rol voor de nationale overheid
          bestaan.
Tabel 2
Sector                                                   Uitdagingen
                           Technologie        Nieuwe inves-       Klimaat-           Europa
                                              teringsbronnen      verandering
Riolering                                                          
Drinkwater                                                         
Afval                                                                                
Dijken                                                                               
Wegen                                                                               
Spoorwegen                                                                            
Vliegvelden                                                                          
Elektriciteit                                                                        
Gas                                                                                  
Elektronische
   communicatie                                                                      
</pre>

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<pre>   infr ast ruc t ures
                       Tabel 2 geeft de uitdagingen weer waarmee de diverse infrastructuren op korte
                       termijn (in de komende vijf jaar) in Nederland worden geconfronteerd.
                 een str ategische heroriëntatie
                       Infrastructuren dienen niet alleen als vehikel van belangrijke diensten, ze zijn
                       ook een voorwaarde voor de economische, sociale en culturele ontwikkeling van
                       een gebied. Dit is een belangrijke reden dat de overheid zich in het verleden op
                       alle fronten heeft bemoeid met infrastructuren. In veel infrastructuren was de
                       overheid als publieke monopolist de eigenaar, de beheerder en de manager van de
                       infrastructuren.
                       In het proces van regimeverandering is de infrastructuur inmiddels op afstand
                       van de overheid gekomen. In de eerste fase van dat proces waren de inspanningen
                       van zowel de overheid als van de infrastructuurbeheerders gericht op het goed
                       functioneren van de markt van diensten, op het vergroten van de efficiency en
                       het verbeteren van de dienstverlening aan de (nationale) consument. Het proces
                       heeft echter ook een grote mate van versnippering opgeleverd in de transactie-
                       keten van de infrastructuren, doordat het aantal betrokken partijen, elk met
24                     onderscheiden belangen, sterk is gegroeid. Ook is er een grote diversiteit ontstaan
                       in de niveaus waarop besluitvorming plaatsvindt.
                       Langzamerhand worden de risico’s duidelijk die hierin liggen besloten. Publieke
                       waarden die op een langere termijn spelen, lijken door de inzet in de eerste fase
                       onvoldoende te zijn gewaarborgd. Het gaat daarbij om waarden die inherent zijn
                       aan de dienst die over de infrastructuur wordt verleend, zoals leveringszekerheid
                       op de lange termijn, maar ook om waarden die betrekking hebben op het bredere
                       maatschappelijke belang van infrastructuren, bijvoorbeeld innovatie en duur-
                       zaamheid.
                       De grote opgave die hier centraal staat, is om institutionele arrangementen voor
                       infrastructuren te ontwerpen die zowel waarden als efficiëntie, dienstverlening
                       en optimaal functioneren van de markt kunnen realiseren (‘Type i’-publieke
                       waarden), alsook publieke waarden als leveringszekerheid op de lange termijn,
                       innovatie en duurzaamheid (‘Type ii’-publieke waarden). Dit moet bovendien
                       plaatsvinden in een context die wat betreft het aantal partijen, de diversiteit van
                       de partijen en het aantal niveaus waarop beslissingen worden genomen (lokaal,
                       regionaal, nationaal én Europees) aanzienlijk is veranderd.
                       Voor de nieuwe institutionele arrangementen in infrastructuur heeft de wrr een
                       nieuwe beleidsoriëntatie ontwikkeld die uit drie pijlers bestaat, die in de hierop
                       volgende hoofdstukken worden toegelicht en uitgewerkt:
                       • nieuwe rollen;
                       • nieuwe verbindingen;
                       • nieuwe ‘checks and balances’.
</pre>

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<pre>                                                                                     summary in dutch
     Uitgangspunt bij deze nieuwe beleidsoriëntatie is dat deze alleen haar vruchten
     kan afwerpen als alle partijen zich binden aan de ‘Type ii’-publieke waarden,
     zoals leveringszekerheid op de lange termijn, innovatie en duurzaamheid.
nieuwe rollen
     De regimeverandering in de infrastructuren heeft, zoals hierboven al is aangege-
     ven, tot gevolg gehad dat er nu veel meer partijen betrokken zijn bij de besluit-
     vorming, die bovendien op meerdere niveaus plaatsvindt. Dat heeft consequen-
     ties voor de functies die vervuld moeten worden om tot investeringen te komen:
     informatievoorziening, toekomstvisie, agendering, doelen stellen, politieke
     besluitvorming, wet- en regelgeving, financiering, projectplanning, toezicht,
     enzovoort. De opgave bij nieuwe rollen is vooral het opsporen van rollen die nu
     onvervuld blijven, het toewijzen van nieuwe rollen die zijn ontstaan als gevolg
     van de regimeverandering en het uiteenrafelen van rollen als er ongewenste
     combinaties ontstaan.
     In Infrastructures: Time to Invest beschrijft de wrr hoe sommige van die func-
     ties – die vroeger in één hand berustten – nu verspreid zijn over verscheidene
     partijen. De overheid is niet meer de enige en alwetende partij die beslist, im-                 25
     plementeert en toezicht houdt. Sommige functies die noodzakelijk zijn voor het
     investeren in infrastructuur, blijven in de nieuwe situatie onvervuld. Het gaat
     vooral om de rollen van informatieverzameling, strategieontwikkeling en
     toezicht. Ook zijn sommige functies tegenwoordig gecombineerd binnen één
     partij. Deze combinaties zijn echter niet altijd even wenselijk of haalbaar, vooral
     als het gaat om een combinatie van de rollen van scheidsrechter, financier en
     politieke besluitvormer. Ten slotte kunnen naast of bovenop de bestaande func-
     ties nog nieuwe functies worden onderscheiden. Met name bij invoering van
     liberalisering van infrastructuren met natuurlijke monopolies is toezicht nood-
     zakelijk geworden – een rol die voorheen door de publieke infrastructuurorgani-
     satie intern werd vervuld.
     Een implicatie die niet altijd goed is gezien, is dat de rol van systeemcoördinatie
     op een passende wijze opnieuw vorm moet worden gegeven, nu de oude invul-
     ling daarvan in onbruik is geraakt.
     Gezien deze feiten bepleit de wrr een nieuwe definitie van de rollen, functies en
     verantwoordelijkheden die noodzakelijk zijn om investeringen te kunnen reali-
     seren. Zo moet dringend aandacht worden besteed aan combinaties van rollen die
     vóór de regimeverandering in de infrastructuur geen probleem opleverden, maar
     gaandeweg dat proces wel problematisch zijn geworden. Dit is vooral van belang
     bij infrastructuren waar commercialisering heeft plaatsgevonden – en dus niet
     privatisering, liberalisering of internationalisering – namelijk de publieke organi-
     saties die nu commercieel gemanaged worden. In de drinkwatersector, bijvoor-
     beeld, bestaat geen verplichting om de winsten die de drinkwaterbedrijven
     maken, te herinvesteren in de infrastructuur. Maar in de afgelopen tien jaar zijn
</pre>

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<pre>   infr ast ruc t ures
                       de drinkwaterbedrijven wel veel commerciëler gaan opereren. In situaties waar
                       publieke organisaties een commerciële drijfveer hebben gekregen en waar geen
                       onafhankelijk toezicht is ingesteld, is speciale aandacht geboden voor investe-
                       ringsfuncties als toezicht en arbitrage, omdat deze het moeilijkst zijn te combine-
                       ren met een commerciële zienswijze.
                       Het gaat echter niet alleen om het ontrafelen van bestaande combinaties van
                       rollen, maar ook om het identificeren van nieuwe rollen, in het bijzonder het
                       toezicht op monopolies. In geen enkele van de in het wrr-rapport bestudeerde
                       infrastructuren vindt momenteel op systematische of structurele wijze toezicht
                       op en beoordeling van investeringen plaats. Waar er al sprake is van toezicht,
                       gebeurt dat vooral indirect, bijvoorbeeld door de kwaliteit van de dienstverlening
                       en de onderbrekingen in de voorziening van water, gas of elektriciteit te meten.
                       Het meten van kwaliteit is uiteraard noodzakelijk, maar onvoldoende. De
                       kwaliteit van de dienstverlening geeft immers uitsluitend inzicht in de huidige
                       staat van de infrastructuur, terwijl investeren een langetermijnkwestie is. Als op
                       dit moment onvoldoende onderhoud wordt gepleegd, zal dit zich pas over enkele
                       decennia gaan uiten in een meetbare kwaliteitsvermindering.
26                     In sommige infrastructuren hoeft een gebrek aan toezicht niet problematisch te
                       zijn, namelijk waar de marktpartijen nieuwe infrastructuren kunnen neerzetten
                       om te voldoen aan de vraag naar nieuwe diensten. Een voorbeeld is de elektroni-
                       sche communicatie, waar afschrijvingstermijnen relatief kort zijn en waar markt-
                       partijen onderling hevig concurreren. Maar in infrastructuren waar de afschrij-
                       vingstermijnen lang zijn of waar ze een natuurlijk monopolie vormen, kunnen
                       de betrokken organisaties niet op kortetermijninvesteringen realiseren. Daar is
                       langetermijnplanning nodig om publieke waarden en doelen als leveringszeker-
                       heid, innovatie en duurzaamheid te bereiken. Voor dergelijke niet-concurrerende
                       monopolies beveelt de wrr het monitoren van de investeringen aan.
                       Toezicht op investeringen kan verschillende institutionele vormen aannemen.
                       De benadering die in Australië is gekozen voor de elektriciteitssector (en die in
                       het wrr-rapport is geanalyseerd), zou tot voorbeeld kunnen strekken voor de
                       Nederlandse situatie. In een geprivatiseerde context is daar een nationale net-
                       werkmonitor ingesteld, die over de nodige technische expertise beschikt om de
                       behoefte aan onderhoud en investeringen te identificeren en die technische plan-
                       nen kan opstellen en investeringsvereisten in kaart kan brengen. De wrr beveelt
                       aan om de mogelijkheid van de introductie van een (publieke) netwerkmonitor
                       te onderzoeken. Afhankelijk van de vraag of het fysieke netwerk al dan niet grens-
                       overschrijdend is (de netten voor drinkwater zijn bijvoorbeeld lokaal, maar de
                       netten voor elektronische communicatie en elektriciteit zijn grensoverschrij-
                       dend), zou ook overwogen kunnen worden om een Europese monitor in te stellen.
                       Door bij het herinrichten van een infrastructurele sector gebruik te maken van de
                       pijler ‘nieuwe rollen’, wordt bijgedragen aan de realisatie van ‘Type ii’-publieke
                       waarden die voorheen onvoldoende geborgd waren. Denk bijvoorbeeld aan het
</pre>

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<pre>                                                                                   summary in dutch
     expliciet toedelen van de rol van toezicht op investeringen. De toedeling van
     deze functie aan een onafhankelijke toezichthouder maakt het mogelijk dat er
     in een sector beter gestuurd en afgerekend wordt op het onderhoud van de infra-
     structuur en de investeringen daarin. Zonder een dergelijke heroriëntatie op de
     rollen zou de publieke waarde van langetermijninvesteringen ondergesneeuwd
     kunnen raken.
nieuwe verbindingen
     Regimeverandering in de infrastructuur heeft niet alleen nieuwe partijen – vaak
     met uiteenlopende belangen – opgeleverd. Ook spelen besluitvormings- en
     onderhandelingsprocessen zich op verscheidene niveaus af. De wrr beveelt
     aan om nieuwe verbindingen te creëren tussen de versplinterde arena’s, gezien
     de noodzaak van een brede strategische visie op investeringsbeslissingen – met
     name waar deze systeeminnovaties ‘Type ii’-publieke waarden betreffen.
     Het is de rol van de overheid om een horizontaal gestructureerde dialoog tot
     stand te brengen tussen de betrokken partijen en tussen de verschillende arena’s,
     om bruggen te slaan tussen concurrerende belangen. Daarbij ligt de nadruk niet
     op het coördineren van processen of het vervangen van versplinterde processen                  27
     door een top-downbenadering. In plaats daarvan is het belangrijk om de uitkom-
     sten van die versplinterde processen te verbinden en op één lijn te brengen. Een
     inhoudelijke nadruk op de realisatie van de ‘Type ii’-waarden door alle betrokken
     partijen is hierbij noodzakelijk.
     Deze pijler van de beleidsoriëntatie heeft de toegevoegde waarde dat rekening
     wordt gehouden met het groeiende aantal niveaus in de infrastructuur dat wordt
     bevolkt door internationale netwerken van experts, toezichthouders en beheer-
     ders, systeemgebruikers en serviceproviders en, in mindere mate, eindgebrui-
     kers. Deze netwerken zorgen voor een schat aan kennis en expertise, maar ook
     voor een breed scala van visies en meningen over definitie, prioritering en realisa-
     tie van publieke waarden. Wij bespreken hieronder vier soorten van verbindin-
     gen: de verbinding tussen verschillende en concurrerende expertises; de verbin-
     ding tussen departement en toezicht; de verbinding tussen de relevante partijen
     binnen een infrastructuur; en ten slotte de verbinding tussen toezichthouders.
     ‘Nieuwe verbindingen’ kunnen helpen om de expertise die in verschillende groe-
     pen wordt voortgebracht effectief te gebruiken voor nationaal infrastructuurbe-
     leid. Ter inspiratie zouden de praktijken op Europees niveau kunnen dienen.
     Daar laten kleine groepen van functionarissen zich leiden door de inbreng van
     externe, vaak concurrerende soorten expertise die soms ook verschillende be-
     langen hebben. Op dit moment maken nationale beleidsmakers nog onvoldoende
     gebruik van het potentieel van dit proces van concurrerende expertiseontwikke-
     ling. Om te beginnen kunnen nationale beleidsmakers actief gebruikmaken van
     de concurrerende visies op infrastructuur die nu al op Europees niveau beschik-
     baar zijn, afkomstig van belangenbewegingen (bijvoorbeeld de consumenten-
</pre>

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<pre>   infr ast ruc t ures
                       bond en de milieubeweging), Europese overkoepelende organisaties van
                       toezichthouders of netwerkbeheerders.
                       Een verdere behoefte aan nieuwe verbindingen heeft betrekking op de aanslui-
                       ting van de ontwikkeling van langetermijnstrategieën op de betrokken departe-
                       menten en het sectorale toezicht op infrastructuren dat zich baseert op beperkte
                       kortetermijndoelen. Ook hier moet strategische coördinatie tot stand worden
                       gebracht via horizontale verbindingen, opdat de uitdagingen waarvoor de infra-
                       structuren op de lange termijn staan, inderdaad worden opgepakt.
                       De wrr beveelt aan dat er een gezamenlijke risicostrategie wordt ontwikkeld,
                       waarin de betrokken partijen (departementen, toezichthouders en dienstverle-
                       ners, systeemgebruikers en consumentenorganisaties) gezamenlijk onzeker-
                       heden en risico’s in kaart brengen, bijvoorbeeld door scenario’s op te stellen die
                       door alle partijen als haalbaar en realistisch worden gezien, inclusief een dege-
                       lijke kosten-batenanalyse. Deze aanpak heeft als voordeel dat partijen zich
                       binden aan de uitkomsten van deze strategie. Deze gezamenlijke aanpak kan
                       verschillende (institutionele) vormen aannemen. Op het niveau van toezicht
                       zou bijvoorbeeld naar Brits model een formele ‘Gezamenlijke Strategie Groep’
28                     met een permanent secretariaat kunnen worden ingesteld als platform voor
                       sectoroverkoepelende aangelegenheden als het ontwikkelen van ‘best practices’.
                       Van daaruit zou ook de ontwikkeling van sectorspecifieke regimes ter hand
                       kunnen worden genomen.
                       Een ander voorbeeld van nieuwe verbindingen betreft intensieve samenwerking
                       tussen de toezichthouders. Zij zouden daarmee een meer proactieve rol kunnen
                       spelen in de omgang met nieuwe problemen en uitdagingen. De urgentie van
                       samenwerking wordt zichtbaar bij de recente opkomst van private-equity- en
                       sovereign-wealthfondsen. Toezichthouders als de Directie Toezicht Energie van
                       de nma of de Vervoerskamer beschikken niet over de nodige expertise om finan-
                       ciële strategieën te beoordelen. De Autoriteit Financiële Markten daarentegen
                       beschikt op dit terrein over meer kennis en ervaring waarmee de andere toezicht-
                       houders hun voordeel zouden kunnen doen. Door op deze wijze in specifieke
                       gevallen onderling expertise te ‘poolen’, zouden deze organen veel effectiever
                       kunnen optreden.
                       Het is eveneens van essentieel belang dat nationale beleidsmakers doordrongen
                       raken van de toegevoegde waarde van nieuwe, internationale netwerken, zodat
                       ze kunnen leren van ervaringen in andere infrastructuren en in andere landen.
                       Ook hiervan is een bijdrage te verwachten voor het beoordelen en evalueren van
                       ‘best practices’. Het verbinden van de resultaten van internationale netwerken
                       met nationale doelen zou toevertrouwd kunnen worden aan de voorgestelde
                       Gezamenlijke Strategie Groep.
                       De pijler ‘nieuwe verbindingen’ draagt dus op verschillende manieren bij aan het
                       realiseren van ‘Type ii’-publieke waarden op de lange termijn. De verbinding
</pre>

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<pre>                                                                                     summary in dutch
     tussen toezichthouders en ministeries helpt om stabiliteit en duidelijkheid in een
     infrastructuurbeleid te vergroten. Die visie zou niet alleen moeten gaan over één
     kabinetsperiode, maar zou een langere termijn moeten behelzen. Op deze manier
     kunnen private partijen gestimuleerd worden om langetermijninvesteringen
     (mede) te financieren, zo was ook de conclusie van een recent onderzoek naar
     infrastructuren van het Britse House of Lords. In dit advies is voorgesteld dat
     ministeries en toezichthouders gezamenlijk beleidsdoelen op hoofdlijnen voor
     een periode van minstens vijftien jaar overeenkomen, uiteraard met behoud van
     parlementaire bevoegdheden om hierin in te grijpen. Maar de bewijslast wordt
     zwaarder als het parlement wil inbreken op een langetermijnvisie, zo is het argu-
     ment. Op dit moment ervaren partijen die willen investeren in infrastructuur
     nog te veel onzekerheid over de koers die verschillende ministeries en toezicht-
     houders de komende jaren willen varen.
     Bovendien draagt de pijler van ‘nieuwe verbindingen’ bij aan de ontwikkeling
     van een gemeenschappelijke visie, niet alleen tussen overheidspartijen, maar
     tussen alle partijen die relevant zijn vanuit investeringsoogpunt. Met name door
     de gemeenschappelijke risicoanalyse wordt voorkomen dat overheden plannen
     voorbereiden die volgens de organisaties uit de sector niet haalbaar of niet wense-
     lijk zijn. Deze oefening mondt uit in breed draagvlak en brede betrokkenheid.                    29
     Dit is vooral noodzakelijk voor infrastructuren die voor een systeeminnovatie
     staan, omdat zonder deze verbindingen de innovatie niet wordt bereikt.
     Een laatste voordeel van ‘nieuwe verbindingen’ betreft het manco dat het huidige
     institutionele arrangement te eenzijdig en soms uitsluitend gericht is op het
     kortetermijnbelang van de nationale consument. Als het systeem al aan de orde
     is, gaat het slechts om nationale pijpen, netwerken, buizen, dijken en wegen.
     Er is onvoldoende aandacht voor de fysieke systemen, zeker waar deze de lands-
     grenzen overschrijden. Nieuwe verbindingen tussen departementen en toe-
     zichthouders, tussen nationale en Europese lagen, maar ook tussen politiek en
     nieuwe belangengroepen en nieuwe groepen die over expertise beschikken,
     zorgen ervoor dat het fysieke systeem weer in het centrum van de aandacht kan
     worden geplaatst.
nieuwe checks and balances
     De omstandigheden waaronder infrastructurele organisaties opereren, zijn de
     afgelopen vijftien jaar drastisch gewijzigd. Toch wordt nog vaak vertrouwd op
     het systeem van ‘checks and balances’ dat onder het oude regime is ontwikkeld.
     Een voorbeeld is dat in een aantal sectoren waarin organisaties met publieke
     aandeelhouders opereren, het toezicht op investeringen intern wordt uitgeoe-
     fend (door de raad van commissarissen). Maar in de loop van de regimeverande-
     ring zijn vrijwel alle prikkels in en op het infrastructuurbedrijf gericht op het
     vergroten van de efficiëntie. De nadruk op efficiëntie die op korte termijn gereali-
     seerd en beloond wordt, is een risico voor de realisatie van langetermijnwaarden.
     Een ander voorbeeld van verouderde checks and balances in de huidige situatie is
</pre>

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<pre>   infr ast ruc t ures
                       dat specifieke bepalingen voor de verhouding eigen vermogen en vreemd ver-
                       mogen in infrastructuurbedrijven veelal ontbreken. In een wereld waarin
                       private-equityfondsen en sovereign-wealthfondsen actief op zoek zijn naar
                       stabiele investeringen, kan dit een risico zijn voor de financiële gezondheid van
                       infrastructuren.
                       We mogen niet verwachten dat het oude systeem van checks and balances recht
                       kan doen aan de dynamiek van de huidige omstandigheden, waarin – als gevolg
                       van de integratie van infrastructuren in de markt – meerdere partijen en meer-
                       dere niveaus betrokken zijn bij de besluitvorming en waarin zeer complexe en
                       vaak concurrerende belangen met elkaar verzoend moeten worden.
                       Volgens de wrr moet een derde pijler van de strategische beleidsoriëntatie
                       daarom bestaan uit het ontwikkelen van adequate checks and balances die onder
                       meer de commerciële oriëntatie van de meeste infrastructurele organisaties weer-
                       spiegelen. Voorbeelden die hieronder nader worden besproken zijn het verster-
                       ken van de positie van belangenverenigingen, het instellen van nieuwe belangen-
                       verenigingen, het doen van reguliere evaluaties van infrastructuurbedrijven
                       waarin ook hun strategie wordt geëvalueerd en ten slotte het aanstellen van onaf-
30                     hankelijke leden van de raden van commissarissen in infrastructuurbedrijven die
                       in publieke handen zijn.
                       De wrr beklemtoont dat het systeem van checks and balances een vorm moet
                       krijgen die politiek opportunisme uitsluit, vooral omdat de belangrijkste finan-
                       cieringsbronnen voor investeringen in de markt moeten worden gevonden.
                       Vanzelfsprekend is het zo dat publieke beleidsprioriteiten om legitieme redenen
                       moeten kunnen worden aangepast. Dan moet echter worden voorzien in wel-
                       overwogen stimulansen die nodig zijn om eventuele investeringsrisico’s af te
                       dekken die daaruit kunnen voortvloeien. Ook dienen er voldoende procedurele
                       waarborgen te zijn, zodat het proces van ontwerp en implementatie van een
                       gezamenlijke planning zo transparant mogelijk is voor de betrokken partijen in
                       de verschillende arena’s.
                       In dit kader stelt de wrr voor om de taken en het doel van de toezichthouders
                       duidelijker te definiëren. Als de taken van de toezichthouder worden uitgebreid
                       met de realisatie van publieke waarden, moet de armslag die de toezichthouder
                       heeft, duidelijk worden vastgelegd in wetgeving en in heldere richtlijnen van de
                       regering. Het is immers de taak van regering en parlement – en niet van toezicht-
                       houders – om de belangen van de burger te definiëren en te bevorderen. Daarmee
                       is niet gezegd dat de overheid hier een monopoliepositie zou moeten krijgen. De
                       eerder geschetste situatie waarin gemeenschappelijk aan strategieontwikkeling
                       wordt gedaan, is daar een rem op. Ook kan een uitgebreide, onafhankelijke rol
                       voor eindgebruikers en consumenten(organisaties) in dit verband een adequaat
                       mechanisme van checks and balances vormen.
</pre>

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<pre>                                                                               summary in dutch
Verder meent de wrr dat procedurele checks and balances vergezeld dienen te
gaan van ministeriële en parlementaire checks and balances. Een brede, reguliere
evaluatie door de overheid van de functies van de infrastructuur zal veel effectie-
ver zijn dan de huidige werkwijze, waarin slechts sprake is van beperkte evalua-
ties van de toezichthouders door externe adviesbureaus. Een duidelijk mandaat
voor toezichthouders om ook op strategisch gebied rekenschap tegenover de
betrokken ministers en een kamercommissie af te leggen in plaats van slechts
over en naar aanleiding van incidenten, zou de voorkeur verdienen. De wrr
benadrukt hierbij dat meer aandacht moet worden geschonken aan resultaat-
analyses en aan de ontwikkeling van adequate indicatoren en ‘benchmarks’.
In dit opzicht kunnen Europese netwerken van toezichthouders een schat van
vergelijkende informatie aandragen die bruikbaar is in de nationale context.
In het rapport van de wrr wordt erkend dat het buitengewoon moeilijk zal zijn
om adequate checks and balances te ontwerpen voor besluitvormingsarena’s die
meerdere niveaus bestrijken. Momenteel wordt ook weinig aandacht besteed aan
dit probleem. Maar als de verantwoordelijkheid voor de goedkeuring van lange-
termijninvesteringsplannen en van afzonderlijke investeringsbeslissingen naar
een Europees orgaan wordt verlegd (zoals al is voorgesteld voor elektronische
communicatie en energieagentschappen), verdient deze dimensie serieuze en                       31
urgente aandacht.
De wrr bespreekt in zijn rapport ook de mogelijkheid die de overheid in prin-
cipe heeft om strategisch gebruik te maken van haar aandeelhouderschap in
geprivatiseerde bedrijven, ten einde invloed uit te oefenen op de realisatie van
publieke waarden in deze organisaties. Een dergelijk gebruik zou echter zeer wel
ten koste kunnen gaan van de prestatie en waarde van de betreffende onderne-
ming. Toezicht, bij voorkeur door een onafhankelijke instantie, lijkt daarom een
potentieel meer geschikt – want minder beperkend en meer transparant – middel
om publieke beleidsdoelen te bereiken.
Tegelijkertijd geeft het aandeelhouderschap de overheid wel toegang tot waarde-
volle informatiebronnen aangaande infrastructuren, bijvoorbeeld ook in infra-
structuren die nu het doelwit worden van buitenlandse sovereign-wealthfond-
sen. In deze context kan overheidsparticipatie op een horizontale basis – als een
van verscheidene aandeelhouders – een belangrijk potentieel controlemiddel
vormen. Hoe dan ook, naar de mening van de wrr moet vervaging van rollen en
verantwoordelijkheden worden voorkomen. Een strikte scheiding tussen beleid
en zakelijke doelen moet gehandhaafd worden, bijvoorbeeld via protocollen die
worden opgesteld tussen de minister van Financiën (als aandeelhouder) en de
functionele ministers die verantwoordelijk zijn voor het beleid.
Ten slotte merkt de wrr op dat checks and balances niet alleen van toepassing
moeten zijn tussen de betrokken partijen; ook binnen organisaties moeten ze
versterkt worden. Gemeenten en provincies, bijvoorbeeld, hebben nu vaak
verschillende petten op: ze zijn aandeelhouder in een nutsbedrijf, maar ook zijn
</pre>

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<pre>   infr ast ruc t ures
                       ze de politiek verantwoordelijke toezichthouder (als lid van de raad van commis-
                       sarissen) en bovendien klant. In zeker twee van die rollen zal het langetermijn-
                       belang van investeringen in de infrastructuur niet hoog op de agenda staan.
                       De wrr pleit daarom voor toevoeging van deskundige leden aan de raad van
                       commissarissen die niet worden benoemd vanwege hun banden met de aandeel-
                       houders, maar vanwege hun expertise.
                       Met de regimeverandering in de infrastructuren is de aandacht gericht op
                       contracteerbare, zichtbare, afrekenbare en kwantificeerbare waarden. Door de
                       juiste checks and balances kunnen echter ook de langetermijnwaarden, de
                       onzichtbare, kwalitatieve waarden, worden ingebracht in het afwegingsproces,
                       zelfs als die zich niet zo gemakkelijk laten kwantificeren en contractueel laten
                       afdwingen.
                 tot slot
                       Bij het ontwerpen van een nieuw institutioneel arrangement voor een infrastruc-
                       tuur zijn de hiervoor beschreven pijlers voor strategische beleidsoriëntaties alle
                       drie van belang. Vanwege de aanmerkelijke verschillen tussen infrastructuren
32                     varieert de toepassing van deze oriëntaties. Zo is van belang of er concurrentie
                       tussen infrastructuren mogelijk is of niet, over welke periode de afschrijving
                       plaatsvindt, de tot nu toe doorgevoerde regimeverandering en ook de uitdagin-
                       gen waarvoor de sector momenteel staat – is er een grote systeeminnovatie nodig,
                       of gaat het om onderhoud?
                       Voor de analyse van de toepassing van pijlers voor de verschillende infrastruc-
                       turen, is gebruikgemaakt van Figuur 1 (pagina 13). In onderstaande figuur is
                       aangegeven hoe de drie pijlers van een strategische beleidsoriëntatie passen in de
                       kwadranten.
                       Voor álle infrastructuren geldt: nieuwe rolverdeling. In alle sectoren moet de
                       minister inventariseren waar gaten zijn gevallen in rollen, waar onwenselijke
                       combinaties van rollen zijn ontstaan (bijvoorbeeld arbiter en speler) en waar
                       nieuwe rollen zijn ontstaan als gevolg van marktwerking of commercialisering
                       (onafhankelijke toezichthouder op investeringen).
                       De tweede strategische beleidsoriëntatie, nieuwe verbindingen, is vooral van
                       toepassing op infrastructuren die gekenmerkt worden door een hoge mate van
                       versplintering onder de betrokken partijen en in de besluitvormingsarena’s.
                       Verticale integratie van de infrastructuurbedrijven is hier mogelijk noch wense-
                       lijk. Publieke waarden op de lange termijn zouden echter krachtiger gerealiseerd
                       worden als toezichthouders, ministeries en de infrastructuurorganisaties hori-
                       zontale verbindingen met elkaar aangaan.
                       Voor infrastructuren waar de betrokken partijen redelijk homogeen zijn en die
                       bovendien vaak nog nationaal georiënteerd zijn, is aandacht voor nieuwe checks
</pre>

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<pre>                                                                                               summary in dutch
Figuur 2      Drie pijlers van strategische beleidsoriëntatie in de kwadranten
    i                                                                                         ii
                                     meerdere niveaus
                                                                                   elektronische
                                                                       energie     communicatie
          nieuwe rollen
 nieuwe checks and balances
                                                                             nieuwe rollen
                                         wegen         vliegvelden
                                                                         nieuwe verbindingen
                                 dijken
                                                   spoorweg
                                                                                       veel en
gelijksoortige
                                                                                  verschillende
    partijen                                          afval
                                                                                      partijen
                                drinkwater
          nieuwe rollen
 nieuwe checks and balances                                        nieuwe rollen                                33
                             riolering
   iv                                    één niveau                                           iii
        and balances van belang. Immers, deze vaak nog publieke organisaties hebben een
        winstoogmerk ontwikkeld (met uitzondering van riolering) en worden expliciet
        afgerekend op efficiëntie (bijvoorbeeld via benchmarks), wat een kortetermijn-
        doel is. Om juist in deze infrastructuren ook de publieke waarden op de lange
        termijn te realiseren, is deze aandacht voor checks and balances nodig.
        Met deze strategische beleidsoriëntatie is geen kant-en-klaar institutioneel arran-
        gement ontworpen voor alle infrastructuren. Maar het is wel duidelijk geworden
        dat er een reëel risico bestaat dat publieke waarden op de lange termijn als inno-
        vatie, duurzaamheid en langdurige beschikbaarheid en toegankelijkheid van de
        infrastructuren op het tweede plan geraken indien de institutionele arrangemen-
        ten niet worden herzien. Als we ook de publieke waarden in de Nederlandse
        infrastructuren op de lange termijn willen blijven realiseren, is een strategische
        heroriëntatie op de drie pijlers noodzakelijk. Deze heroriëntatie resulteert in een
        investeringsopdracht in beleid, institutionele arrangementen en in de harde
        infrastructuur.
</pre>

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<pre>   infr ast ruc t ures
34
</pre>

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<pre>                                                                                 executive summary
executive summary
Drinking water supply, mobility, communications and energy are critical for the
functioning of contemporary society. Without these services all modern societies
would collapse, as major energy blackouts and train accidents often remind us.
Equally indispensable are the infrastructures that enable the protection against
flooding, that facilitate electronic communications and transport by road, rail
and air.
The efficiency of the entire economy is heavily influenced by the effectiveness,
quality and universality of these infrastructures. They are priority factors in loca-
tional decisions for investment by firms in many industries. The effects of effi-
ciency and universality ripple throughout the economy and society in a manner
that multiplies their direct impact many times. Because of their core functions,
infrastructures and the services they deliver (also referred to as public utility
services) have been treated differently from other sectors of industry and have
not been simply left to market forces.
Core infrastructures have become truly critical infrastructures – in the sense that                35
they are key to continued societal and economic security and well-being in the
face of external threats. Such external threats may be brought about by factors
such as a growing dependence on external natural resources and terrorist threats.
Indeed, these threats are increasingly recognised by policy makers both at the
European and the national level. At the same time, infrastructures are also seen
as the key to a successful transition towards a low-carbon sustainable future for
most of the world’s economies. The Netherlands, with its heavy reliance on
(increasingly imported) gas and coal, its overcrowded roads, railways and airports
and its ambitions to become a knowledge intensive society, is no exception. In
addition there is the need to adjust the Dutch flood protection, its water manage-
ment and spatial planning to the challenges of sea level rising and increasingly
violent run-off of rivers. The costs of transition to a sustainable future are both
uncertain, as well as enormous in monetary terms (Euro 2 billion a year in the
near future, according to the Energy Transition Platform). Thus, system innova-
tion is necessary in various infrastructures. In others, maintenance will require
substantial investments in the future.
Why this repor t: From a ‘ Type I’ to a ‘ Type II’-strategy
Over the last two decades most infrastructures have been subject to significant
regime change, which led to more emphasis being put on service delivery, lower
prices and enhanced consumer choice, together with a greater concern for effi-
ciency. In fact, five modes of regime change may be identified: liberalisation,
privatisation, unbundling, corporatisation and internationalisation. Liberalisa-
tion concerns the opening up of an infrastructure to allow for competition in
supplying goods and services to consumers. Privatisation involves a transfer of
ownership from the public to the private domain. Internationalisation refers to
</pre>

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<pre>   infr ast ruc t ures
                       the processes involving a transfer of functional operations and in some cases,
                       governance aspects of infrastructures to a supra-national level. Unbundling
                       concerns the splitting up of vertically integrated undertakings into separate units.
                       Lastly, corporatisation involves the trend in which publicly owned infrastruc-
                       tures are increasingly managed according to commercial or market based ‘princi-
                       ples’. In virtually all infrastructures, effects of regime change can be distin-
                       guished, albeit that these various modes of regime change have been introduced
                       in the various infrastructures at different times with varying scope.
                       Regime change in infrastructures has to a large extent lived up to its original
                       objectives. However, problems and limitations of regime change have also mani-
                       fested. First of all, regime change in some cases has created a bias towards short-
                       term interests at the expense of long-term investment requirements. A singular
                       eye on static efficiency runs the risk of undermining relevant public values like
                       accessibility, affordability, reliability as well as wider economic and societal
                       concerns, including the environment and public health. Second, a narrow focus
                       on service delivery is likely to crowd out attention to the quality of physical infra-
                       structures. Thus, the initiative drive of regime change has tailored to address
                       what are called in this report ‘Type I’ market failures (i.e. lacking or improper
36                     market functioning). What is needed today is a strategy that effectively addresses
                       ‘Type II’ market failures (i.e. ineffective and/or inefficient realisation of long
                       term – public – values).
                       In the light of the foregoing, the central question of this report is: what strategic
                       policy is necessary to secure long term investment in physical infrastructures
                       under the new conditions brought about by the process of regime change and in
                       the light of the future challenges which these infrastructures are required to
                       meet.
                       Achieving both ‘Type I’ and ‘Type II’ values requires major investments in
                       infrastructures. Investments offer, therefore, a relevant lead for designing a new
                       strategic policy framework. On the basis of such orientations, institutional
                       arrangements may be created that serve both short term values such as efficiency
                       and service provision and long term values such as security of supply, innovation
                       and sustainability.
                       The effects of regime change
                       A strategic policy framework must be related to the current situation in infra-
                       structures, which is characterised by the effects of regime change. Firstly, regime
                       change has led to a change in actor constellation in infrastructures. Not only has
                       the number of actors increased, but also the heterogeneity of actors. Instead of
                       one public monopolist, infrastructures now consist of a mix of public and
                       private parties, regulators, consumer watchdogs etcetera. Secondly, the number
                       of levels on which the decision making, financing, development of expertise,
                       monitoring, supervision and regulation takes place, has increased too. The Euro-
                       pean Union has become an ever more relevant governance level, other interna-
</pre>

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<pre>                                                                                   executive summary
tional, regional and local authorities have become increasingly relevant as well.
Not only supervision and regulation, but also financing infrastructures is nowa-
days a concern of multiple levels of governance. These two developments (change
of actor constellation and shift towards multiple levels) taken together result in
a splintered transaction chain, in the sense that investment decisions are often
made in bilateral and discrete relations (for example between regulator and net
manager). Different actors with differing interests are involved in different parts
of the ‘decision chain’. Consequently, infrastructures are separated from service,
regulation is separated from implementation, short term transactions are sepa-
rated from long term transactions and technical issues are separated from politi-
cal issues.
Obviously, regime change has had different consequences in the various infra-
structures. Introducing concrete modes of regime change has been in part a politi-
cal decision. Railways and energy infrastructures have been unbundled, while
sewerage and water infrastructures have remained integrated. Although
unbundling would have been a technical possibility in these infrastructures, for
reasons of high transaction costs it was decided not to turn to this particular
mode of regime change. Regime change is also dependent on technical character-
istics. A natural monopoly in an infrastructure requires independent regulation                      37
in case of liberalisation or privatisation. This may not be so if it is possible to
create alternative, competing infrastructures.
Consequently, the role of the state has changed substantially across the various
infrastructures. By and large and in most cases, the role of the state as owner,
planner, financer and operator of the majority of the national infrastructures has
been severely challenged with the introduction of market-based principles. Thus,
the process of regime change has created critical dilemmas for future infrastruc-
tural provisions and investments, which is referred to as the ‘mission paradox’
in this report. As part of the regulatory bargain of institutional liberalisation, the
state has relinquished direct responsibility for the operation of infrastructures, to
a multitude of actors. At the same time, even if policy makers and regulators are
increasingly operating at a distance in the interest of effective consumer demand
and delivery, they cannot relinquish responsibility altogether. Public policy
remains critical in ascertaining whether infrastructural provisions remain able to
meet and uphold (long term) public values.
The actor constellation and the constellation of governance levels are decisive for
understanding the consequences of regime change in infrastructures. Therefore,
these dimensions are used to cluster the various infrastructures. Thus, a template
is created on the basis of x: homogenous and heterogeneous actor constellation
and y: single/multi-levels. Figure 1 aims to provide an indicative ‘snapshot’ of the
historical/critical and current position of the various infrastructures. The dotted
lines (which depict the position of the sector some twenty years ago) illustrate
the dynamics in the position of the different infrastructures.
</pre>

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<pre>     infr ast ruc t ures
                    Figure 1         Infrastructures in a multi-level and heterogeneous-actor constellation stakeholders
                                                             multi-level
                           i                                                                                         ii
                                                                                                    electronic
                                                                                         energy
                                                                                                  communication
                                                              roads        airports
                                                    dikes
                                                                      railways
                     homogeneous                                                                       heterogeneous
                                                               ■                 waste
                        actor                                                                              actor
                     constellation                                                                     constellation
                                                  drinking     ■
                                                   water       ■
                                                               ■
                                                    ■
                                                      ■
38                                               sewage      ■■
                           iv                                                                                        iii
                                                            single-level
                                A strategic policy framework needed based on three pillars
                                The WRR recommends to develop a strategic policy framework for the realisa-
                                tion of both ‘Type I’ and ‘Type II’-public values in a heterogeneous actor and
                                multi-level constellation. To this end, the wrr has developed three pillars:
                                – define and redefine roles and responsibilities;
                                – realign goals and resources through joining-up and connecting actors and
                                   levels; and
                                – recalibrate risks and rewards through the elaboration of appropriate checks and
                                   balances.
                                The wrr recommends that any institutional design in infrastructures should
                                combine these three pillars. However, given the substantial differences between
                                infrastructures, the employment, scope and relative weight of the pillars will
                                differ.
                                Pillar I: Redefine roles and responsibilities
                                A robust strategic policy framework requires the clear recognition and proper
                                allocation of roles and responsibilities to the various actors involved to avoid
                                default reliance on hierarchical, top-down interventionism. It is equally neces-
                                sary to ensure a clear allocation of roles and responsibilities for implementation
                                and for the constant evaluation of this process in order to engender commitment
</pre>

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<pre>                                                                                 executive summary
and trust. Finally, the allocation of new roles may be necessary to address the
specific consequences of regime change in certain sectors.
The wrr therefore advocates a (re)definition of functions, roles and responsi-
bilities that are necessary for the realisation of investment. Redefining roles and
responsibilities ensures that actors in infrastructures are guided by multiple
incentives, instead of mainly commercial and short term incentives.
The role of government
Given the consequences of regime change, as analysed in this Report, a return to
direct state intervention in investment decisions is no longer a realistic or fruitful
option in the liberalised sectors.
A frequently heard political claim is for a return to the old paradigm of top down
planning and state-controlled monopolies or even ‘national champions’. Yet to
conclude that this approach would be either desirable or possible is to ignore, that
infrastructures have become in many sectors, not only a global good as opposed
to national or local tool for industrial policy, but also an important, stable and
predictable source of revenue for private investors as well as public shareholders,
who may in turn be responsible for at least partly financing new investment.
The complexity of the heterogeneous actor and multiple level exacerbates the
problem of asymmetrical information- given their operational responsibilities-                     39
the sectors themselves are the primary locus of detailed economic as well as
technical knowledge and expertise. Full stakeholder involvement is necessary
to ensure both the quality and eventual success of any longer term institutional
arrangements for infrastructural provision.
The role of ministers in evolving Sectoral Road Maps
The evolution of sectoral roadmaps should be conceived as a form of strategic
dialogue and partnership between the relevant stakeholders. The primary role of
ministers should be to ensure that national policy strategies for major infrastruc-
ture developments are drawn up and revised at regular intervals. These strategies
could be prepared in the first instance by a panel of independent advisors who
would in turn draw on the expertise of a wide range of stakeholders, and who
would provide informed and non partisan advice on the objectives to be met and
the options for meeting them.
The Role of Independent Regulators
The process of regime change has generated new institutions, such as specialised
economic regulators, with specific roles. In the sectors in which independent
regulators are well established, this has led to a clearer demarcation between
political and regulatory authority that enhances regulatory stability, creating a
better climate for investment, and with it the realisation of longer-term public
values. The relationship between regulators and responsible ministers should be
re-considered as a target for realignment if the regulators are entrusted with the
implementation of wider public value tasks. Regulators must continue to play a
valuable role in the development of a strategic long term perspective. However, if
independent regulators are to assume wider responsibilities for achieving social
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<pre>   infr ast ruc t ures
                       and economic objectives this must be under clear political guidance, regularly
                       updated on the basis of consistent monitoring processes, and stipulating how, as
                       a matter of principle, trade-offs should be made.
                       New role in system coordination
                       In infrastructures in which the regime mode consists of corporatisation (and not
                       liberalisation, privatisation or internationalization), special attention should be
                       given to undesirable combinations of roles. An infrastructure organisation that is
                       now commercially operating (in the drinking water sector for instance) may no
                       longer be entrusted with all the functions necessary to realize investments. An
                       external monitoring or refereeing role may be a useful mechanism to counter the
                       disadvantages of hybridity and to directly address the merits of ploughing back
                       profits into new investment in infrastructures.
                       Similarly, the disentanglement of combined roles and the assignment of new func-
                       tions must be addressed. For example, in none of the infrastructures studied in
                       this Report investment is monitored and assessed in a systematic and structural
                       way. This may cause serious problems for infrastructures with long depreciation
                       periods and for infrastructures with a (natural) monopoly in which infrastructure
40                     organisations cannot realize the investment in a short time span. For these non-
                       competitive national monopolies, the wrr recommends obligatory monitoring of
                       the quality and the level of investment of infrastructures. Thus, the identification
                       of where and when major investments or maintenance are required is secured.
                       The wrr recommends investigating the possibility of the introduction of a public
                       network monitor in the Dutch context, after the example of the Australian national
                       monitor which is independent from both politics and industry.
                       Avoiding Blurring of Roles and Interests
                       Explicit attention to allocating clear responsibilities for monitoring may ensure
                       that the multiple, and often hybrid actors and organisations are guided by multi-
                       ple longer term incentives in the public interest.
                       Pillar II: Realign goals and resources – exploring ways to join-up and
                       connect actors and levels
                       An emphasis on joining-up and horizontal coordination is required to devise as
                       well as implement and monitor sectoral strategies to ensure their full success.
                       Joined up action at all different stages of the process of designing and operational-
                       izing a strategic perspective will provide greater certainty and clarity for the vari-
                       ous actors involved with the infrastructures and engenders trust and commit-
                       ment. Furthermore, the process of joining up or re-connecting encourages and
                       improves coordination across and between the different splintered arenas, creat-
                       ing openings for an alignment of competing interests.
                       Joined-up action at the political level
                       In sectors in which competition between networks is not economically feasible,
                       joining up at political the political level may be realised by a joint mapping
</pre>

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<pre>                                                                                   executive summary
approach in which the parties involved (ministries, regulator and service
providers, system users and organisations representing final customers) together
map the uncertainties and risks, for example by outlining scenarios that all parties
regard as possible and realistic.
Joined up action at regulator y level
Maximizing various ways of reconnecting actors and levels can be an important
guiding principle for the potential for regulators and regulation to realize long term
perspectives, and for securing a coherent and consistent approach to monitoring
and evaluating the objectives they seek to promote. Possibilities in this regard
are the exchange of information between relevant regulators and promoting
regulatory learning or installing a formal Joint Regulator Group with a perma-
nent Secretariat in order to promote a platform for ‘joined up thinking’ on cross-
infrastructural regulatory issues (after the proposal of the UK House of Lords).
Similarly, a joined up regulatory process could be deployed to assess the advan-
tages and disadvantages of formal as opposed to informal regulatory instru-
ments.
Conferral of concurrent powers
The conferral of joint regulatory powers may allow infrastructural regulators to                     41
take a more proactive role in dealing with certain novel issues or new challenges.
The possibility to jointly investigate certain issues across infrastructures could
also be considered.
Multilevel joining up and Learning from Brussels
It is vital to recognize the value of the output which trans-national networks offer
to national policy makers to formulate a more structured and at the same time
sufficiently flexible approach, to learn form experience in other sectors and from
other countries, to establish a clear, stable framework for assessing and evaluating
best practices. This potential for national bodies this is currently unexplored
territory and deserves serious attention.
The Council stresses the opportunities for government as a manager of the ‘net-
work of networks’ to harness the deliberative processes developing within these
networks to enrich both policy formation and regulatory policy at national level.
A structured link between regulators and ministries helps to increase policy
stability and coherence. Moreover, realigning contributes to the development of a
joint strategy, which involves not just state actors, but all actors that are relevant
in the light of investment in infrastructures. This contributes to support and
commitment. The resulting shared vision should extend over a longer period
than just one cabinet term, in this way, uncertainty is reduced which may stimu-
late private actors to finance long term investments.
Pillar III: Recalibrate Checks and Balances
Substantive and procedural checks and balances ensure that longer term objec-
tives are realized in practice, but without sacrificing flexibility. It follows that the
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<pre>   infr ast ruc t ures
                       processes of redefining roles and aligning goals and resources may need to be
                       supported by an adequate system of checks and balances which can ensure a fair
                       and transparent allocation of investment risks and rewards.
                       In particular careful attention has to be paid to the requisite incentives for the
                       various parties involved to commit to new investment. To mitigate the inevitable
                       regulatory uncertainty and risk that attends major system innovation, urgent
                       attention should be given to recalibrating incentive mechanisms and instru-
                       ments. Although joined-up action and the institutionalisation of horizontal link-
                       ages and regulatory learning has considerable potential, this type of governance
                       approach will be more powerful with the right incentives structures and (even)
                       unattractive ‘penalty defaults’ in place.
                       A National Super fund for Infrastructures?
                       Certain exogenous developments are likely to put enormous financial pressures
                       on infrastructures in order to meet the challenge, for example the transition to
                       a low carbon economy. A state-sponsored investment fund – a Superfund for
                       investment in infrastructures – could be created to ensure that critical invest-
                       ments are realised on time.
42
                       Strategic public shareholdings
                       The present policy of the Dutch government to exercise its shareholding rights in
                       companies in which it still maintains a financial interest with restraint (Wilkes-
                       huis 2008; De Pree 2008 and Kenniscentrum voor ordeningsvraagstukken 2006),
                       is now being actively re-considered (Tweede Kamer 2007-2008, 24036, nr. 345).
                       The Council considers that the eventual (re-) deployment of strategic public
                       shareholdings must be evaluated in the context of regime change as analysed in
                       this Report.
                       The added value of a strategic shareholding as a means to achieve public objec-
                       tives is questionable. The Council subscribes to the conclusions put forward in a
                       report by the Kenniscentrum voor ordeningsvraagstukken (2006). A strategic
                       shareholding is only one of a number of mechanisms that can be employed as a
                       form of check (chapter 5). Regulation may be seen as a potentially less restrictive
                       and more transparent means of achieving public policy objectives than strategic
                       public shareholdings, especially if carried out by an independent regulatory
                       authority.
                       At the same time, it may be acknowledged that the retention of public shares may
                       also provide government with a right to be well informed as a shareholder, and to
                       have access to valuable sources of information in sectors where new actors are
                       emerging. In this type of context, government participation on a horizontal basis,
                       but on an equal footing with other shareholders, could provide an important
                       potential check. Finally, participation by a state-owned company in new ventures
                       can also be used to serve commercial objectives, and can prove a useful mecha-
                       nism for encouraging major new investments.
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<pre>                                                                            rapporten aan de regering
If strategic shareholdings are to be actively used in any sector, a strict separation
between policy and business objectives should be maintained and blurring of
roles and responsibilities should be avoided. The Council is of the opinion that
supervision by an independent regulator with an extended mandate to address
‘Type II’ public values is a preferable alternative to strategic shareholdings, given
that transparency and accountability can be more effectively guaranteed.
Procedural Checks and Balances
The evolution of a joint strategic roadmap will also result in better checks and
balances. The Council suggests that the duties of regulators/supervisory bodies
need to be defined more clearly. If an expansion of the economic regulators’
duties to include the realisation of more open-ended public interest objectives is
deemed necessary, then the scope of the regulators’ powers should be circum-
scribed by legislation, and accompanied by clear guidelines issued by ministers in
accordance with legislation. In the Council’s view, the interests of citizens and
general public are for government and parliament – and not regulators – to define
and promote. However, an enhanced, independent role for end-users and
consumers may also be considered.
Multi-level checks and balances                                                                       43
The Council recognizes that devising adequate checks and balances on multi-
level arenas are especially problematic. Very little attention is currently paid to
this aspect by policy makers. But if responsibility for approving long-term
investment plans as well as individual investment decisions shifts to a European
body – as is now proposed with respect to the new electronic communications
and energy agencies (see chapter 6) – serious and urgent consideration must be
given to this dimension to . There is a pressing need to devise better and more
open processes of accountability, which could be a task for the Joint Regulatory
Group.
.
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44
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<pre>                                                                                     preface
 preface
This report has been prepared by an internal project group of the wrr. The group
consisted of prof.dr. Leigh Hancher as member of the Council, and staff members
dr. Willemijn Dicke (project coordinator), mr.dr. Ton van den Brink, dr. Aad
Correljé (external advisor), drs. Gera Arts and drs. Niels Feitsma. In addition,
ir. Marten Jorritsma contributed to this report for a year during the course of the
project.
The analyses in this report are, in part, based on studies conducted by externals at
the request of the Council. These studies will be published simultaneously with
the report in the series ‘Verkenningen’ no. 19 New Perspectives on Investment in
Infrastructures. That publication contains contributions by dr.ir.ing. Rudi
Bekkers, dr. Theon van Dijk, drs. Dick van Duijn, prof.mr.dr. Ernst ten Heuvel-
hof, mr.drs. Hamilcar Knops, prof.dr. Pierre Larouche, mr.dr. Saskia Lavrijssen
and prof.dr. Leigh Hancher, prof.dr. William Melody, mr.dr. Jan de Pree,
prof.dr.ing. Geert Teisman, and mr. Kirsten Wilkeshuis. Along with this report
and the ‘Verkenning’ a webpublication by prof.dr. Leigh Hancher, dr. Willemijn
Dicke and ir. Marten Jorritsma will be published.                                            47
In preparing this report, the Council also used advice and information provided
by people from the Dutch Court of Audit, the ‘Algemene Rekenkamer’. We wish
to thank Eric Polman, Cor van Montfort, Jan Wieles and Freek Hoek. Further-
more the project group organized several workshops with policy experts, practi-
tioners and academics, and we did a number of interviews. During the seminars
and interviews we spoke with: Nico Baken (kpn), Daniel Tijink (ez), Robert
Haffner (nma), Wim Holleman (rws), Luc Kohsiek (rws), Arend Kroes
(GasUnie), Mark Leijsen (Kennisinstituut voor mobiliteit), Frits Otte (ez),
Annetje Ottow (opta), Siebe Riedstra (vw), Robert Stil (opta), Gert Zijl (nma),
Alexander van Altena (Prorail), Sjoerd Bakker (EnergieNed), Edgar van Boven
(kpn), Bernard Dijkhuizen (Zesko bv), Arjen Frentz (vewin), Lex Hartman
(Tennet), Frank van den Heuvel (Delta), Helma Kip (Essent), Hans van der Meer
(nam), Petra Smeets (GasUnie), Maurice de Valois Turk (kpn), John Groenewe-
gen (Delft University of Technology), Ger Ardon (vrom), Jurrien Prast (vrom),
Ton Bestebreur (rws), Erik van de Brake (Rabobank), Jaap Korf (Rabobank),
Wim Dik (Zesko), Paul Disveld (dnb), Hubert Schokker (dnb), Jon Eikelenstam
(ez), Arjen Frentz (vewin), Wim Gideonse (vw), Martijn van de Groep (vw),
Mira Huussen (nma/dte), Chris Kwant (The Hague municipality), Vincent
Oomes (Deloitte), Aad van den Ouweland (Robeco), Gerben de Zwart (Robeco),
Reinier Pollman (afm), Roelof Prins (npm Capital), Hans Speetjens (Delft
municipality), Leo Valkenburg (bng), Ger Vogelesang (Evides), Willem van de
Wal (dte), Bas ter Weel (afm), Rob van Veldhuizen (abn amro), Philip Karré
(nsob), Nicole van Gelder (ind. advisor), prof.dr. Jan Smit (eur) and dr. Robert
Went (wrr). The council is grateful to all concerned for their contributions.
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48
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<pre>                                                                                           introduction
1     introduction
1.1   why this report?
      Drinking water supply, mobility, communications and energy are critical to the
      functioning of contemporary society. Without these services all modern societies
      would collapse, as major energy blackouts and train accidents often remind us.
      Equally indispensable are the infrastructures that enable the protection against
      flooding, that facilitate electronic communications and transport by road, rail
      and air.
      The efficiency of the entire economy is heavily influenced by the effectiveness,
      quality and universality of these infrastructures. They are priority factors in loca-
      tional decisions for investment by firms in many industries. The effects of effi-
      ciency and universality ripple throughout the economy and society in a manner
      that multiplies their direct impact by many times. Because of their core functions,
      infrastructures and the services they deliver (also referred to as public utility
      services) have been treated differently from other industry sectors and have not
      simply been left to market forces (Mooij and Prast 2002; Teulings, Bovenberg and                  49
      Van Dalen 2003; Melody 2008).
      Core infrastructures have become truly critical infrastructures – in the sense that
      they are key to continued societal and economic security and well-being in the
      face of external threats. Such external threats may be brought about by factors
      such as a growing dependence on external natural resources and terrorist threats.
      Indeed, these threats are increasingly recognised by policymakers both at the
      European and national levels. At the same time, infrastructures are also seen as
      the key to a successful transition towards a low-carbon sustainable future for
      most of the world’s economies. The Netherlands, with its heavy reliance on
      (increasingly imported) gas and coal, its overcrowded roads, railways and airports
      and its ambitions to become a knowledge-intensive society is no exception.
      Moreover, there is the need to adjust the Dutch flood protection strategy, its
      water management and spatial planning policies to the challenges of the sea level
      rising and the increasingly violent run-off of rivers. The costs of a transition to
      a sustainable future are both uncertain, as well as enormous in monetary terms
      (€ 2 billion annually in the near future, according to the Energy Transition Plat-
      form, Taskforce Energie Transitie 2006).
1.1.1 the vital (but often neglected) role of infr astructures
      Events around the globe have illustrated not only the vital nature of infrastruc-
      tures which provide key services, but also their vulnerability to external chal-
      lenges – like, for instance, climate change (section 1.5.3). The floods in July 2007
      in the south of England tested electricity and water infrastructures to their limits;
      in the immediate flood crisis, a major water treatment plant failed and a major
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<pre>   infr ast ruc t ures
                             electricity substation for the national grid network also nearly failed. The Russ-
                             ian-Ukrainian gas crisis of December 2005 also underlined the European Union’s
                             growing vulnerability to external energy dependence. Price volatility – in partic-
                             ular soaring oil prices – has added to the grim picture. Energy security and the
                             importance of infrastructures in guaranteeing the security and reliability of the
                             supply became the new – or at least rediscovered – mantra.
                             These events illustrate not only how vital infrastructures are to our daily lives,
                             but also underline how indispensable the long-term investment in the mainte-
                             nance of investment levels in infrastructures has become. Power cuts around the
                             world, for example in London in 2003, in California in 2001 and in Rome and the
                             north of Italy in 2003 focused (not only politicians’) attention on the potential
                             consequences of ageing power networks on the reliability of the supply of elec-
                             tricity and on the need for higher rates of asset replacement (Tutton 2008).1
                             In the Netherlands, for instance, electronic communication problems and major
                             energy blackouts have reminded us of how important reliable infrastructures
                             are. Problems with software at ProRail caused serious train traffic delays for
                             over 24 hours in February 2007 and an electricity network failure left the city of
50                           Haaksbergen without power for three days in 2005.
                   Box 1.1          Substantial investments are needed 2
                   According to European Commissioner Andris Piebalgs, massive investment is needed throughout
                   the global energy system to meet future energy demands. In Europe alone, this could be as much as
                   € 1 trillion over the next 20 years.3 The European Commission has called for investments of at least
                   € 30 billion in energy infrastructure by 2013 (€ 6 billion for electricity transmission, € 19 billion for
                   gas pipelines and € 5 billion for lng terminals throughout the 27 Member States) (Lisbon Agenda 4
                   and the Commission Green Paper on Energy; (European Commission 2006a). Connecting more
                   electricity generated from renewable sources to the grid will cost an estimated € 700 to 800 million
                   per annum. Implementation of priority trans-European transport networks will require invest-
                   ments of € 260 billion by 2013 – out of a total estimated budget of € 600 billion, which will be
                   required to fund investments in the entire trans-European network. Capital expenditures on fibre
                   optic networks of up to € 25 billion per annum is required to realise ambitious goals in the elec-
                   tronic communications sector (European Commission 2007: 5).5 The Commission’s ambitious
                   tens policy calls for € 600 billion in investment in so-called Trans-European Networks (ten)
                   (see chapter 4). In the Netherlands, according to the Milieu en Natuur Planbureau, between
                   € 1 to € 3 billion are needed to implement European Regulation policy regarding the environmental
                   protection of rivers (Milieu en Natuurplanbureau 2006). In the sewerage sector, the investment
                   shortfall is nowadays estimated at € 2.9 billion (Gerritsen and Sterks 2004). Furthermore, the port
                   of Rotterdam has developed plans to capture and store co2. The costs of this storage system are
                   estimated at € 100 to 200 million annually.
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<pre>                                                                                          introduction
1.1.2 the effects of integr ation and interdependence
      What is perhaps equally important from the perspective of this report is that one
      single event – a falling tree or a boat mast hitting overhead transmission lines on
      the River Elbe in Northern Germany – can now have far-reaching implications
      and cause black-outs across large parts of Europe. The impact of Hurricane
      Katrina in the us in August 2005 also underlined how tightly integrated many
      infrastructures are: Katrina triggered problems for crude oil delivery but also hit
      natural gas production, oil and gas transport, refineries and electricity and water
      supplies in one of the world’s most energy intensive areas.
      Infrastructures are increasingly integrated and investment decisions – or the
      failure to make a decision in one country – can have a direct impact on the
      viability of infrastructures in a neighbouring country. Extensive investments in
      German wind energy have resulted in the requirement to strengthen the Dutch
      high transmission electricity grid (see chapter 6). The failure to invest in high-
      speed trains in Germany, on the other hand, has had a significant and negative
      effect on the huge investments in the construction of the Betuwe railway line.
      Similar externalities characterise mobile communications – a national govern-
      ment had little incentive to deal with high ‘roaming charges’ when the benefits                  51
      of reducing these charges would accrue to users in other jurisdictions (Larouche
      2008) and a change in German waste treatment policy has major implications
      for the organisation of waste disposal facilities in the Netherlands (Karré and
      In ’t Veld 2007).
      However, despite the vital role these infrastructures play in contemporary soci-
      ety, for more than a century, tracks, grids and pipelines were rarely at the fore-
      front of public attention or concern, as is illustrated in detail in Van der Woud
      (2006) and Schot et al. (2003). As recently as 30 years ago, public water, electronic
      communications and electricity companies could carry out their work in relative
      anonymity, providing a convenient if scarcely visible instrument for the realisa-
      tion of wider economic or social goals – whether it was the provision of cheap
      power to large energy intensive users, the widespread distribution of gas or cable
      services to Dutch households, or the provision of universal telephone services to
      all Dutch users.
1.2   regime change in infr astructures
      Paradoxically, it is the invisible hand of the market or market forces that have
      forced this rather neglected sector into the limelight. In the last two decades, an
      ongoing process of regime change – a process which can broadly be described as
      the shift from reliance on a state owned and/or controlled public monopoly
      provider for these public services (i.e., responsible for the operational processes),
      to a new situation in which, as a result of the introduction of market disciplines,
      heterogeneous actors both public and private, share ownership and responsibility
      in various institutional arrangements or constellations for the delivery of services
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<pre>   infr ast ruc t ures
                       over the various infrastructures – has occurred in the majority of the Dutch
                       infrastructures.
                1.2.1  five modes of regime change
                       The process of regime change for the organisation of infrastructure provision is
                       conceptualised in this report to consist of five modes, namely liberalisation,
                       privatisation, unbundling, corporatisation and internationalisation. These modes,
                       which are discussed in detail in the next chapter, may be introduced in separate,
                       sequential stages, but this is not necessarily the case. Regime change is an ongoing
                       process. The primary objective of regime change throughout the infrastructures
                       has been to introduce some form of competition as a means to ensuring greater
                       efficiency, as well as enhancing customer orientation and customer choice.
                       But it has also been motivated by the desire to reduce political intervention and
                       opportunism within infrastructures – by increasing the freedom of companies
                       to ‘efficiently’ pursue commercial as opposed to political objectives.
                       This process of regime change has nevertheless been accompanied by policy
                       concerns regarding issues that are related to the specific characteristics of
52                     infrastructures. Most of the infrastructures discussed in this report once had a
                       natural monopoly character (Berg and Tschirhart 1988). Once liberalisation or
                       privatisation is introduced, some form of regulatory supervision must be created
                       simultaneously to substitute the workings of the market and to prevent the abuse
                       of market power by the incumbent monopolist. However, beyond regulatory
                       supervision, regime change implies that government and industry should
                       concentrate on their respective functions. Incumbents can no longer dictate regu-
                       latory and policy choices and conversely, government or regulatory authorities
                       should focus on regulation and guaranteeing that public values are safeguarded,
                       but, at the same time, they must let go of operational matters.
                       This report is based on ten infrastructures: sewerage, drinking water, waste,
                       dikes, roads, railways, airports, electricity, gas and electronic communications.
                       The five modes of regime change have taken different shapes among these ten
                       infrastructures (see Table 1.1).
                       In part, the mode of regime change is a political decision: the railway and the
                       energy sector have been unbundled, whereas the sewerage and drinking water
                       companies have remained integrated. Although these sectors can, from a strictly
                       technical view, be unbundled too, the negative governance implications (espe-
                       cially the increase in transaction costs) are thought to outweigh the supposed
                       advantages of unbundling. But the chosen mode of regime change is also deter-
                       mined by the interplay with technical characteristics. Relevant elements are, for
                       example, the feasibility of constructing a second, competing network. In other
                       words: is the network a natural monopoly? The introduction of liberalisation or
                       privatisation in case of a natural monopoly always requires independent regula-
                       tion. In this way, technical characteristics directly influence the possibilities for
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<pre>                                                                                                 introduction
  Table 1.1       Modes of regime change in (all physical) infrastructures
  Infrastructure          Liberalisation Privatisation    Unbundling       Corpora-  Internatio-
                                                                           tisation  nalisation
  Sewerage
  Drinking water              √                                                √
                                               6
  Waste                       √              √                                 √         √
  Dikes                       √7                                               √8
  Roads                       √9             √ 10                              √ 11
  Railways                    √ 12                             √               √         √
  Airports                    √ 13                                             √         √
  Electricity                 √                                √               √         √
  Gas                         √                                √               √         √
  Electronic
    communications            √              √                                 √         √
           institutional arrangements. Another relevant characteristic for the choice of the
           mode of regime change is the depreciation period of the infrastructure. For dikes,                 53
           the investment for extensions last for over hundred years. In the drinking water
           sector, infrastructures can easily last for sixty years, whereas in the electronic
           communications sector, this period is much shorter as new technology offers
           new possibilities. Shorter depreciation periods enable more modes of regime
           change since the investments are less lumpy and sunk.1 4
1.2.2      t wo stages of regime change: t ype i and t ype ii market failures
           In the first stage of regime change, the emphasis was on ‘trimming the fat’ of the
           former public monopolist as well as enhancing affordability and choice for the
           consumer (Larouche 2008; Van Dijk 2008). In the majority of sectors, regime
           change has been fairly successful in this respect. According to a recent report on
           liberalisation (Ministry of Economic Affairs 2008), regime change has led to
           greater freedom of choice and lower prices for the consumer in electronic
           communications; while in the electricity and gas sectors it has resulted in effi-
           ciency gains and lower prices.
           Whereas the current processes of regime change appear to adequately address
           what this report labels as ‘Type I’ market failures (i.e., improper market function-
           ing), the potential for ‘Type II’ market failures has been largely disregarded. The
           latter category consists of market failures, which indicate the inability to address
           wider societal concerns (Van Dijk 2008) that lead to the failure to realise public
           values that are relevant for the long term, often requiring dynamic institutional
           arrangements, not least because these values are neither easily defined or measur-
           able, nor indeed as visible in comparison to the efficiency issues typical of ‘Type I’
           market failures.
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<pre>   infr ast ruc t ures
                       ‘Type II’ market failures thus refer to the ineffective or inefficient realisation of
                       long-term values. Unlike the strategy aimed at ‘Type I’ failures – that used a static
                       arrangement to monitor static efficiencies – the strategy towards ‘Type II’ failures
                       will need to focus more probingly on dynamic arrangements to realise long-term
                       issues that comprise both generic concerns (e.g., innovation or sustainability) and
                       infrastructure-specific public values (such as public health, environmental care,
                       spatial planning, etcetera).
                       To illustrate this point: the public value of the ‘protection of the captive user’ can be
                       operationalised, among other things, through the price that customers have to pay
                       for a service. But other public values are harder to define and determine in contracts
                       or concessions. Prime examples of ‘Type II’ values that may not be realised in the
                       case of ‘Type II’ market failures are: the long-term reliability of networks, long-
                       term security of supply, long-term accessibility of networks, innovation, mobility
                       and sustainability. For each of these ‘Type II’ values, major investments are indis-
                       pensable. What these values have in common is that they are hard to put into con-
                       tracts since their definition and operationalisation is contested. They comprise
                       many dimensions and are open to many interpretations. Sustainability, to provide
                       an illustration, is not just some item in a contract that can be checked off. Instead,
54                     there are many and often qualitative parameters necessary that indicate whether
                       innovation or sustainability has indeed been realised.
                       In the case of market failures threatening to lead to public value failure in which
                       broader, long-term interests are at stake, this report speaks of ‘Type II’ market
                       failures. This, in turn, may require a reorientation of the interaction of the public
                       and the private values as well as actors, to establish a stable long-term framework
                       for infrastructure investment which properly allocates costs and risks as well as
                       rewards and responsibilities to the various actors involved. To avoid the dangers
                       of government failure, this new role should, however, supplement rather than
                       replace the short-term, efficiency-based approach engendered by the first stage of
                       regime change that has characterised the majority of infrastructures in the
                       Netherlands to date.
                1.2.3  the changing inter action bet ween the public and the private
                       The very process of regime change has fundamentally altered the interaction
                       between the public and the private sectors in relation to decision making about
                       future large-scale investments in many of the major infrastructures, even if these
                       are considered to be vital to society. The state can no longer direct or mandate
                       that certain investments should be made – this is increasingly a decision for
                       commercially-oriented (public or private) operators, and based essentially on
                       commercial criteria.
                       There is an increased recognition among academics and policy makers nowadays,
                       that a focus on ‘trimming the fat’ and an exclusive concern for ‘Type I’ market fail-
                       ures is only a short-term strategy. However, when focussing on long-term objec-
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<pre>                                                                                         introduction
      tives public authorities should take into account that commercially motivated
      actors may be distrustful of (the threat of) renewed state intervention. Adopting
      additional or new regulatory instruments may indeed have either a direct or indi-
      rect impact on potential investment returns and competitiveness or intrude on
      their commercial freedom by determining how and when to invest and at what
      costs. This is perhaps the most important challenge facing policy makers dealing
      with infrastructures today – how to realise broader public objectives without
      threatening the very sources and possibilities of new and private investment.
      Opportunistic and ad hoc political intervention is likely to act as a deterrent to
      new investment, by creating risk and uncertainty. A focus on investment requires
      that we tackle the problem of longer-term dynamism at its very root.
1.2.4 changing actor s , various levels
      Regime change has lead to a new constellation of actors. It has even affected flood
      protection strategies (Broekhans and Correljé 2008). The operational role of the
      state has in some infrastructures been taken over by private enterprises. Regula-
      tors are installed along with international investment institutions. Unbundling
      has in some sectors resulted in different actors becoming responsible for the
      operation of the infrastructure and the delivery of services. Responsibilities are              55
      thus more fragmented than they were before. Inevitably, the relationships among
      the various actors change, and this will in turn affect the positions and roles of
      the actors involved. Regime change is thus not just relevant in terms of a growing
      list of participants.
      Similarly, regime change has resulted in new layers of government becoming
      increasingly relevant. Most notably, the European Union is involved more inten-
      sively in sectors such as electronic communication, rail, energy, but also in the
      drinking water sector (section 1.5.4). Even in infrastructures not covered by
      specific eu measures, general provisions – for example on free competition,
      prohibition of state aid – remain applicable. The European (recently revised)
      Lisbon agenda is also relevant in this respect (see Box 1.1).
1.3   the fundamental dilemma – the mission par adox?
      A principal contention of this report is that the very process of regime change
      together with challenges that will be described in section 1.5, has created funda-
      mental dilemmas for future infrastructural provisions. This can be referred to as
      the ‘mission paradox’ (Larouche 2008). As part of the regulatory bargain at the
      basis of regime change, the state has relinquished direct responsibility for the
      operation of infrastructures, to a multitude of often heterogeneous actors. Yet,
      given the new demands made on infrastructural development and the massive
      level of investment, which is necessary for making the transition to a more
      sustainable, low carbon economy, the state can not intervene in the daily opera-
      tions of these sectors without engendering mistrust and uncertainty among those
      actors who now bear the primary responsibility for very capital intensive invest-
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<pre>   infr ast ruc t ures
                       ments in infrastructures. At the same time, even if policy makers and regulators
                       must let go of an infrastructure and allow it to evolve in response to customer
                       demand, they must also be there to judge whether an infrastructure performs in
                       order to meet public policy objectives and to guarantee public interests or values.
                       This, in turn, implies that policy makers should have a clear strategy on how
                       these infrastructures should evolve and perform.
                       As we shall examine in the following chapters, the very process of regime change
                       together with future challenges, has further complicated the picture. The change
                       in interaction of the public and the private (values as well as actors) has led to the
                       need for the design of new institutional architectures. These new institutional
                       arrangements should enable public private interaction in such a way that long-
                       term investment is guaranteed. These arrangements should, furthermore, be
                       based on the fact that the state does not and can no longer perform the same
                       operational role it once fulfilled. At the functional level (the cables, pipes, lines,
                       roads, and dikes) a network of networks is emerging – or a system of systems.
                       This system of systems has not yet fully emerged on the institutional or gover-
                       nance levels. In this report, the Council has sought to develop a strategic policy
                       framework for institutional arrangements necessary to maintain long-term
56                     investment in physical infrastructures.
                       To summarise, this report and the aim to develop a strategic policy framework
                       for the institutional arrangements is needed in light of two main concerns. The
                       first concern is whether adequate investments have been secured in the present
                       institutional arrangements. The apprehension concerns both the investment in
                       infrastructures that require important maintenance investments and infrastruc-
                       tures where major system innovation is needed. Secondly, theoretical insights as
                       well as empirical evidence in countries with a longer history of regime change
                       foster the concern whether the current modes of regime change in infrastructures
                       are able to achieve long-term public values that are hard to measure and lie
                       beyond static efficiency issues, beyond the national consumer and beyond the
                       issues of service delivery.
                1.3.1  definition of the problem
                       This report seeks to examine a strategic policy framework for investment in
                       infrastructures, and the necessary institutional arrangements needed to maintain
                       long-term investment in infrastructures under the new conditions brought about
                       by the process of regime change and in light of the future challenges that these
                       infrastructures are required to meet.
                       The focus in this report is on so-called physical infrastructures. More specifically,
                       the infrastructures of energy and gas, electronic communications, rail, road, air-
                       ports, water, drinking water, dikes and sewerage have been explored. The analysis
                       has been limited to physical infrastructures. Other infrastructures, such as social
                       and/or financial are thus outside the scope of this report. Physical infrastructures
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<pre>                                                                                          introduction
    are marked by long-term investments, a high degree of dependence on technical
    developments and parallel needs for maintenance and system innovation. The
    special nature of investment in the field of physical infrastructures is marked by
    their lumpy character (system innovation in particular requires immediate major
    investments), their sunk nature and their long depreciation period. Moreover,
    the focus of this report on investment and the public-private interaction in that
    respect, distinguishes physical infrastructures from other infrastructures.
1.4 investment in infr astructures – a necessary focus
    This report maintains that a focus on investment offers a clear crystallisation for
    a coherent and sector-wide approach to the major but multifarious challenges
    which must urgently be addressed to develop a longer-term strategic policy frame-
    work in order to restore the balance between the short-term efficiency-based
    approach engendered by the first stage of regime change that has characterised the
    majority of infrastructures in the Netherlands to date and long-term investments.
    The process of regime change is currently at a crucial juncture because major
    decisions on the future direction of these regimes should now be addressed. That
    we are now at a crucial point in time is visible in many different ways in the various
    infrastructures: in the energy sector, as a result of climate change, major system                 57
    innovation requires an entirely new infrastructure; in flood management new
    solutions are also needed to deal with climate change; the Dutch sewerage infra-
    structure requires major investment to deal with overdue maintenance; the railway
    infrastructure needs investment in safety and security systems (Bekkers 2008)
    and the mobility infrastructures (roads and public transport) urgently need system
    innovation in order to deal with the ‘mobility coronary’ (see also oecd 2007).
    In all these cases, the shift towards a long-term investment approach has to be
    made. In the United Kingdom, this is already happening.
    Indeed, this report does not seek to offer a final verdict on the merits of regime
    change. Its purpose is rather to stress that there is more to regime change than
    choice, service delivery and efficiency. Rather than evaluating past processes, our
    ambition is to examine the strategic parameters necessary to secure long-term
    investment in physical infrastructures. Instead of evaluating the reasons for start-
    ing the transformation process and its effects, the focus will be on how to shape
    a strategic policy framework for institutional arrangements to achieve public-
    private interaction to guarantee long-term investment. In this process, the roles
    (of both the government and the other parties) need to be redefined to prevent
    the blurring of responsibilities and to prevent a return to automatic hierarchical
    solutions (Teisman 2008) that are no longer adequate or even possible in the
    current situation in which infrastructures have become networks of networks. In
    this strategic policy framework for institutional arrangements, it is also necessary
    to identify new roles where needed, e.g., regulatory roles.
    Furthermore, an univocal assessment of regime change is unlikely. Rather, the
    complexity of the process has produced heterogeneous results. It is this heteroge-
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<pre>   infr ast ruc t ures
                       neous situation that will form the starting point of this report and the central
                       question will thus be how to move forward in the current state of affairs.
                       The focus of this report is on the challenges that the process of regime change
                       itself, in conjunction with other challenges, for example, technological change,
                       has created for the future and longer-term demands which will inevitably be
                       made on infrastructural provision if ‘Type II’ market failures (these challenges
                       are described in detail in chapter 6) are to be addressed. It is vital to look to the
                       future and not to long for the past or a romantic construct of it.
                1.4.1  critical investment decisions
                       This report is concerned with the networks, the physical infrastructures
                       – the grids, the pipes, the wires, the dikes and the transport infrastructures –
                       and, more precisely, the investment in infrastructures under new conditions
                       brought about by regime change. Service delivery is thus not the focus of
                       attention here.
                       The types of investment dealt with in this report can be referred to as critical
58                     investment decisions involving not only investment in new or ‘greenfield’
                       projects but also in major extensions to existing infrastructures and large-scale
                       refurbishment.The realisation of critical investments in all of the aforementioned
                       infrastructures is a complex process involving a long time frame and an intricate
                       series of stages from planning and design, environmental and spatial planning
                       procedures as well as major financial decisions, and, in some cases, regulatory
                       and governmental approval (Van Duijn 2008). The responsibility for making
                       initial decisions as to what types of investment to make, or when extension
                       and/or refurbishment is required, and for the subsequent maintenance and oper-
                       ations of the infrastructures, as well as how these investments are to be funded,
                       varies from one sector to the next. With roads, railways and dikes for example,
                       the allocation of investment budgets is a political decision, made in the political
                       domain, whereas in the gas, electricity, drinking water and electronic communi-
                       cations sectors these decisions are essentially commercially driven.
                       This report distinguishes between two different types of critical investment
                       decisions in infrastructures. The first category is major maintenance schemes and
                       new construction of infrastructures in which existing technology is used, e.g.,
                       the extension of railways or the new construction of roads. A second category
                       consists of investment related to system innovation. The envisaged transition to
                       low carbon energy is an illustration of the latter category.15
                       New infrastructures and often new technologies are needed to enable this transi-
                       tion. Investments for ‘business as usual’ as opposed to investment for ‘system
                       innovation’ necessitate distinctive approaches.16 This report argues that, given
                       the nature of the challenges in the latter category, and in order to address longer-
                       term societal values (‘Type II’ market failures), a strategic policy framework and
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<pre>                                                                                               introduction
      the necessary institutional arrangements for infrastructure provision is required
      in order to secure long-term investment.
      Decisions regarding major investments in infrastructure may occur at different
      stages in the sectors, depending, in part, on the depreciation period of the assets
      involved.The investment for extensions on dikes, as mentioned earlier, last for
      over a hundred years. In the drinking water sector, infrastructures can easily last
      sixty years, whereas for the electronic communications sector this period is much
      shorter as new technology offers new possibilities.
1.4.2 a sector-wide focus on investment
      Infrastructures are undoubtedly diverse in several respects, including their
      manner of regulation, but the Council has identified the emergence of four
      common themes which justify a more generic or sector-wide focus on invest-
      ment in infrastructures.
      Adequate ser vice deliver y
      First, investment in infrastructures is the precondition for adequate service deliv-
      ery, not only now but more urgently, in the future. If the current regimes governing                  59
      the respective systems do not secure long-term investment in infrastructures, the
      provision of the associated goods and services that are crucial for society can not be
      secured in the long term. Economists recognise that investment determines dy-
      namic efficiencies and hence the price of services in the long term (Van Dijk 2008:
      3). Even if public perception and media concern tends to be concentrated on (an
      allegedly) declining quality of service and rising prices, there is a direct relation to
      investment levels. Without good infrastructures and the investments necessary to
      secure them, a high level of service delivery in the long term is impossible.
      A shif ting focus
      Second, a focus on infrastructure investment reflects the pace and course that
      regime change itself has taken in a number of infrastructures. What is referred to
      in this report as the first stage of regime change – and accompanying regulation –
      has focused on dealing with market failure ‘Type I’, and in doing so, promotes
      efficiency gains and lower prices. Once the fat is eliminated, the focus should
      shift from price control and efficiency concerns to establishing a stable, long-
      term framework for infrastructure investment which properly allocates costs and
      risk as well as rewards and responsibilities to the various actors involved. This
      trend can already be illustrated by the electronic communications sector, which
      is the most mature of the liberalisation regimes. The focus is gradually shifting in
      this direction, albeit not without controversy (Larouche 2008).17
      However regime change is far from complete. Indeed the initial policy and/or
      regulatory response to the fostering of future investment levels is often to devise
      new policies and regulatory instruments as well as refining regulatory techniques
      to deal with short-term issues or address specific incidents (Holt 2007).
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<pre>   infr ast ruc t ures
                       As we shall examine in chapters 2 and 5, this may take the form of conferring new
                       powers and duties on regulators to address wider market failures, and to graft
                       new objectives onto their existing powers. Or it may take the form of introducing
                       supplementary or ad hoc tactics. The provision of subsidies or other forms of
                       public support (for example, support for broadband roll-out at the local level) or
                       the use of various specially tailored mechanisms to encourage investment by
                       certain actors (e.g., a capacity payments scheme for electricity generators to build
                       more reserve capacity), or the imposition of tougher pricing or access regulations
                       on those infrastructure providers who are perceived to benefit disproportion-
                       ately from asymmetrical regulation – that is, regulation addressed to former
                       monopolists – are all examples of supplementary or ad hoc tactics.18
                       Regulator y risk
                       As this report will examine in later chapters, another equally common tactic is to
                       encourage new investment by removing what is often termed ‘regulatory risk’ –
                       that is to exempt new infrastructural development from the very regime which is
                       supposed to regulate it. This may include the adoption of ‘regulatory holidays’ or
                       lighter regulatory regimes for certain networks (the recent German proposal to
                       exempt ‘new’ communications markets from regulation is a case in point)
60                     (Larouche 2008); or special exemption regimes for new electricity and gas inter-
                       connectors, storage facilities or lng terminals (see chapter 6). While these policy
                       and regulatory responses may well be motivated by broader public interest
                       concerns, the effects of these types of initiatives on competing market players
                       cannot be overlooked. Competing firms are confronted with more regulatory
                       uncertainty, and may be less willing to engage in longer-term investment in this
                       climate of insecurity engendered by ad hoc regulatory tinkering.
                       This gradual shift in focus is visible in a broader range of infrastructures in coun-
                       tries with more regime change experience, notably the United Kingdom (uk). In
                       these countries, there are already serious concerns about the effect of the first
                       stage of regime change for long-term investment (ofwat and ofgem 2006, see
                       also MacAvoy 2007).
                       In most Dutch physical infrastructures, the necessary shift from short-term effi-
                       ciency goals towards longer term or more dynamic investment-related goals has
                       not yet been made.
                       However, academic analysis (Helm 2007; Larouche 2008), increasingly supported
                       by foreign experience (House of Lords 2007), indicates that a further regulatory
                       as well as a policy shift in focus towards investment in infrastructures is crucial.
                       This does not imply that such a shift is an automatic process. Instead, urgent
                       attention is required in order to establish whether the conditions for making this
                       important policy shift are in place.
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<pre>                                                                                            introduction
      Trust and stability
      Finally, and as will be discussed in chapter 2, economists recognise that invest-
      ments in physical infrastructures have special characteristics as well – not only
      are they ‘lumpy’ and expensive, but their sunk character is such that investors are
      locked into the investment for a considerable duration – and will often only see a
      return on their investments in the long term (Van Dijk 2008). A commitment to
      invest may only be made after investors have been assured that the regulatory
      regime governing the sector is sufficiently stable in order to ensure that they
      will realise a reasonable return in the long run. This adds to the challenge facing
      policymakers – not only must they be able to address the new and increasingly
      urgent demands made on infrastructures, but they must do so in a manner which
      engenders trust and provides investors with an adequate level of security that
      they can realise future returns. The expected costs of government intervention
      must not exceed the expected benefits.
      This report argues that the proper starting point for constructing a new paradigm
      on investment provision should be grounded in the policy and the regulatory
      framework for the relevant sector as a whole and not, as frequently appears to be
      the case, the other way around, with only a narrow short-term focus on the
      details of particular investment projects or specific short-term problems or inci-                 61
      dents.
1.4.3 public values
      Investment in infrastructure is a precondition for the realisation of public values
      that are linked to a specific infrastructure, including accessibility and affordabil-
      ity. Furthermore, infrastructures serve wider societal values, including general
      economic development and sustainability. This report maintains that investment
      is an important instrument for the achievement of public values.
      Historically, the state was responsible for the realisation of public values associ-
      ated with infrastructures. As a result of regime change, however, the Dutch
      infrastructures have undergone significant change, albeit at various paces and to
      various degrees. Nowadays, public values must be secured by private or at least
      commercially oriented firms and these types of actors hold different views
      towards the trade-off of public values, depending on the objectives they seek to
      pursue. The incentives guiding private infrastructure organisations are different
      from the ones that are prominent in public organisations. For example, as Van
      Dijk (2008: 8) and Ten Heuvelhof (2008) argued: infrastructure organisations in
      public hands make different trade-offs between public values. One example is the
      public value of efficiency. Since there is no pressure from the capital market on
      the company to minimise costs, the soft-budget constraint (risk of bankruptcy is
      not present) may lead to less pressure on the management. These are some of the
      reasons why public organisations face different incentives and make trade-offs
      with regard to public values that are different from those of private organisations.
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<pre>   infr ast ruc t ures
                       Regime change has also altered the role of the state with respect to infrastructure
                       provision. As public values are still broadly considered the heart of the matter in
                       infrastructures, the state has shifted from an operational role to a strategic role.
                       The state has become a ‘director’ (Tweede Kamer 1999-2000, 27018, no. 1). In the
                       first stage of regime change, institutional arrangements such as the introduction
                       of an independent economic regulation, contracts and concessions and self-regu-
                       lation, have been developed to deal with ‘Type I’ market failures. The focus of
                       these arrangements tends to be on short-term efficiency, which can lead to
                       considerable risks for the achievement of public values other than static effi-
                       ciency. Although there is no easy institutional solution for the problems engen-
                       dered by the first stage of regime change, there is a need for review. A guarantee
                       that public values are realised in the long-term needs to be part of the incentive
                       structure for the infrastructure organisation, as much as short-term efficiency.
                1.5    challenges on investment decisions in
                       infr astructures
                       As this report explains in greater detail in chapter 2, the internal dynamics of the
                       process of regime change in infrastructures have fundamentally altered the
62                     conditions under which investment decisions in infrastructures are made. Differ-
                       ent actors are involved and decisions are made in different arenas, beyond the
                       national political domain. Furthermore, the current regimes for infrastructural
                       regulation are being put to the test by a series of challenges which interact with
                       their internal dynamics, and which will have a direct impact on the design of a
                       policy and regulatory framework – an institutional architecture (or governance
                       structure) capable of securing adequate levels of investment in the future. In this
                       section, we briefly review three developments: in technology, in new sources of
                       investment and in the consequences of climate change. These challenges are
                       further intensified by the European dimension, which, over the years, has gained
                       importance in the decision-making processes concerning infrastructures. It has
                       led to ongoing developments in European law and policy, especially in response
                       to growing awareness of problems relating to external dependency, on natural
                       resources and sustainability.
                1.5.1  technological change
                       Technological factors are an important dynamic for investment in infrastruc-
                       tures. On the one hand, technological advances can enhance interdependence
                       between countries (e.g., the interconnectors in energy); on the other hand, Euro-
                       pean policy engenders new possibilities for technological interdependence (e.g.,
                       in the electronic communications sector). New technological developments stim-
                       ulate demand for new forms of regulatory arrangements (e.g., the growing inter-
                       dependency of electricity networks as a result of greater trade across national
                       boundaries requires a re-consideration of purely national institutional arrange-
                       ments) (Knops 2008). The gradually increasing dependency on longer distance
                       eu external supplies of natural gas requires the large scale development of under-
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<pre>                                                                                          introduction
      ground gas storage, demanding specific forms of access and tariff regulation.
      Convergence in electronic communications (Larouche 2008: 2) is another exam-
      ple of changes in technology that may require new institutional arrangements.
      But technological developments may also enable new forms of governance.
      Originally a natural monopoly due to the prohibitive costs of duplication of the
      network, the introduction of electronic communications has changed the elec-
      tronic communications landscape completely. Competing networks can now
      transmit data for television, internet and telephone to end-users.
      In some sectors, the development of technology is rapid (electronic communica-
      tions); while in other sectors it may be more inert (Knops 2008). But even in the
      more ‘stable’ sectors, technology does change and this can affect the governance.
      In the flood protection sector, for example, a sector that is known for its inert-
      ness, technology is changing: instead of building higher and stronger dikes, the
      policy on ‘room for the rivers’ is now dominant. These examples show that the
      infrastructure is constantly in transition regarding what is increasingly referred
      to as a ‘system of systems’ (Sajeva 2006; Larouche 2008).
1.5.2 new sources of investment gaining ground and diminishing                                         63
      public owner ship/control
      Following a wave of consolidation and (often foreign) take-overs, privatised
      infrastructures are now perceived as increasingly attractive targets for private
      equity investors – pension funds and other institutional investors, including
      sovereign wealth funds, who are primarily interested in the stable revenue flows,
      generated by regulated infrastructures. In some countries such as the uk, a major
      share of the infrastructures is already in the hands of private equity funds. What
      are the implications of a globalised capital market for the present and future
      policy choices for promoting and securing investment in Dutch infrastructures?
      Is it relevant for a national government and national infrastructural policy if the
      owner of a Dutch infrastructure is a global private equity fund, with its head-
      quarters in Australia, Canada or the us, or even a sovereign wealth fund based in
      Dubai, Kuwait or China?
      While some commentators claim that private equity companies are beneficial for
      the efficient operation of infrastructures, there is also growing concern in both
      government and certain sectors of the financial community that the rise of
      private equity could create a threat to infrastructure provision in the longer term
      (Melody 2008). The commitment of these types of funds to longer-term invest-
      ment strategies, particularly given their highly leveraged financing strategies, has
      been questioned.
      Yet many of the traditional instruments available to the state for the control or
      direction of strategic investment decisions in privatised firms have disappeared.
      Following a series of legal actions brought against it by the European Commis-
      sion, the Dutch government has been forced to abandon its reliance on ‘golden
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<pre>   infr ast ruc t ures
                       share’ type constructions, and no longer appoints board members to firms in
                       which it has a shareholding. Arm’s-length, sector-specific regulatory regimes are
                       the primary instrument of control, even if their effectiveness for stimulating
                       and/or preserving investment levels, given the emergence of new stakeholders
                       and with distinctive financial interests and aims, has by no means been proven.
                1.5.3  climate change
                       There are strong indications that the climate is undergoing change (wrr 2006).
                       The scale of change, and the way it will be manifested is less certain. Infrastruc-
                       tures are vulnerable to a variety of anthropogenic or natural disruptions even
                       though their functioning is vital to the creation and maintenance of quality of
                       life. Climate change can influence productivity, demand and reliability of supply,
                       and therefore roads, airport runways, dikes, railway lines and pipelines may
                       require increased maintenance and renewal as they become subjected to greater
                       temperature variation, for instance.
                       At the same time, infrastructures are necessary to meet the challenges of climate
                       change, by delivering new solutions. For instance, infrastructures are seen as the
64                     key to a successful transition to a low-carbon sustainable economy (see section
                       1.1). In the Netherlands, infrastructures will also be necessary in order to adapt to
                       the effects of climate change. Most notably, flood protection places new burdens
                       on dikes. Climate change has thus a double effect: not only will adaptations be
                       necessary in order to make infrastructures themselves ‘climate change proof’,
                       infrastructures will also be necessary for society to be able to cope with the
                       effects of climate change. In both instances, however, substantial investments
                       will be required.
                1.5.4  the european dimension
                       The three challenges mentioned above, are further intensified by a European
                       dimension which, over the years, has gained importance in decision-making
                       processes concerning infrastructures. The European dimension can be consid-
                       ered a dual concept. On the one hand, the eu is one of the main drivers for new
                       developments in infrastructures, which have given rise to current problems. On
                       the other hand, it is at the eu level where measures can be taken that contribute
                       to the finding of the right solutions.
                       As one of the main drivers for regime change in infrastructures, European regula-
                       tion has undoubtedly exerted a major influence on national policy, and has
                       resulted in far-reaching changes to traditional national arrangements for infra-
                       structure provision. European directives were adopted primarily with the aim of
                       removing national barriers to the realisation of open and competitive internal
                       markets, for electricity and gas, for electronic communications and so on. Their
                       predominant aim was, therefore, to secure the erosion of national monopolies
                       and the removal of exclusive rights and privileges, by facilitating access for
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<pre>                                                                                            introduction
    competitive new entrants as well as imported goods and services. New actors
    who could enforce their statutory rights of access to national infrastructures have
    emerged. Equally importantly, national actors are looking to wider markets and
    the potential and challenges offered by a wider European market are now driving
    commercial investment decisions in infrastructures.
    In its early stages, European intervention in infrastructures were primarily in the
    form of directives which set the objectives to be achieved but left considerable
    scope to the Member State to decide how to best achieve its goals. As a result,
    these liberalisation measures did not necessarily replace national rules or national
    public values in the utility services sector. The latter could still be invoked,
    subject to certain conditions, to temper the liberalisation process. In other words,
    national infrastructural regimes could still be designed to reflect national policies
    and prerogatives and national public values.
    This relatively indirect approach is gradually changing in many infrastructures:
    European law and policy is becoming more directly interventionist. As chapter 4
    will examine in greater detail, European developments have not only resulted in
    the emergence of new actors and new roles for existing actors, but also in the emer-
    gence of a variety of arenas and levels in which potential conflicts between national                65
    policy objectives and commercial goals can be negotiated. Eventually the creation
    of new Euro-regulators (in addition to the already existing European Rail Agency)
    will further challenge if not replace national institutional arrangements – especial-
    ly with regard to securing national public interest objectives. Taken together, these
    developments at the European level have introduced a major new external dynamic
    factor into the national decision-making process on investment. This factor works
    out differently in the various infrastructures. In the rail sector, for instance, Euro-
    pean standardisation and coordination, as promoted by the European Rail Agency
    has led to the necessity of substantial new investments (see Bekkers 2008). Other
    infrastructures such as gas and electricity are confronted with coordination and
    integration challenges to meet changes to patterns of demand.
    Table 1.2 describes the current challenges for the next five years. Given current
    legislation, statutory duties and institutional arrangements, some challenges are
    not expected to become prominent in the near future.
1.6 approach
    Although there is as yet no firm empirical evidence that investment in the infra-
    structures in the Netherlands is decreasing rapidly, there is evidence that earlier,
    ‘pre-regime change’ levels of investment are not being maintained (oecd 2007).
    The urgency for a clear focus on investment lays in the future challenges – chal-
    lenges that are not yet identified in a coherent or systematic way by government.
    This report draws on a series of case studies and essays, examining various aspects
    of infrastructural regulation, investment in infrastructures and future challenges
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<pre>   infr ast ruc t ures
                   Table 1.2          Challenges in relation to infrastructure investment in the Netherlands at present 1
                   Infrastructure                                                                 Challenges
                                                          Technology               New sources              Climate Change        Europe
                                                                                    of investment
                   Sewerage                                    √                                                 √
                   Drinking Water                              √                                                 √
                   Waste                                       √                        √                        √                   √
                   Dikes                                       √                                                 √                   √
                   Roads                                       √                        √                        √                   √
                   Railways                                    √                                                                     √
                   Airports                                    √                                                 √                   √
                   Electricity                                 √                                                 √                   √
                   Gas                                         √                                                 √                   √
                   Electronic communications                   √                        √                                            √
                   1
                     This is a description of the current state of affairs and does not reflect predications on future developments.
66
                             in greater detail. These essays have been contributed by various recognised aca-
                             demic experts from a variety of disciplines. The essays, presented in an accompany-
                             ing wrr study entitled New Perspectives on Investment in Infrastructures analyse
                             regime change in selected sectors in greater depth and compare the results of differ-
                             ent types of change on infrastructural and service provision.
                             We draw upon these essays in the following chapters. It must be stressed that these
                             chapters do not aspire to provide a detailed sector-by-sector analysis. Instead, they
                             are primarily indicative and aim to provide more general, sector-wide insights.
                             Chapter 2 investigates the process of regime change and examines theoretical as
                             well as empirical issues in relation to longer-term investment strategies (drawing
                             on Van Dijk 2008; Ten Heuvelhof 2008). Chapter 3 evaluates the emergence of new
                             types of actors and hybrid constellations of public and private actors in infrastruc-
                             ture provision and their impact on the principal-agent relationship through the
                             emergence of discrete critical transactions which have to be negotiated in multi-
                             layered but often splintered arenas (drawing on Teisman 2008; Knops 2008;
                             Bekkers 2008; Wilkeshuis 2008 and Van Duijn 2008). Chapter 4 shifts the focus to
                             the European level and examines the gradual shift of the arena for decision making
                             on infrastructural operation and investment to a multi-layered setting where na-
                             tional and supra-national institutional arrangements interact through networks of
                             experts (see inter alia Hancher, Dicke and Jorritsma 2008; Larouche 2008). Chapter
                             5 examines the impact of these various dynamics on public values in infrastructure
                             provision (see further De Pree 2008; Van Duijn 2008).
                             This report’s aim is to introduce a useful strategic policy framework and the
                             necessary institutional arrangements to maintain long-term investment in
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<pre>                                                                                         introduction
    physical infrastructures under the new conditions brought about by the process
    of regime change and in light of the future challenges which these infrastructures
    are required to meet. The Council will devote some attention to one of the most
    ‘developed’ infrastructures – in which the combination of regime change as well
    as wider market integration (commercial and technical) has not only resulted in
    the emergence of multi-level and heterogeneous actor arenas, but is also now
    undergoing major institutional evolution. This case study of the electricity
    and gas sector, which is taken up in chapter 6, is intended to highlight new and
    emerging issues which can be of relevance as a learning exercise for other sectors.
    These findings are then further developed in the concluding chapter 7, which
    introduces a strategic policy framework based on three pillars that may be able to
    address these urgent challenges.
1.7 conclusion
    This report contends that, taken at a general level, the process of regime change –
    irrespective of whether or not it has resulted in fully fledged privatisation – has in
    itself led to or at least set into motion two interlinked institutional changes which
    have to be addressed in order to meet the challenges posed by what the Council
    refers to in this report as ‘Type II’ market failures.                                            67
    Firstly, regime change is dominated by a pre-dominantly short-term focus on
    ‘Type I’ market failure – delivering cheaper goods and services over the infrastruc-
    tures. This, in turn, has led to a reorientation and narrowing of the focus on the
    wider public values with which infrastructural provision has been traditionally
    associated. Secondly, the process of regime change has led to a major splintering
    of the traditional principal-agent paradigm, in which the state was responsible
    for many of the operational decisions associated with infrastructural provision.
    In its place, we can trace the emergence of a multitude of discrete and autonomous
    transactions in relation to infrastructures involving both multiple and heteroge-
    neous actors and principals and at multiple levels or arenas, in which conflicts
    can be resolved or negotiated. In this process, the public-private interaction has
    altered significantly.
    As a result of regime change, critical infrastructural systems have become
    complex ‘systems of systems’ (Sajeva 2006; Larouche 2008). It is in this specific
    context that the public-private interaction must be re-oriented in order to estab-
    lish the potential for meeting the challenges of ‘Type II’ market failures – chal-
    lenges which will require large-scale system innovation to ensure the transition
    to a low-carbon sustainable economy as well as to guaranteeing sustainable
    mobility and a robust, knowledge-based society. A strategic policy framework is
    needed in order to design the public-private interaction so that it will meet these
    challenges and guarantee the many public values associated with infrastructural
    provision in the longer term. This is the central concern and focus of the subse-
    quent chapters of this report.
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<pre>   infr ast ruc t ures
                notes
                1      In its Report ‘Resilience of the National Electricity Network’, published on 25
                       May 2004, the House of Commons Trade and Industry Committee stated that
                       ‘there is a danger that there is currently an insufficient investment in the
                       (national electricity) network to replace in a planned and orderly way equipment
                       which is reaching the end of its life’ and ‘we consider that the Regulator’s concern
                       to reduce costs to consumers should now be tempered by a greater emphasis on
                       ensuring that electricity network owners have the financial resources necessary
                       to secure a viable long-term electricity supply.’
                2      See, for more figures, the Stern Review: The Economics of Climate Change (HM
                       Treasury 2006).
                3      Institute of European Affairs, Address by Commissioner Andris Piebalgs March
                       21, 2006,
                       http://iiea.com/images/managed/events_attachments/IEAPiebalgs.pdf.
                4      European Council (2000), Presidency conclusions. Lisbon European Council 23
                       and 24 March 2000, available on:
                       http://www.consilium.europa.eu/ueDocs/cms_Data/docs/pressData/en/ec/
68                     00100-r1.en0.htm.
                5      Estimate by London Economics regarding investments in tangible fixed assets in
                       e-communication across the eu 25 was Euro 32 billion for 2004. Total invest-
                       ments were lower in 2004 than in 2001, dropping until 2003 and then increasing
                       slightly in 2004 (London Economics and PriceWaterhouseCoopers 2006).
                6      Through private equity.
                7      Through outsourcing.
                8      The formation of the ‘Rijkswaterstaat’ agency.
                9      Through outsourcing and concessions.
                10     In some instances, privatisation, through ‘Public, Private Partnership’ construc-
                       tions.
                11     The formation of the ‘Rijkswaterstaat’ agency.
                12     Through concessions.
                13     Competition between airports.
                14     In the accompanying wrr study ‘New Perspectives on Investment in Infrastruc-
                       tures’, Knops (2008) has reflected on the interplay between technical characteris-
                       tics and governance.
                15     For instance, a series of expansions (three power plants) are planned for the Port
                       of Rotterdam Area in the coming years. The power plants are constructed in a
                       way so that co2 gasses are captured when they are released from the chimney and
                       subsequently stored in exhausted oil fields in the North Sea (between 2015 and
                       2020).
                16     The roles concern: initial steps of information gathering and analysis, agenda
                       setting, political decision making, developments of principles and laws, the
                       financing, monitoring and refereeing.
                17     Twenty years after the start of electronic communications liberalisation with the
                       1987 ec Commission Green Paper, and almost 10 years after the removal of the
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<pre>                                                                                          notes
   last monopoly rights in 1998, the ‘fat trimming’ operation has been largely
   successful, and in some areas, even beyond expectations. Instead of a single large
   incumbent with competitive fringes keeping it under pressure, the incumbent’s
   market share has shrunk and the competitive fringe has become a set of well-
   established ‘mainstream’ players. But now the initial asset base of the fixed-line
   incumbent is no longer sufficient to guarantee a satisfactory level of innovation in
   the longer term. Fostering investment in infrastructure needed to continue to
   innovate is now displacing ‘fat trimming’ as the paradigm for market regulation
   (Larouche 2008). Other sectors, and most notably the energy and the transport
   sector, find themselves at a comparable juncture.
18 An example of this latter type of response is the motion of November 2006 in the
   Tweede Kamer for new legislation for the cable sector to put the latter on an equal
   stringent regulatory basis with kpn (Tweede Kamer 2006-2007, 30800, no. 19).
19 This is a description of the current state of affairs and does not reflect predictions
   on future developments.
                                                                                                69
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<pre>   infr ast ruc t ures
70
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<pre>                                                           regime change and investment in infrastructures
2   regime change and investment in
    infr astructures
2.1 introduction
    As the previous chapter described, infrastructures are critical for the functioning
    of modern society as well as the key to successful social change such as, for
    instance, a transition to a low-carbon sustainable future for most of the world’s
    economies. In the context of a multitude of discrete and autonomous transactions
    in relation to infrastructures involving both heterogeneous actors and principals
    at multiple levels or arenas, hybrid constellations of public and private actors and
    technological developments, critical infrastructures have become ‘systems of
    systems’ (Sajeva 2006; Larouche 2008).
    The first stage of regime change focused on ‘Type I’ market failures, which
    implies ‘trimming the fat’ of the former monopolist as well as enhancing afford-
    ability and choice for the consumer. Whereas the processes of regime change
    adequately address a ‘Type I’ market failure, the potential for ‘Type II’ market fail-
    ures, that threaten to lead to public value failure in which broader, long-term
    interests such as the longer-term reliability, the accessibility of the networks and                   71
    innovation are at stake, has been largely disregarded. This, in turn, may require a
    strategic policy framework for the institutional arrangements of infrastructure
    provision in order to establish a stable long-term framework for infrastructure
    investments, which properly allocates costs and risks as well as rewards and
    responsibilities to the various actors involved. This focus restores the balance
    between the short-term efficiency-based approach engendered by the first stage
    of regime change and has characterised the majority of infrastructures in the
    Netherlands to date and longer-term societal values.
    This chapter commences with a description of the role of infrastructures in facili-
    tating and pushing spatial, economic and social development in section 2.2. In sec-
    tion 2.3, the specific features of investment in infrastructures are enumerated, fol-
    lowed by an assessment of the process of regime change in section 2.4. In section
    2.5, five modes of regime change are distinguished, namely liberalisation, privatisa-
    tion, unbundling, corporatisation and internationalisation. The analysis in section
    2.6 shows that regime change is never completed and in continuous transition.
    Subsequently, the difference between function and governance in infrastructures
    are highlighted in section 2.7. Regime change takes place in both dimensions, albeit
    not to the same degree and at the same pace. We conclude this chapter with two
    major consequences of the process of regime change: investment in infrastructures
    increasingly takes place in a multiple actor- and multi-level context (section 2.8).
2.2 the role of infr astructures
    In his study ‘Een nieuwe wereld’, Auke van der Woud (2006) provides an
    account of the growth of the main infrastructures in the Netherlands: water
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<pre>   infr ast ruc t ures
                       transport via normalised rivers, canals and sea ports, the tram and railways, the
                       postal services, telegraph and telephone and the roads system. He argues (2006:
                       17) that the layout of the network of 19th-century infrastructures became a domi-
                       nant factor in the spatial, economic and social development of the Netherlands.
                       ‘Op de plek waar de infrastructuur de meeste capaciteit en het intensiefste gebruik
                       kreeg, groeide het hart van het land, de regio van de grote steden, de huidige Rand-
                       stad. Buiten die dominante regio ontwikkelde Nederland zich als periferie.’ The
                       various infrastructures played a crucial role in facilitating and pushing spatial,
                       economic and social development in the country.
                       Although one could argue that the role of infrastructures in contemporary soci-
                       ety differ from those in an industrial society – the present emphasis on the
                       distinction between the spatial centre and the spatial periphery can be disputed –
                       the general idea that infrastructures are a precondition for development is still
                       valid. This was obviously the case with the 19th-century transport networks, as it
                       was in the 20th century when electricity, gas, water supply and other networks
                       supported the development of concentrated modern cities and the process of
                       industrialisation. The availability of and connection to communication and trans-
                       port networks is today still considered a precondition for the growth of regions
72                     and economic activities. Moreover, by adjusting the functionality and shape of
                       these networks, it is possible to influence patterns of growth and development,
                       including the associated positive and negative environmental and social
                       economic externalities.1 This implies that the management and expansion of
                       networked infrastructures goes way beyond the pure provision of a service to
                       satisfy demand. The provision of infrastructural services should be responsive to
                       a derived demand, resulting from established spatial and structural patterns of
                       economic and other activities, but it is also an instrument for steering and
                       supporting shifts in these patterns. Thus, decision making on the construction
                       and planning of (new) infrastructures has special characteristics, from both a
                       public and private interest perspective. The overall value of an adequately devel-
                       oped set of infrastructures to a society will most likely surpass the value that
                       individual users attach to it, which can be considered a positive externality.
                       A second crucial aspect that follows from this specific role of infrastructures is
                       that – almost by necessity – negative externalities are also present. There may be
                       alternative systems conceivable to individual users, but these may cause an addi-
                       tional burden to society as a whole. The individual willingness to pay for the
                       preferred solutions will be lower than the cost of establishing such a system,
                       which means that a public value is again at stake. These issues are discussed in
                       more detail in Van Dijk (2008).
                       With respect to the traditional solutions to the externality dilemmas posed by
                       infrastructure development, history shows that the public realm has often played
                       a crucial role. Whereas many infrastructures – in transport, electronic communi-
                       cation, energy and the management of water – were launched as private initia-
                       tives, public authorities generally took over at some point. The reasons for these
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<pre>                                                          regime change and investment in infrastructures
    transfers varied, as Van der Woud (2006) has shown. But the arguments can
    generally be characterised as one (or a mix) of the two types of externalities listed
    above. Depending on the (optimal) spatial scale of several systems and the effects
    involved, the municipalities, the provinces or the state took a role in the further
    development and management of the systems. Sometimes, the systems were set
    up at arm’s length as enterprises whose shares were publicly owned. Sometimes
    they were (re)established as executive departments under the close scrutiny of
    municipalities or the state. Interestingly enough, this distinction can be related to
    the extent to which the provision of these services either yielded a profit to their
    public shareholders, or whether they constituted an external cost, to be recovered
    from the public budget.
    Current arguments regarding these externalities are essentially based on the
    notion that a private initiative is more efficient in providing these infrastructures
    and services. Either the profits generated for the public owners were much too
    high and needed to be replaced by normal taxation under democratic political
    control, or the costs at which the public sector provides these services could be
    reduced, by introducing competition and the discipline of a (quasi) market
    regime. A third argument concerned attempts to raise private funding to finance
    infrastructures. The longer-term developmental issues were generally considered                       73
    less important, until very recently. On the one hand, it was thought that specific
    subsidies would be sufficient to cover these aspects, while, on the other hand, the
    market in respect to many services was seen as a better indicator for their indis-
    pensability than the political process and the public bureaucracy. The insights, as
    shown below, induced regime change which is the subject of this study.
2.3 the specifics of investment in infr astructures
    Before turning to a detailed analysis of the relation between regime change and
    investment in infrastructures it is useful to highlight the complexity of the
    process of investment in infrastructures itself. Infrastructure investment exhibits
    certain specific economic characteristics that make the relation with regime
    change more complex than the relation solely between regime change and the
    provision of the services.
    Van Dijk (2008) provides an overview of these characteristics in the accompany-
    ing wrr study New Perspectives on Investment in Infrastructures drawing on
    insights on the specifics of investments in infrastructures as referred to in the
    economic literature:
    – Sunk investment: Investment in infrastructures is irreversible. Once a railway,
       a dike or a road is built, it can not be moved and used for other purposes;
    – Long lead times: There is a long time between start and use of the investment
       in infrastructure investments;
    – Risk: Investments in regulated monopoly infrastructures are characterised by
       asymmetric ‘up-’ and ‘downside’ risk. The ‘upside’ of an investment, or the
       extra revenues stemming from a successful investment, are ex post appropri-
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<pre>   infr ast ruc t ures
                          ated via strict public regulation, while the ‘downside’ investment, the less
                          successful investments, do not lead to a relaxing of the regulation. This is
                          because network owners are less willing to invest ex ante.
                       – Long duration: Most infrastructures have a long physical life span. As an illus-
                          tration, water pipes can last up to 100 years.
                       – Lumpy: Most expansion, renewal and construction of new infrastructures
                          cannot happen gradually. The investment has to be carried out in big, discrete
                          steps with an obvious risk of ‘gold plating’.
                       – Inelastic demand: Demand for drinking water, electricity and gas is fairly
                          predictable, as it is often a function of the number of consumers and their
                          income levels. Thus, demand is inelastic to a large degree. As a result, there are
                          stable cash flows for the infrastructure company. For some new investment
                          projects, however, future demand is highly uncertain, e.g., the use of new
                          technologies in the communications sector.
                       Inelastic demand is the only characteristic of infrastructure investment that
                       decreases the investment risk. All other characteristics increase the investment
                       risk.
74
                2.4    regime change: an incomplete process
                       There seems to be a general level of discontent these days with the (perceived)
                       results of regime change, and not just regarding infrastructures but in many liber-
                       alised sectors (see, for instance, Ankersmit and Linkers 2008). This is not only the
                       case in the Netherlands.2 An example of this dissatisfaction is the manifesto of
                       the Dutch trade union, the fnv, which advocates a ‘moratorium’ on regime
                       change (fnv 2007) in all sectors,3 because of the many unintended and negative
                       consequences, most notably unemployment. And last spring, of course, the
                       Dutch Finance Minister, Wouter Bos, announced a change in policy that implies
                       that the days of ‘unlimited privatisation’ are over. According to Minister Bos,
                       further privatisation has been ruled out, unless deemed absolutely necessary.4
                       This section offers a general overview of the main reasons for the processes of
                       regime change since the 1970s.
                       Traditionally, the combination of natural monopoly and public good characteris-
                       tics – known as the traditional neo-classical approach – had justified public
                       ownership and regulation in infrastructure-based public services, such as
                       communications and postal services, electricity, gas and water supply, and public
                       transport based on the concepts of market failure and market imperfections. Here,
                       the state is called upon to remedy market imperfections and failures, including
                       problems involving excessive market power, externalities, lumpy investments,
                       spill-over and so on (Scherer 1980; Stiglitz 1986). In the us, privately owned
                       utilities were generally regulated by sector-specific federal and state agencies. In
                       Europe, the utilities were owned by the state, municipalities or other regional
                       bodies. The regulators in the us and public ownership in Europe also secured the
                       public interest elements or public values associated with these services, which
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<pre>                                                       regime change and investment in infrastructures
involves issues of safety, security of supply, acceptable prices for specific types of
users, objectives of local and sectoral development, the supply of jobs, and – more
recently – issues of sustainability and environmental protection (Foreman-Peck
and Milward 1994; Van der Woud 2006).
Meanwhile, the disadvantages of this approach, such as it being inert, inefficient
and inward looking, have often been catalogued and analysed; see, for example,
Williamson (1990 and 2002), Megginson and Netter (2001), World Bank (2002),
Van Damme (2006) and Van Dijk (2008). The essays of De Pree (2008) and Van
Dijk (2008) summarise the risks inherent in the public monopoly with regard to
investment:
– Public organisations lack the pressure from the capital market regarding the
    management that will minimise costs;
– There is less pressure on the management in general because of soft budget
    constraints (there is no risk of going bankrupt);
– There is the risk of opportunism from political pressure to adapt objectives.
    Infrastructures are more vulnerable in this respect than other sectors because
    of its long-term perspective and the fact that it is taken for granted: installing
    or replacing sewers is not a front-page story. If politicians have to choose
    between an investment in education or in the sewerage system, political                            75
    opportunism will lead them to prefer the first.
– There is opportunism caused by the variety and changeability of goals. To
    illustrate this point: in times of economic recession, employment becomes
    more important in relation to the investment in infrastructures. If the dura-
    tion of the economic recession lasts for any substantial period of time, invest-
    ment schemes will be delayed or thinned. This is often mentioned as a cause of
    the privatisation wave in the drinking water sector in the uk. The water pipes
    were in such bad condition, that only private money could finance the invest-
    ment needed for an upgrade to European standards (Helm 2007; Dicke 2001).
The risks for investment stemming from these characteristics are obvious. If it is
true that the management in public organisations is not scrutinised as effectively
as in private organisations, the risk for investment is gold plating. Political pres-
sure and the time span of the election period may bring about an incoherent and
inconsistent strategy on investment. The volatility of goals may lead to under-
investment in times of economic depression.
By the late 1970s, the traditional neo-classical approach was, gradually and
initially only in a few Anglo-Saxon countries and Chile, replaced by the kind of
‘liberalism’, associated with the late Ronald Reagan and Margaret Thatcher. Effi-
ciency and economic reform were sought by ‘rolling back the state’, which
involved the lowering of taxes, the privatisation of public enterprises and by
introducing competition into the public sector wherever possible (Friedman
1962; Demsetz 1968; Parker 2000; Helm 2003). In 1985, the adoption of the Euro-
pean single market made liberalisation a point of departure for the European
Commission, which was initially a major instrument used to tear down the
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<pre>   infr ast ruc t ures
                            prevailing barriers to intra-community trade between the European national
                            markets (Haaland Matláry 1997). The public service character of most infrastruc-
                            ture-based industries, however, has kept these sectors more or less immune from
                            the pressures for liberalisation. It was not until the 1990s that the efficiency argu-
                            ment began to emerge in Europe and that liberalisation in the domains of elec-
                            tronic communications, electricity, gas, transport and water became accepted as a
                            means to enhance welfare.
                            By that time, the experiences of forerunners, like the UK and Chile, had shown
                            that a simple privatisation strategy and a withdrawal of the state did not yield the
                            expected efficiency improvements. Selling public monopolies off to the private
                            sector as private monopolies, only contributed to a reduction of public debt, but
                            efficiency was not increased. This required a more subtle approach of infrastruc-
                            ture systems in which the notion of efficiency was actually related to market
                            competition and not just privatisation. What emerged from this new perspective
                            was the notion of unbundling, in which potentially competitive segments of
                            industries had to be set apart from the inherently natural monopoly segments in
                            the value chains. Generally this implied that, on the one hand, competition
                            would have to be introduced in the production, services and retail segments
76                          while, on the other hand, the arteries of the systems, like pipes and wires, had to
                            be regulated as essential facilities. The former implied a kind of transitory
                            approach in which the regulation of prices, supply and quality were left to the
                            market, in a step-by-step mode, parallel with the growth of competition via the
                            entry of new suppliers. The latter implied the development of new approaches
                            towards the regulatory control of monopoly segments. As a result of the develop-
                            ments in the uk’s policy on the deregulation of its utilities, the Austrian school
                            has become an important source of wisdom, providing the basis for a more
                            dynamic type of regulation (Newbery 2000).
                            In contrast with the traditional static equilibrium approach, in which prices were
                            regulated on the basis of assumed costs plus a reasonable allowance for invested
                            capital, the Austrians focused on dynamic processes in competitive markets. For
                            example, price-cap regulation (for an illustration see Box 2.1) encourages opera-
                            tors to reduce their costs, by letting them keep the difference with fixed prices for
                            a period of time. For instance, the yardstick regulation of costs, tariffs, quality and
                            efficient trading, and auctioning arrangements are being applied in these sectors
                            to imitate the market process (Littlechild 1983; Laffont and Tirole 1993; Kirzner
                            1997; Newbery 2000; Robinson 2000; Hawdon and Stevens 2001). Moreover, a
                            further requirement for ‘dynamic’ competition and for harvesting its advantages
                            is that new concepts and solutions are embraced.
                   Box 2.1        The rpi-x approach
                   ‘The rpi-x approach is an example of a price-cap mechanism that gives firms incentives to operate
                   efficiently. Under this approach, prices or revenues are only allowed to increase by some measure of
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<pre>                                                                       regime change and investment in infrastructures
 price inflation (retail price index, rpi) minus the X factor, where the X factor is set according to the
 regulator’s expectation of potential efficiency improvements. The cap is then fixed for an exoge-
 nous period of time, often between three and five years. Any efficiency improvements achieved
 beyond the X factor can be kept by the company as profits. At the end of the control period, these
 cost reductions can be passed on to the consumer in the form of lower prices for the next period’
 (Oxera 2004: 25).
2.5       defining liber alisation, privatisation, unbundling ,
          corpor atisation and internationalisation
          As described in section 2.4, the Dutch economy has witnessed a process of
          regime change in most of its infrastructures over the past two decades. This
          process can be described as the shift from the neo-classical approach in which
          publicly owned (local) monopolists were responsible for infrastructure provision
          to meet national needs, to a situation in which different parties, both public and
          private, share responsibility and ownership in various institutional arrange-
          ments. A new league of competing firms, supplying infrastructure-based services
          to a variety of users in the wider European markets emerged.
                                                                                                                       77
          In regime change for the organisation of infrastructure provision, five different
          modes can be distinguished: liberalisation, privatisation, unbundling, corporati-
          sation and internationalisation. These modes are sometimes considered sequen-
          tial steps towards a full liberalisation of a sector. However, this is not necessarily
          the case. How regime change has taken place in different sectors has been driven
          by the particular technical, institutional and economic issues specific to the
          different infrastructures. Moreover, the choices made in different countries also
          vary strongly, depending on contextual factors and policy preferences (Correljé
          and De Vries 2008).
2.5.1     liber alisation
          The first mode of regime change, ‘liberalisation’, refers to an opening up of a
          sector, so that several firms can compete in the supply of goods and services to
          consumers. According to Van Dijk (2008):
 Examples of this approach can be found in the electricity and gas sector, where the exclusive supply
 rights of the sep, GasUnie and the regional energy companies were abolished by the Electricity and
 Gas Laws, so that new entrants could compete for the supply of electricity and gas to customers.
 To this end, the networks, as essential facilities, were forced to provide access on an equal footing
 to the competing suppliers. Network tariffs were regulated on a price-cap or rpi-x (see Box 2.1)
 basis, to ensure that the networks would be encouraged to reduce their costs of operation and capi-
 tal. This, of course, required a ring-fencing of the network activities of the still integrated network
 operations.
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<pre>   infr ast ruc t ures
                2.5.2  privatisation
                       Another mode of regime change can be referred to as ‘privatisation’, which
                       involves a transfer of ownership from the public to the private sector. Liberalisa-
                       tion and privatisation can be combined in a single programme, but this is not
                       strictly necessary. Publicly owned companies can be liberalised, as is the case in
                       the Dutch electricity and gas sector, and privatisation can take place without the
                       introduction of competition, as many early examples in the British utility sectors
                       show. Public monopolies then become private monopolies. These examples are
                       generally seen either as unfinished business (in the Netherlands), or as a starter’s
                       mistake (in the uk).
                       There are different ways to privatise, which involve a) selling the utility as a
                       whole to a private (or foreign public) conglomerate; b) selling shares to a group of
                       private equity investors; c) sale via the stock exchange. However, in the Nether-
                       lands, the tendency has been to keep the networks in public hands, while the
                       potentially competitive production and trading activities are considered potential
                       privately operated activities.
78                     As part of regime change and irrespective of a transfer of ownership to the
                       private sector, certain new regulatory and monitoring functions have emerged.
                       The state assumes the responsibility for regulation while – at a greater or lesser
                       distance – public and private firms carry out commercial and network operations
                       (Larouche 2008). The state can assume its regulatory responsibilities through
                       a range of instruments, which vary across the infrastructures, as we explain
                       below.
                2.5.3  unbundling
                       A more rigorous step in the process of regime change is ‘unbundling’, in which
                       the vertically integrated undertakings are split up into separate units, according
                       to their functions, involving either potentially competitive activities, or essential
                       network facilities. Unbundling may be carried out to various degrees, ranging
                       from ring-fencing or organisational unbundling, to legal unbundling and eventu-
                       ally, full ownership unbundling. The Dutch energy sector is now fully unbun-
                       dled so that control (and even ownership) of the networks is strictly separated
                       from ownership of other energy assets. The main argument behind unbundling
                       is to reduce the incumbent’s dominance of the market via its control of the
                       network components, by creating impartial operators of essential facility func-
                       tions. An example of ownership unbundling is the separation of the formerly
                       integrated Dutch railways into a service provider (ns) and an independent organ-
                       isation, responsible for the rail infrastructure (ProRail).
                       The essential network facilities are normally maintained as regulated monopo-
                       lies. The Dutch operation of the gas and electricity infrastructure is now in the
                       hands of two state-owned companies, GasUnie and TenneT, both of which are
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<pre>                                                            regime change and investment in infrastructures
      subject to extensive regulation as regards access conditions and tariffs for third
      parties, to ‘trim the fat’. The regulation is undertaken by a sector specific body –
      the Directorate for the Supervision of Energy Markets (dte), a specialised cham-
      ber of The Netherlands Competition Authority (nma). The role of the state share-
      holder, the Ministry of Finance, remains at arm’s length, and the Ministry is not
      involved in commercial and operational procedures.
      The unbundled, potentially competitive, components of a sector may end up in
      public or private hands. Moreover, they may be split up horizontally, to create a
      number of competitors right from the start. Otherwise, competition would have
      to await the arrival of new, or foreign, entrants onto the market. It is generally
      considered difficult to gain market share from the incumbent supplier.
2.5.4 corpor atisation
      The fourth mode of regime change is often referred to as ‘corporatisation’, which
      indicates a shift towards the management of publicly owned infrastructure on
      the basis of commercial management ‘principles’, including the valuation of
      assets, specific types of human resource management, etcetera. The introduction
      of commercial principles requires a weak separation of the infrastructure opera-                      79
      tor, or particular functions, from public bodies to be carried out by distinct legal
      entities with more commercial objectives. An example of corporatisation was
      the splitting off of kpn from the Ministry, which was responsible for electronic
      communications in the mid 1980s. The concentration of the municipally owned
      gas and power suppliers into regional energy companies, as well as the bundling
      of water supply companies, in the 1980s and 1990s should also be understood
      from this perspective.
2.5.5 internationalisation
      The process of internationalisation includes both the physical and the gover-
      nance aspect of infrastructures (see also section 2.7). Internationalisation refers
      thus to international trade, the physical connection of networks between coun-
      tries, international laws, rules and authorities, and international cooperation
      between countries, regulators and companies. The term as it is used here, also
      encompasses the international expansion of the activities of infrastructure
      companies.
2.6   continuous regime change and hybrid arr angements
      At first glance, it could be argued that despite the liberalisation of most infra-
      structure-based sectors in the Netherlands, there has not been much of a funda-
      mental change with respect to the networks as such. Ten Heuvelhof (2008) for
      example, concludes that:
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<pre>   infr ast ruc t ures
                   On the level of infrastructures, the monopoly is still the dominant market form, with an occasional
                   duopoloid or oligopoloid structure. The infrastructures have remained in public hands, with the
                   exception of the electronic communications sector. The infrastructure operators have become more
                   autonomous from the service providers. Regulation has become substantially stronger. The overall
                   picture is that the present situation is between the classic paradigm and the new paradigm.
                           Regime change in the Dutch infrastructures appears to be an incomplete process
                           which has only led to full privatisation and full liberalisation in special cases.
                           With the exception of the electronic communications sector, public ownership is
                           not contested and regime change has been characterised by outsourcing (roads,
                           dikes, drinking water), unbundling (electricity and gas), or the deployment of
                           concessions (railways).
                           However, and in order to appreciate the variety of the institutional regimes in
                           Dutch infrastructures and the degree to which regime change has actually taken
                           place in practice, it should be recalled that the separation of commercial responsi-
                           bilities from state prerogatives and regulatory goals can and has pragmatically
                           taken various forms in the Netherlands (Van Damme 2006). For example, the
80                         concession model is not frequently used in the Netherlands (Wilkeshuis 2008),
                           apart from the railways where ProRail has a maintenance concession, whereas
                           the concession model is widespread in other countries, most notably in France.
                           Further, public organisations increasingly outsource key activities to private
                           subcontractors or to specially created companies. But here too a huge variety in
                           institutional regimes can be found. The degree to which subcontracting takes
                           place varies considerably: from minor tasks to full operation and management.
                           This model is applied to the drinking water, roads and dikes sectors. What these
                           three sectors have in common is that more and more tasks are being outsourced
                           (Ministry of Transport, Public Works and Water management 2004), even if the
                           degree of autonomy enjoyed by the contractor varies. Another variant of
                           outsourcing is Public Private Partnership (ppps). These are a form of permanent
                           cooperation between public and private actors, in which these actors develop
                           mutual products and/or services and in which risk, costs, and benefits are shared.
                           This method is believed to accomplish added value through the integration of
                           public and private resources and skills (Teisman 2008). Thus, some forms of
                           regime change as described in section 2.5 have taken place in all Dutch infrastruc-
                           tures, but to various degrees and it has led to different institutional arrange-
                           ments. Another element in the variety of institutional arrangements that has
                           attracted the attention is the various degree of distance between principal and
                           agent: this distance is small in some instances (e.g., roads, dikes, sewerage) while
                           it is large in other sectors (e.g., electronic communications).
                           Section 2.5 described regime change as a shift from the neo-classic approach
                           towards a new situation, that involves liberalisation, privatisation, unbundling,
                           corporatisation and internationalisation as if it were a straightforward step from
                           A to B. This bold statement must be qualified: the process of regime change is
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<pre>                                                            regime change and investment in infrastructures
      never completed. Most of the sectors examined in this report are still in transition
      and display a mix of features from both the classic and new approach. This
      continuous shift is partly due to shifting preferences in the political domain and
      to new external pressures, like technological developments that are constantly
      emerging.
      However, on top of these factors that cause continuous change, there are also two
      other fundamental factors. Firstly, in the course of regime change there will
      always be a combination of intended and unintended consequences and,
      secondly, there are direct and indirect consequences. Thus, there are the intrinsic
      characteristics of the process of regime change itself that require continuous
      adaptation.
2.6.1 intended and unintended consequences
      The process of regime change has both intended and unintended consequences.
      The intended – or expected – consequences are the achievement of customer
      choice, lower prices and increases in efficiency (World Bank 2002). In the Dutch
      drinking water sector, for example, efficiency has increased by 21% since the
      introduction of a sector benchmark (Van Damme 2006); the price for electricity                        81
      has decreased by some 15% since the introduction of liberalisation and this
      general tendency of improved efficiency is visible in most sectors where regime
      change has been introduced (Ministry of Economic Affairs 2008; see also seor-
      ecri 2007a).
      But there are also unintended consequences of regime change, which are related
      to the characteristics of the infrastructures as identified in the economic litera-
      ture (Van Dijk 2008; Ten Heuvelhof 2008). Most sectors studied in this report are
      similar in that they require a fixed natural monopoly network to deliver the serv-
      ices, and as such, some form of regulation has to be introduced to control access
      conditions and tariffs to third parties and to cap their revenues and/or tariffs
      (section 2.3). An exception is, again, the electronic communications sector. The
      introduction of a form of tariff or access regulation has a number of consequences
      for the industry as well as for the newly established regulator, stemming from the
      so-called principal-agent relationship between the regulated industry and the
      regulator. These include: information asymmetry, regulatory opportunism, vari-
      ous forms of strategic behaviour and incomplete contracts.
      Information asymmetry can be attributed to the difference between the insight
      and information that the operators, as agents, have about their business, and that
      of the regulator, as the principal. Moreover, the agent may be confronted with
      multiple principals, e.g., various ministries, inspectors, regulators, and may
      receive conflicting instructions, information and requirements from these vari-
      ous principals. This renders it difficult to supervise and control the operators in a
      uniform or even coordinated manner.
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<pre>   infr ast ruc t ures
                       Regulatory uncertainty and regulatory opportunism involves the risks that stem
                       from regulatory behaviour, either unintended (regulatory uncertainty) or
                       premeditated (regulatory opportunism). The latter refers to the behaviour of
                       regulators who renege on agreements with the agents, for example, in cases
                       involving cost recovery. As a result, the agent anticipates this behaviour and does
                       not invest or postpones investment (Van Dijk 2008). Infrastructures are espe-
                       cially susceptible to regulatory opportunism given that infrastructure invest-
                       ment is irreversible and sunk.
                       Strategic behaviour of the regulated party is a form of opportunistic behaviour,
                       which has always been and will always be part of the management of public utili-
                       ties (Ten Heuvelhof 2008). However, under modes of regime change, additional
                       incentives that create strategic behaviour may lead to either under- or over-
                       investment.
                       Incomplete regulatory contracts (Van Dijk 2008; Ten Heuvelhof 2008) are related
                       to the problem that formerly integrated functions must now be made explicit and
                       embedded in a contract between different actors. This contract can never be all
                       encompassing. New situations that are not described in the contract will always
82                     emerge so that regime change will never be complete. A similar issue is true for
                       institutional arrangements: no matter how clear and restrictive certain rules and
                       regulations are, there is always room for ambiguity in one’s behaviour, which Ten
                       Heuvelhof (2008) has called ‘permanent ambiguity’. Although this behaviour is
                       not unlawful, it is undesirable and regulatory institutions will respond to this
                       behaviour by attempting to correct it so as to mitigate the undesired outcome.
                       This, in turn, provokes new types of ambiguous behaviour, to which the institu-
                       tions must then respond.
                       Potential reactions from the regulated entity are asset sweating and hold-up
                       behaviour – examples of strategic behaviour that may lead to under-investment. It
                       is not easy to predict whether certain types of behaviour either leads to over-
                       investment or under-investment. Other factors may also influence the level of
                       investment and these other forces may compensate for the strategic behaviour,
                       but they may also strengthen each other. It can be concluded – tentatively at least
                       – that under the classic paradigm, the incentives that tend to dominate incite
                       strategic behaviour resulting in over-investment in infrastructures. Adverse
                       selection and gold-plating are relevant in this context. Potential responses to
                       incomplete contracts may seriously undermine long-term investment.
                2.6.2  direct and indirect consequences
                       In addition to the unintended consequences, there are also the indirect effects of
                       regime change (Van Dijk 2008: 25). This distinction is relevant for understanding
                       regime change, since it explains why the process of regime change is a continuous
                       transition.
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<pre>                                                          regime change and investment in infrastructures
    Liberalisation can mean that returns for the investor are more difficult to realise
    under competition, which, in turn, can act as a disincentive for making new
    investments. Furthermore, financing options may be limited by the unbundling
    of the network from other functions. Efficiency gains and synergies that were
    possible under vertical integration may disappear. Think, for instance, about
    what happened to the Dutch railways after unbundling.5 Lastly, risks may arise in
    relation to the introduction of ex post regulatory measures, which cause further
    insecurity (Larouche 2008). In the case of gas and electricity network regulation,
    for example, certain investments may be treated as exceptions and a tariff
    increase may be allowed, but the network operator might not have a guarantee
    that this procedure will be followed through, nor can he predict the outcome
    until a later stage in the investment process. This has obvious repercussions for
    potential profit margins.
    In conclusion, regime change itself leads to further changes within the institu-
    tional arrangements that require continuous adaptation (Sioshansi 2008). The
    process of regime change is therefore never complete.
2.7 function and governance                                                                               83
    The consequences of regime change may be particularly complex for infrastruc-
    tures and may go beyond the institutional level, given that we are dealing here
    with a physical network (the cables, pipes, dikes and roads). The five modes of
    regime change have both a functional and a governance dimension.
    In these physical networks there are many relevant operational elements that may
    alternatively limit or accelerate and enable regime change including the degree of
    standardisation, and eventual interoperability with other networks beyond
    national borders. The same is true for the financial dimension: infrastructural
    assets also have an increasingly significant function in the international capital
    market, as Melody (2008) and Hancher, Dicke and Jorritsma (2008) have shown.
    Chapter 6 of this report will illustrate this process in the electricity and gas
    sectors in greater depth. This case study will examine the various stages of the
    process of the internationalisation of infrastructure markets and their major
    actors, starting with commercial integration through competition from new
    players from other jurisdictions and as a result of enhanced trade and pressure on
    the physical network, which then moves on towards technical integration to
    ensure more efficient and coordinated network management across national
    borders. The final stage in this process may well be enhanced institutional inte-
    gration, with the creation of new European (or sub-European regional) regulatory
    institutions (see chapter 4). As we will see, institutional integration is also occur-
    ring in some other sectors, most notably in the energy and electronic communi-
    cations sectors, where European liberalisation policies are the most established
    (Larouche 2008 and chapter 6).
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<pre>   infr ast ruc t ures
                       Hence, operational functions are no longer confined to a purely national context.
                       Regime change in the Netherlands has generally occurred as a response to inter-
                       national (or European) developments. For example, the liberalisation of the
                       energy and communications sectors and the introduction of competition, was set
                       in motion by the adoption of European directives. At the same time, as a result of
                       liberalisation and of the increased independence of commercial operations, these
                       sectors have become open to new actors and new interests, both operational and
                       financial, while existing actors (both public and private) may seek new roles and
                       explore the challenges offered by internationalisation. As a result, the underlying
                       infrastructures take on a new functional role, and are no longer confined to the
                       provision of primarily national public goods.
                       Regime change has therefore also opened up the possibility to a wider integration
                       of national markets and national actors along different dimensions. For certain
                       infrastructures this has meant a measure of commercial integration across Europe
                       (e.g., gas, electricity, and electronic communications), while in others it has
                       meant that an increasing physical or technical integration has been the leading
                       characteristic (Railways). Functional change should therefore be viewed as an
                       important component of regime change, and not just a consequence of institu-
84                     tional change (Knops 2008). It is a component that can develop and take shape
                       irrespective of whether institutional change has progressed from public to
                       private ownership and full competition – from the classic to the new paradigm.
                       This is important to bear in mind because functional change occurs irrespective
                       of national policy choices regarding the speed or direction of regime change.
                2.8    results of regime change: numerous and
                       heterogeneous actors and multi - levels
                       The most important consequences of regime change for investment in infrastruc-
                       tures in general can be summarised as follows: 1) there are numerous and hetero-
                       geneous actors involved in investment in infrastructures; and 2) decision making
                       on investment in infrastructures takes place on multiple levels.
                       As a result of regime change, new actors are involved in the investment in infra-
                       structures, both public and private, including regulated and unregulated public and
                       private actors; public and private actors responsible for operation/exploitation of
                       the network, and new actors responsible for the financing as well as regulatory bod-
                       ies with varying degrees of power over these various players. Moreover, existing
                       actors have taken on new roles. This multiplicity of actors is the topic of chapter 3.
                       Decision making on investment occurs at many levels – international, European,
                       regional, national and even local or decentred (Black 2007). This is not only true
                       for the regulation and control of operations, but also of their financing. As a result
                       of regime change, tasks related to regulation and supervision are diffused over
                       different public actors including different ministries, regulators, and various
                       informal or self-regulatory bodies. In other words, and as reflected in recent
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<pre>                                                                    regime change and investment in infrastructures
         research into Principal Agent theory, the ‘principal’ is no longer represented by
         one single body, but consists of numerous principals (Steenhuisen and Van Eeten
         2008). Chapter 4 describes the emergence of multiple layers of decision making
         in greater detail.
         The introduction of heterogeneous actors and of multiple layers has important
         consequences for the investment process in infrastructures. As a result of the
         introduction of new actors, new interests and values emerge. What is good
         investment? What is adequate investment? New criteria and values become rele-
         vant when evaluating the adequacy of investment, and inevitably, new conflicts,
         for example, between private and public organisations, come to the fore. The
         multiplicity of actors, the new roles they take on, combined with the multiple
         layers, may lead to distrust and insecurity and provide for more opportunities for
         strategic behaviour and regulatory opportunism. A combination of the multiplic-
         ity of the actors and of the levels in turn leads to what the Council terms ‘splin-
         tered arenas’6 of decision making. However, given the specific features of the
         investment in infrastructures, as discussed in section 2.3 above, it is this new
         multi-actor/multi-layer constellation that creates a major challenge for future
         infrastructure provision, especially given the huge levels of investment that are
         expected to be essential over the coming decades.                                                          85
2.9      conclusion
         This chapter described and analysed regime change in general during the past 15
         years in the Netherlands. The Council identified the (potential) consequences of
         regime change for long-term investment. In doing so, we have investigated the
         current framework of the public discourse on regime change for infrastructures.
         The Council contends that this discourse has all too frequently shown a one-
         dimensional tendency and is often based on a ‘from-to’ model – from public
         ownership to private ownership and from non-commercial to commercial
         exploitation under conditions of competition. The model assumes that regime
         change should follow the pattern shown in Table 2.2.
         In other words, the assumed logic of regime change is couched in terms of a
         steady progression from full public ownership to full private ownership with a
 Table 2.2      Ordering in the classic paradigm and the new paradigm
                                               Classic paradigm               New paradigm
 Relation between links in the chain           Vertical integration           Unbundled
 Competition                                   No                             Yes
 Ownership                                     Public ownership               Private ownership
 Source: Ten Heuvelhof 2008: 20.
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<pre>   infr ast ruc t ures
                       limited role for government as a ‘director’ or ‘marktmeester’ that is responsible
                       for correcting market failures. It implies the reverse logic: if the new paradigm
                       does not deliver the results, then a return to the classic one is the best solution.
                       This chapter has shown, however, that on the basis of the experiences with
                       regime change across the sectors, there is no such ‘from-to’ model either in
                       theory or practice. Instead, the process of regime change is one of continuous
                       evolution. Once the initial structures, institutions and commitments have been
                       erased, there is no returning.
                       The primary lessons to be drawn from this chapter are that regime change is a
                       constant and incomplete process, and that it is also multi-directional – so that
                       risks and rewards for infrastructure investment are not clearly apportioned.
                       Uncertainty with regard to investment in infrastructures has to be seen in view
                       of the particularities of infra-investment (lumpy, sunk, long term). Further, this
                       chapter has also stressed that regime change has intended and unintended conse-
                       quences. Perhaps unfortunately, one cannot deal with these unintended conse-
                       quences simply by reversing the process by returning to the classic paradigm, nor
                       can we expect additional regulations to deliver a final solution. Inevitably, new
                       regulatory responses will generate new indirect and unforeseen consequences.
86                     Finally, this chapter has stressed the interaction between function and gover-
                       nance in infrastructures. The next two chapters discuss two aspects of regime
                       change in more detail: the relation between multiple and heterogeneous actors
                       and multiple levels for investment in infrastructures, in order to establish the
                       remaining scope for national public values to be achieved in increasingly inte-
                       grated markets, in which the interests of a variety of actors must be addressed in a
                       range of arenas.
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<pre>                                                                                      notes
notes
1   Positive and negative impacts on any party not involved in a given economic tran-
    sition.
2   See ‘Rising power prices sour German view of liberalisation’, Financial Times, 7
    January 2008.
3   See also ‘fnv wil einde aan privatiseringsgolf’, Trouw, 24 March 2007 and ‘Staak
    liberalisering tot duidelijk is of het werkt’, de Volkskrant, 24 March 2007.
4   See ‘Minister Bos kondigt gematigder privatiseringsbeleid aan; pvda-minister is
    terughoudender met privatiseringen en wil snelle invoering van sociale
    vennootschap’, Het Financieele Dagblad, 16 March 2007.
5   See ‘Ontspoord; Duizenden treinen rijden elke dag over gebrekkige wissels van
    ProRail’, nrc Handelsblad, 17 November 2007, ‘Ontspoord (2); ProRail heeft te
    weinig greep op het onderhoud van het spoor’, nrc Handelsblad, 24 November
    2007 and ‘ProRail erkent problemen; Privatisering onderhoud spoor mislukt’,
    nrc Handelsblad, 24 November 2007.
6   See also Graham and Marvin (2001).
                                                                                            87
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<pre>   infr ast ruc t ures
88
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<pre>                                                                            a new constellation of actors
3     a new constell ation of actors
3.1   introduction
      Concerns have recently been raised on the negative aspects of private involve-
      ment in infrastructures, a discourse for which the rise of private equity funds,
      foreign actors and discussions on the – possible – transfer of ownership into
      private hands provide the new context. More generally, the desirability of the
      private actors’ involvement in infrastructures has become an ever more probing
      issue in political debates. There is no doubt that many new actors have come to
      the fore, albeit that differences between infrastructures are substantial. It would
      be too simplistic, however, to limit the effects of regime change on the actor
      constellation to the mere emergence of private actors next to a public actor that
      used to have a monopoly position. Inevitably, the emergence of new actors – but
      also other manifestations of regime change – has caused existing relations to
      change and new relations to develop. These changes have demonstrated that the
      role and position of government is, in fact, a multifaceted one, because it
      comprises decision making, financing, regulating and supervising functions, but
      also (in sectors in which regime change has had only limited effects) operational                   89
      functions and ownership.
      This chapter addresses two issues. First, it focuses on the developments in the
      actor constellation. As a result of regime change, both the roles, and the interests
      and interactions between the (now multiple) actors have changed. Secondly, this
      chapter shows that the intensity of the change is in part a function of the degree
      of regime change itself and is also intrinsically linked to the degree and the type
      of competition in the sectors.
      When analysing the trends in actor constellations, the differences between the
      various sectors cannot be ignored. In some sectors, infrastructures are now in
      private hands, and a regulator has been introduced (electronic communications).
      In other sectors, the state has awarded a concession to a publicly owned company
      (railways), while in still others the network is in the hands of public owners
      (drinking water). In the gas and electricity sectors, networks are owned and oper-
      ated by a regulated monopoly. Lastly, regime change may have resulted in a public
      organisation, such as a government department or a local authority, outsourcing
      various activities, such as waste management, to private actors. Although the
      actual situation may thus differ from sector to sector, parallels may nevertheless
      be drawn with regard to the underlying trends and issues they are faced with.
3.1.1 regime change: rival actor s , multiple principals and splintered
      arenas
      There are three elements of importance in connection with the relation between
      regime change and the constellation of actors: rival actors, multiple principals and
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<pre>   infr ast ruc t ures
                       splintered arenas. The first, rivalry, originates from the fact that as a result of
                       regime change, heterogeneous actors were introduced into infrastructures, some
                       were public, some were private while others were hybrids. Regime change fosters
                       a rivalry between these existing and ‘new actors’– with rivalry being the essence
                       of a competition that was introduced intentionally with regime change (see also
                       chapter 6). While it is true that most infrastructures themselves remain natural
                       monopolies, there has been a competition between producers/service providers
                       supplying for networks, and between rival wholesalers/traders that deliver goods
                       and services from the networks to supply-end users. In the initial stage of regime
                       change, the networks are supposed to facilitate these processes by facilitating
                       access in an efficient way. Unbundling networks from other operational func-
                       tions has been designed to secure this. Separation of ownership and regulatory
                       functions is also designed to prevent conflicts of interest between different actors
                       and to facilitate competition. Regime change was meant to encourage new
                       entrants with rival solutions. It is inevitable that this would effect the way the
                       networks themselves performed (see also chapter 6). The result of all this is that
                       there are not only heterogeneous actors, but also rival actors.
                       A second issue of regime change is that instead of one principal, multiple princi-
90                     pals have emerged, mainly as a result of the ownership and regulation changes.
                       This has important implications for the implementation of strategic goals into the
                       practice of infrastructure organisations – as this chapter will show.
                       A third aspect of regime change is that the transactions needed for investment in
                       infrastructures take place in splintered arenas. A direct effect of regime change is
                       the emergence of separated arenas in which these transactions take place.
                       Unbundling has led to a separation between the operation of the infrastructure
                       and the delivery of services. Privatisation does not imply the end of government
                       involvement, but may in fact strengthen the regulatory function of government.
                       This leads to a separation of regulatory and operational arenas. Naturally, these
                       separated arenas are not without their risks if they become too isolated and
                       distinct from each other. In section 3.2 the separation of arenas will be analysed.
                       A major consequence of regime change, but also of the developments discussed
                       above, are the changing roles of actors in the different arenas. Network companies
                       have begun to act increasingly like market players, driven by commercial motives
                       and seeking new business opportunities outside their traditional businesses,
                       even if they are in fact in public hands. In sectors such as electronic communica-
                       tions, public actors are no longer responsible at the operational level, but have
                       assumed new functions, i.e., such as the monitoring of the activities of private
                       actors. The roles of actors have also changed via the process of functional or
                       ownership unbundling, or structural separation of different functions, and most
                       notably as a result of the separation between service and infrastructure provision
                       (e.g., the unbundling of the railways, gas and electricity sectors).
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<pre>                                                                                          a new constellation of actors
         An example that provides an extreme illustration of the new roles, new interests
         and potential collision forms the trend for – public or private – owners to view
         infrastructure assets as important financial assets in their own right. This causes
         the roles of the actors to change as well. Infrastructure assets will more often be
         used to underwrite borrowing for other, not necessarily related, purposes. With
         the growth of private equity participation, this changing function for the infra-
         structure itself is likely to become more marked. Long-term investments may
         thus be seriously endangered. Melody argues that:
 For public utilities, the entry of Funds is unlikely to bring strategies for long-term investment in
 infrastructure development. Rather they are likely to bring strategies for disinvestment by massive
 cash payouts as long-term investor value is converted into short-term value. This in turn can be
 expected to have significant negative multiplier effects on the growth of utility industries (Melody
 2008: 7).
         In the electricity sector, regulatory measures have been taken to counteract such
         behaviour. The Electricity Act of 1998 explicitly prohibits network managers
         from using infrastructure assets to create funding for investments with other
         objectives than the infrastructure itself. Another example can be found in drink-                              91
         ing water legislation and the gas and electricity legislation that basically prohib-
         ited the privatisation of drinking water companies (Tweede Kamer, vergaderjaar
         2006-2007, 30895, no. 3) These examples illustrate the importance of the
         government’s role not only in the adapting of its policies to a changing cast of
         actors, but to the changing roles of the actors as well.
3.2      splintered arenas
         The analysis in the previous chapter of the transaction chain in infrastructures
         – as a result of regime change – divided it into separate transactions with different
         actors involved in different parts of the chain. The investor in the infrastructure,
         for instance, is not necessarily the actor who operates the infrastructure; the
         service provider and the owner or operator of the infrastructure, have increas-
         ingly become different actors. Different parts of the transaction chain are negoti-
         ated between those specific actors who are active in that particular part of the
         chain, which in turn causes sub-arenas to emerge (Knops 2008). These sub-
         arenas are relatively unconnected and different actors may be present in the
         different (sub) arenas, but also in a variety of other roles.
         The most important dividing lines between these arenas result from the follow-
         ing inherent characteristics of regime change, as discussed in chapters 1 and 2:
         1) the separation between infrastructure and service; 2) the separation of regula-
         tory and operational functions; 3) the separation between short-term trans-
         actions and long-term transactions; and 4) the separation between technical and
         political arenas.
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<pre>   infr ast ruc t ures
                       Separation between ser vice and infrastructure
                       The separation between infrastructure and service stems from the introduction
                       and promotion of free competition. Establishing a situation of free competition
                       for services that require infrastructures is only possible when service delivery
                       companies have equal access to the network. This requires a clear split between
                       service and infrastructure functions; otherwise those service companies with the
                       closest ties to the network manager would be in the most favourable positions.
                       This rationale for so-called unbundling played a dominant role at the time of the
                       introduction of competition in sectors with one or a few vertically integrated
                       incumbents that were also active in the market of service provision.
                       However, the negative side effects of unbundling have become increasingly clear.
                       The case of ns and ProRail is exemplary in this respect. Bekkers (2008) observes
                       that the unbundling of infrastructure from service, information from end-users
                       has not reached the level of the network manager, however. Consequently,
                       investment decisions are made using inadequate information. Larouche makes a
                       similar argument with regard to the electronic communications sectors in coun-
                       tries such as the UK where infrastructure and service have been separated
                       (Larouche 2008).
92
                       Separation of regulator y and operational functions
                       It was initially seen as a temporary regulatory task to curtail the power that the
                       incumbent still had in the early stages of liberalisation. The introduction of regu-
                       lation is implemented in many sectors as a separation between regulatory and
                       operational functions (Larouche 2008). Larouche argues that it was difficult to
                       actually make this distinction in the electronic communications sector. Network
                       managers, especially those working for incumbents, have found it difficult to
                       accept that they will (no longer) be making all of the regulatory choices, while
                       policy-makers must learn to accept that they are no longer involved in hands-on
                       management (Larouche 2008: 11). This change has been difficult to accept, espe-
                       cially for policy-makers, because it requires a new type of involvement. Policy-
                       makers must ‘ensure that public policy objectives are fulfilled’ without ‘super-
                       imposing a holistic vision … on the sector’ (Larouche 2008: 13). Above all,
                       attention will have to be shifted from the network itself to the behaviour of, and
                       the relations between, the actors in the sector (this is what Larouche refers to as
                       the ‘network of networks’).
                       Shor t-term and long-term transactions
                       Actors are interested in the short term and are relatively well versed in the details
                       of the current institutional or regulatory framework (service delivery). The intro-
                       duction of free competition, embedded in a regulatory framework, guarantees
                       and determines the relations between the actors. In various sectors, the results
                       have meant price reductions and an improvement in the quality of services. Much
                       less attention has been devoted to the situation with regard to the operation of
                       networks. This questions the suitability of the institutional framework for long-
                       term transactions. Larouche (2008) analyses the electronic communications
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<pre>                                                                          a new constellation of actors
    sector and argues that the institutional framework in that field fails to address
    long-term interests. In particular, policy fails to provide the sector with adequate
    incentives to stimulate investments. A systematic approach of tackling this issue
    is not available and solutions that address this problem are therefore ad hoc and
    come with their own particular problems (e.g., regulatory holidays).
    Technocratic and political arenas
    Investment decisions in infrastructures require a great deal of technical expertise.
    At the same time, however, infrastructures serve to satisfy the essential needs of
    the public and are used to realise public values of various kinds. As such, they
    require political involvement as well. A serious drawback of the political domain
    is (as was shown in chapter 2) political opportunism and a preference for short-
    term over long-term issues. The technical and the political arena must therefore
    be closely connected. This is, however, not always the case. This is especially at
    the international levels of government, where technical arenas of decision
    making have the upper hand over the political decision making arenas. This
    phenomenon is omnipresent even in the European Union (wrr 2007). As was
    noted in the previous chapter, technical forums and similar informal organisa-
    tions which can determine norms and standards and coordinate regulation have
    been introduced and/or strengthened in the field of infrastructures various                         93
    networks of experts. In many cases, these networks provide new opportunities
    for connecting national and European actors, but in general, they seldom succeed
    in reaching the political domain. The position of regulators fits into the techno-
    cratic arena as well, separated as they are from the political domain. In the
    Netherlands politicians are, therefore, not very inclined to entrusting regulators
    with extra-statutory or broadly defined powers (see chapter 5). Decisions on
    ‘technicalities’ may, however, have significant political implications as well.
    It is important that the institutional design of an infrastructure takes into account
    the implications of the four dividing lines, and its implications in terms of the
    emergence of divergent sets of actors with divergent roles and interests (Van Dijk
    2008). The emergence of multiple principals and multiple agents across these
    dividing lines raises complex issues from the perspective of examining which
    (groups of) actors respond to what types of incentives to commit to longer-term
    investments, especially given the special characteristics of infrastructure invest-
    ment discussed in chapters 1 and 2.
3.3 new actors
    The formerly single and homogenous actor constellation has changed into a
    multiple and heterogeneous actor constellation. Different actors have become
    responsible for the different parts of the chain of transactions in infrastructures,
    from planning the investment, financing the project, building the infrastructure,
    as well as ensuring its maintenance, operation, as well as the provision of goods
    and services. Multiple newcomers have thus entered these arenas. To name just a
    few of the newcomers to the infrastructural scene, we have private subcontrac-
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<pre>     infr ast ruc t ures
                           tors, consultancy firms, engineering firms and legal firms assisting both the
                           subcontractors and the state companies, regulators, meta-regulators (Black 2007)
                           and private investors. As Figure 3.1 shows, there are now more than eight differ-
                           ent actors, whereas prior to regime change, there was only one actor.
                    Figure 3.1   The sectoral and horizontal regulatory regimes plus the business and consumer
                                 stakeholders
                                                         Government and Parliament
                                                                     ▼
                                                               the sectoral
                                                            regulatory regime
                                   ▼                                                                    ▼
                               horizontal                                                          horizontal
                                                   ▼                                 ▼
                            regulatory regime                                                   regulatory regime
94
                                                                     ▼
                       Other Regulatory Agencies                                          Other Regulatory Agencies
                       • National, EU and Local              Core Regulatory              • Competition Commission
                       • Environment department                  Agency                   • Sectoral Regulator
                       • Sectoral Regulator                                               • Trade Regulator
                                                                     ▼
                                                          Regulated Companies
                                                   ▼          • Incumbents         ▼
                                                             • New Entrants
                                                             • Multinationals
                                                                     ▼                  ▼
                                                   ▼         Consumer-Citizens
                                                    • Average individual consumer-citizens
                                                • Poor, vulnerable dependent consumer-citizen
                                                         • Sceptic/compliant consumer
                                                            • Business as consumer
                    Source: Wilks and Doern (2007)
                           As a result of liberalisation, supervision, peer reviews and regulation have been
                           introduced (column on the right) and this too has introduced new actors. The
                           form and the intensity of regulatory supervision differ from sector to sector.
                           Some sectors rely primarily on the self-regulation of network companies, which
                           is the case, for example, in the drinking water sector. The networks are owned by
                           the drinking water companies, which are public owned companies with shares in
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<pre>                                                                          a new constellation of actors
    the hands of the provinces and municipalities. The quality of the drinking water
    is supervised by the Inspectorate of the Ministry of Housing, Spatial Planning
    and the Environment (vrom), but the infrastructure investments are neither
    supervised nor monitored externally. It is the sole responsibility of the water
    company. A specialised regulator has also been introduced in other areas such as
    the electronic communications, energy and railways sectors. Moreover,
    consumer groups have become more active, although their activities are mostly
    focussed on service provision (e.g., Rover monitors the Dutch railways).
3.4 multiple principals and multiple agents
    Furthermore, regime change has also led to changes in principal-agent relations.
    Principal-agent literature mainly focuses on an isolated relation between a single
    principal and a single agent. In infrastructures, this model is reflected in the
    traditional paradigm discussed in chapter 2. However, the result of regime change
    has been that actors within infrastructures fit in badly into this single princi-
    pal/single agent model; in fact, the actual situation is not just limited to multiple
    agents, but also includes multiple principals.
    The so-called ‘multiple principals problem’ is the subject of growing attention in                  95
    the literature. According to Steenhuisen and Van Eeten (2008) this problem
    manifests itself in the effects of multiple incentives from multiple principals on
    the agents in the absence of a prearranged hierarchy among the principals (see
    e.g., Kagan and Scholz 1984; Waterman and Meijer 1998; O’Toole, Meijer and
    Nicholson-Crotty 2005; Jordan 2006). This literature shows that more incentives
    lead to more inconsistencies and conflicts between incentives, which correlates
    with more non-compliance (Kagan and Scholz 1984; Waterman and Meijer 1998;
    Verhoest 2002; Kim 2005; Perin 2005: 10). Non-compliance, in turn, results in
    the principals providing even more incentives, thus creating a vicious circle
    (Downs 1967; Bothe and Meier 2000). Furthermore, Coen (2005) describes how
    multiple principals enable agents to play principals off of one another. Multiple
    incentives can even interact in a more complex and counter-intuitive way, i.e., the
    ‘crowding out’ principle (Francois 2000; Miller and Whitford 2002). Thus the
    presence of multiple principals, from the perspective of safeguarding public
    values (chapter 5), is a complicating factor (Steenhuisen and Van Eeten 2008).
    For instance, until 1994, ns was the only train operator in the Netherlands. The
    Ministry of Transport (as principal) used to supervise ns on how the railway
    network should be operated. Currently there are various transport companies
    that operate on the Dutch railway network, while the number of principals has
    increased as well. Although sector reform was intended to deregulate the indus-
    try, the number of separate supervisory bodies 1 has actually increased over the
    years, and so has their influence. As a result, the current ‘multiple principals’
    structure’ can be characterised by its detailed rules, extensive operational
    agreements and intense public debates (Steenhuisen and Van Eeten 2008). The
    actor constellation in the sector of rail is complicated, even when the picture is
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<pre>   infr ast ruc t ures
                            restricted to actors entrusted with supervision. This is revealed in Figure 3.2. In
                            chapter 6, this point is illustrated with concrete examples in the energy sector.
                   Figure 3.2      Multiple principals situation of ProRail
                                                                 Ministry of
                                                               Environment
                                                      Ministry of           Customs
                                                     the Interior
                                          The Dutch                                Office of
                                         safety board                             Transport
                                                                                  Regulation
                       Parliament          Inspectorate                                            Labour
                                                                               Regional
                                           for Transport                                        inspectorate
                                                                              transport
                                                                             authorities
                                     Ministry of                                            Police and
                                      Transport                                            Fire brigade
96
                                    Contractors                    ProRail                       Train
                                                                Infrastructure               operators       Passengers
                                                                   operator
                   Source: Adapted from Steenhuisen and Van Eeten 2008
                3.5         hybrids
                            The distinction between public and private actors in the field of infrastructure
                            investment decisions may suggest that the dividing line between the public and
                            the private domain – and the roles assigned to each domain – is a clear one.
                            However, in reality the dividing line not only shifts over time, but also blurs and
                            becomes permeable. This was a result of the various hybrid organisations and
                            forms of Public Private Partnerships (ppp) emerging (Teisman 2008).2 We will
                            discuss hybrid organisations and ppp below.
                3.5.1       hybrid organisations
                            Regime change was introduced in order to separate roles and organisations,
                            thereby fostering competition. The line of argument was thatthis would lead to
                            improvements in the production of goods and services related to infrastructures
                            (see chapter 2). However, this separation, in practice, led to a blurring regarding
                            the organisations, functions and roles. Over the last few years, the number of
                            organisations that function between the public and private sectors has increased.
                            The corporatisation and privatisation of public organisations, as well as the
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<pre>                                                                            a new constellation of actors
      (re)introduction of market-type mechanisms in the provision of public services
      has led to a situation in which that were originally public organisations have
      entered the marketplace to engage in commercial relations with private compa-
      nies (Karré 2006).
      Two schools of thought can be distinguished in the Dutch discussion regarding
      hybrid organisations (see, for an extended overview, Karré 2006). The first is
      influenced by Jacobs’s (1994) theories on the basic incompatibility of the values
      of the public and private sectors. The most influential proponent of this view was
      Cohen, who, as the chairman of a government committee, proposed the legal
      banning of all hybrid organisational forms (Werkgroep Markt en Overheid 1997).
      Other critics include Simon (1989), Verhoef and Simon (2001) and Gradus (2005),
      who see hybrid organisations in a more positive light. In ’t Veld (1995, 1997, 2001,
      2005 and 2006), for example, argues that while there is a tension between public
      and private values, combining them within hybrid organisations may lead to
      synergy. The wrr (2004) and ser (2005) argue that dividing our world into two
      mutually exclusive domains might work in theory, but it has limitations in stud-
      ies that involve social reality. Hybridity, they argue, is no unusual or perverse
      form. On the contrary, all organisations are more or less hybrid (Brandsen, Van
      de Donk and Kenis 2006: 421).                                                                       97
      Although public and private values may indeed cross-fertilise and improve actual
      practices, certain roles in the realm of infrastructure investment (chapter 2)
      should not be blurred in theory or in practice, especially the roles of the arbiter
      and related roles.
3.5.2 public private partner ships
      The Knowledge Centre, which supports ppp initiatives and was established by
      the Ministry of Finance, in 1998 argued that the establishment of Public Private
      Partnerships leads to the faster and more efficient implementation of infrastruc-
      tural projects, an argument that has also been voiced in other countries (Teisman
      2008: 3). Meanwhile, many politicians continue to be attracted to the notion of
      clearly distinguishing between the private and public domains. However, experi-
      ence shows how difficult it is to combine the demands of the partnership with
      the internal ‘logic of action’ and the preferences of the individual actors. Both
      public and private actors are subject to this logic; public authorities remain highly
      attached to their formal decision-making powers, whereas private actors find it
      difficult to assume risks other than those related to the market (Teisman 2008: 7;
      a striking example is the Mainport Rotterdam project). Despite the advantages,
      the realisation that cooperation may be difficult and the clinging to formal but
      outdated roles may eventually present obstacles to the creation of effective forms
      of collaboration (nabu/Norton Rose 2004).
      Public and private actors have become increasingly mutually dependent both in
      ppp and more general terms: public authorities need private actors to invest in
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<pre>   infr ast ruc t ures
                            infrastructural projects, while private actors are dependent on public authorities
                            for the necessary administrative decisions to be made. Moreover, private and
                            public elements of physical infrastructures have become increasingly integrated.3
                            Many authors therefore acknowledge the added value, in terms of output, of
                            combining these arenas and focus on strengthening the mutually interdependent
                            roles of the actors involved.
                            The emergence of multiple layers of government – as well as multiple principals –
                            poses additional challenges to investment in infrastructures. The challenges
                            of ensuring the compatibility of public-private partnerships with eu legislation
                            on free competition and an open market are well-known. Moreover, as eu law
                            is based on a dual approach (the involvement of private actors leading to legal
                            consequences which do not arise in a totally public setting), uncertainty may
                            arise regarding the applicability, scope and meaning of these rules to hybrid
                            forms of cooperation. A recent example, although not involving infrastructure,
                            was the application of eu public procurement rules to the realisation and devel-
                            opment of social housing in a ppp-construction with housing corporations.
98              3.5.3       key observations with regard to hybrids
                            Different constellations of heterogeneous actors, multiple principals and blurred
                            roles in hybrids, each raise important coordination issues (see Teisman 2008).
                            Regime change has led to a liberalised, quasi-privatised sector (see Box 3.1).
                   Box 3.1         Illustration of changes in the constellation of actors and their roles in renewable energy
                                   in vinex locations
                   The planned construction of large-scale housing projects in the sub-urban perimeter around Dutch
                   cities since 1990 has afforded a lot of potential to implement new, integrated, energy systems, with
                   low carbon emissions and high energy efficiency. Depending on the local circumstances, the scale
                   of the projects and the type of residences, a range of energy supply solutions could have been
                   installed. Examples include multi-fuel co-generation, green power, insulation, heat pumps, photo
                   voltaic systems, heat storage, low temperature heating, secondary use of industrial heat, etcetera.
                   Despite this potential, the large-scale realisation of such systems has not happened. The question
                   is why. First we will look at the difficulties in incorporating such systems within the traditional
                   context of project development. Subsequently, it will be explained how the restructuring of the
                   energy market has created new barriers and why the application of new, market-oriented, policy
                   instruments has thus far failed. The major elements in this chain include the actor network, the
                   process of decision making and the dynamics of the interaction between the parties involved.
                   Energy infrastructures and vinex
                   Traditionally, the utilities’ supply infrastructures for large-scale building projects, or vinex loca-
                   tions, evolved within a formal sequence of plans that determined land use, the lay-out of projects
                   and housing design. The actor network includes several public policy-making, administrative and
                   executive echelons of the state, the provinces and the municipalities; the utilities, later split-up into
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<pre>                                                                                          a new constellation of actors
suppliers and network operators; the construction sector, involving project developers, financiers,
construction companies, sub-contractors, architects and real estate agents; and the local commu-
nity, which includes citizens, potential buyers, housing corporations and NGOs. These actors
interact at specific moments in the decision-making process, to deal with particular issues. This is
partly determined by the formal planning process. Starting at the national level, via regional, struc-
tural and functional design plans, this process yields the concrete blueprints for an area and the
buildings and infrastructures to be constructed. What was important was the identification of
stages where crucial decisions about the energy system were made and where actors interact and
engage in agreements and contracts. To some extent, their content is a function of laws and policy
objectives. Moreover, there are the ‘hard’ considerations of financial economic and technical
origins. But issues like the image of a municipality, a project or an architect also play a role.
A potential buyer does not only purchase the premises, but also accessibility to infrastructures.
These propositions represent hard commercial arguments in the decision-making process.
The objective of municipalities is to reap maximum revenues from the selling of lots, but they also
seek to create attractive and affordable – and possibly sustainable – new neighbourhoods. These
objectives reflect a functional variation among the different municipal departments, present in the
process. Housing corporations seek to cover the costs of their housing projects with revenue. Proj-
ect developers seek to maximise their profits, via a quick throughput of housing units at reasonable
margins. Revenue is often needed to finance the later phases of a specific plan. Thus, developers are                   99
risk averse and strive for continuity. However, it is also in their interest to secure early involvement
in the planning of new housing districts, by maintaining a good image and good relations with the
municipality. The main issue of the energy utilities used to be the pay-back time – given up-front
investments and fixed and variable cost – and given subsidies to stimulate the use of low carbon
energy supply systems. Thus, the former backbone of the Dutch fossil fuel conservation policy, the
public utilities had a double objective. Sustainable energy supply is clearly part of the broader set of
objectives and thus has to compete with other issues, such as location, design elements, etcetera.
Conflicts were resolved by negotiations and by trading-off bundles of interests from one party
against the other. However, the capacity of the various parties to evaluate all of the options was
limited and, thus, traditional supplies of power and gas prevailed.
Since the mid-1990s, the Dutch government has begun to stimulate the construction of sustainable
energy supply systems by the subsidised participation of advisors, early on in the process: the so-
called Optimal Energy Infrastructure programme (oei). The objective was to improve the quality
of the decision-making process, by bringing the right parties to the table at the right time. With
relative independence and with a broader view over a range of projects, the oei advisors provided
new insights and information, supported and facilitated the use of subsidies, commissioned feasi-
bility studies and validated technical and economic data. Thus, local decision making was made
more transparent, taking into account site-specific circumstances and the various interests of the
involved parties. This stimulated the application of sustainable energy supply solutions on a larger
scale than before.
         It is apparent from the case study that new actors have introduced new interests,
         and that the role of the principal should be adapted accordingly. After all supervi-
         sion, peer review and regulation have been introduced as a result of liberalisation,
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<pre>    infr ast ruc t ures
                        and this has also led to the introduction of new actors. The form and the intensity
                        of regulatory supervision differ from sector to sector. Some sectors rely primarily
                        on the self-regulation of network companies as is, for example, the case in the
                        drinking water sector. The infrastructures are owned by the water companies,
                        which are public companies, with shares owned by the provinces and municipali-
                        ties. The quality of the drinking water is supervised by the Inspectorate of the
                        Ministry of Housing, Spatial Planning and the Environment, but the investments
                        in infrastructure are not externally supervised or monitored. It is the sole respon-
                        sibility of the water company. In other sectors, a professional regulator has been
                        introduced (electronic communications, energy and rail). Moreover, consumer
                        groups have become more active, although their activities are mostly focussed on
                        service provision (e.g., Rover for the Dutch railways). The complexity of the actor
                        constellation in the sector of rail, even when the picture is restricted solely to the
                        actors entrusted with supervision, is shown in Figure 3.2. The case study shows a
                        second element. Even in a process of limited regime change, for example, in the
                        case of ppp construction or hybrids, coordination is important and can easily be
                        obscured by blurring.
                        The conclusion must be that participating in hybrid forms of cooperation
100                     requires the public actor to adopt (and to adapt to) a new role – that of the net-
                        work manager (Teisman 2008: 17). The real challenge for public authorities there-
                        fore lies much more in the shaping of this new role for itself, rather than in
                        designing new institutional arrangements (public/private). As Goldsmith and
                        Eggers (2004: 52) argue, the role of network managers is to ‘… master the chal-
                        lenges of governing by networks: aligning goals, providing supervision, averting
                        communication melt down, coordinating multiple partners, managing the
                        tensions between competition and collaboration, and overcoming data deficits
                        and capacity shortage’. When a number of different (private and public) actors
                        are involved, combining them (and strengthening mutual interdependence) is
                        thus the main objective, and not the delineation of a rigid and inflexible border-
                        line between what are and should be the public and private roles.
                 3.5.4  changing role of government in multiple actor/multiple
                        principal settings
                        The most significant change of role has probably been that of the government.
                        In sectors where regime change has made a lot of progress, government has now
                        become the regulator instead of the owner of the infrastructure (e.g., electronic
                        communications). Consequently, the government has become one among many
                        other actors. In other sectors, the distinction between internal government roles
                        has been more clearly indicated. In the electricity and gas sectors, shares of the
                        network companies are owned by the Ministry of Finance, whereas regulation and
                        supervision are the responsibilities of the Ministry of Economic Affairs. In the rail
                        sector, the Ministry for Transport is responsible for regulation and supervision,
                        while in the Ministry for Public Health, Spatial planning and Environment bears
                        that responsibility in the drinking water sector. This may help prevent conflicts
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<pre>                                                                                      a new constellation of actors
        with private actors, but it can also become the source of new tensions and conflicts
        within government itself. Whereas the Finance Ministry’s interest may primarily
        be high returns on its investments (which may be realised through the exploiting of
        international opportunities), functional ministries may be focussed instead on
        protecting the shorter-term interests of the nation’s consumers.
        Although it no longer exercises a clear hegemony over the sectors that are the
        subject of this report, the government nevertheless remains a ‘privileged’ actor.
        Only government can employ it law-making powers to correct or adjust a partic-
        ular regime, or to safeguard public values. Moreover, it can mobilise large-scale if
        not unlimited financial resources to fund infrastructure projects or rescue failing
        projects if and when political prerogatives so dictate.
        In the current and future constellation of actors and roles, however, government
        policy will need to meet the following requirements.
        i) It will have to be evaluated and assessed in terms of its impact on the role of
              new actors and their interests.
        ii) It must take the different roles that the existing actors have assumed as a
              result of regime change fully into account.
        iii) It has to be evaluated on the impact it has along the entire but splintered                            101
              transaction chain of decision making as well as in the various other arenas.
Box 3.2        ‘Windfall profits’ – unintended consequences
In 2007, the energy regulator performed further research into the effectiveness of the current tariff
regulation system in order to determine whether the profits gained from regulated activities corre-
sponds to the return which the nma/dte deemed to be reasonable and whether the system enabled
the network companies to realise an adequate return within the framework of the present regula-
tory system to enable them to continue investing. In the case of the regional gas and electricity
network operators, the nma’s subsequent research established that in the years 2003, 2004 and
2005 the companies generated more than 32% gross profits above the approved limit for under the
standard rate of return in accordance with the regulatory method.4
As the regulator has admitted, when the regulatory system was designed, it was impossible to
determine with any certainty whether the intended effect would be achieved and/or whether
undesired consequences would occur (nma 2007, under q.4). Based on its own analysis, it
concluded that the networks were expected to outperform the x-factor and should be rewarded for
being efficient. An unintended consequence of the present system of regulation for the regional
network operators – given that it is based on tariff regulation and not turnover regulation – is that
growth in volume results in higher profits which are not necessarily re-invested in expansion of the
network. A further unintended effect of the system, which operates on 5-year regulatory periods,
has been that it has allowed the regulated companies to reduce their operating costs much more
quickly than was foreseen at the beginning of the regulatory period, but it was not required to pass
on the improvements in efficiency to the consumers in the form of lower network tariffs. However,
the network managers acknowledged that they were able to generate and maintain sufficient
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<pre>    infr ast ruc t ures
                    revenue on the basis of their standard returns to finance necessary (replacement) investments.
                    What was of greater concern to the nma was that almost all of the profits realised on the regulated
                    network activities were paid out to the holding company – i.e., the shareholders. If there is a guar-
                    antee that the network manager has had sufficient funds at its disposal at all times to make invest-
                    ments, there is nothing in the law to prevent the profits from being distributed to the holding
                    company. The nma currently has no powers however to prevent dividends from being paid out.5
                    As a consequence of this investigation the nma is taking further steps to reduce information asym-
                    metry. The possibility that it will take further steps to guarantee that the levels of dividends paid
                    out to shareholders will not adversely affect investment strategies cannot be ruled out. Whether
                    these measures will sufficiently deal with strategic behaviour, however, remains to be seen.6
                            One of the key questions for the government is whether institutional arrange-
                            ments reflect and match not only the new actors, but also the new roles the vari-
                            ous actors (including the government itself) have assumed. The above nma case
                            study on windfall profits shows that the roles are not always adapted to a new
                            situation. The above case illustrates that profits are paid out to public share
                            holders who have no incentive for reinvesting these profits back into the sector.
102                         An important lesson from this case is the need to further investigate whether
                            other adjustments to institutional arrangements are necessary in order to cope
                            with the changing scenario of actors and roles.
                 3.6        conclusion
                            This chapter has described how the enormous changes in the constellation of actors
                            has forced the government to change its role. The Council suggests that political
                            attention will have to be shifted from the network itself, to the behaviour of, and
                            the relations between, the actors in the sector. Larouche (2008) and Teisman (2008)
                            refer to this type of government role as the ‘network of networks’.
                            Furthermore, this chapter has argued that rivalry and competition – the necessary
                            features of short-term goals typical of the first stage of regime change – can also
                            pose longer-term problems in network sectors where coordination is still impor-
                            tant for technical reasons. Electronic communications is one of the few sectors
                            where this is less of an issue because competing networks are indeed possible.
                            However, the natural monopoly situation in the remaining sectors has continued
                            (Knops 2008) and this is especially problematic. Technical coordination may still
                            be necessary to ensure optimal investment levels. This point will be elaborated
                            upon in the case study in chapter 6.
                            Finally, this chapter described how the emergence of new actors has not only
                            altered the number of actors involved in investment infrastructures, but has also
                            altered the mutual relations and the interests of the actors. Therefore, new incen-
                            tives may be necessary in light of this new constellation, a point which will be
                            elaborated upon in chapter 7.
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<pre>                                                                                        notes
notes
1   These bodies include: 1) The provinces that have been developing their role as
    regional transport authorities from 2000 on; 2) The new inspection authority for
    rail safety issues that was created in 2003, which was formerly an internal ns
    division; 3) Interest groups and consumers’ representation, which have become
    increasingly institutionalised since the new franchise arrangements were intro-
    duced; 4) The Office of Transport Regulation, established in 2004 as part of the
    Netherlands Competition Authority (nma), which oversees the non-discrimina-
    tory provision of services; 6) Members of Parliament who increasingly claim that
    their role is to put pressure on ProRail on a variety of issues via the Minister of
    Transport. These pressures frequently deal with higher norms and new regula-
    tions (Steenhuisen and Van Eeten 2008; 9-10).
2   See the definition provided by the Ministry’s of Finance’s Knowledge Centre:
    www.pps.minfin.nl.
3   For example, the increasing importance of (private) ict systems for public infra-
    structures.
4   This percentage was later challenged in an appeal against the nma/dte by the
    regional network operators.                                                               103
5   This situation maybe addressed within the framework of the new Independent
    Network Management Act, however.
6   This case study is only meant to illustrate the new roles between various actors in
    the energy infrastructure. The Council is aware that regional network operators
    balance public values internally. However, at present, there is no external trans-
    parency or accountability mechanism with regard to the prioritisation of public
    values.
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<pre>    infr ast ruc t ures
104
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<pre>                                                                    infrastructures in a multi-level arena
4   infr astructures in a multi - level arena
4.1 introduction
    This chapter analyses increasing internationalisation as a second change to the
    organisation as well as the delivery of public values within the infrastructure. In
    chapter 2, we examined the impact of regime change and analysed how public
    values in infrastructure provision had come under pressure from private sector
    involvement and with it, a blurring of the dividing line between public and
    private values, undermining the ‘public-ness’ of infrastructures. The second rele-
    vant challenge is that of the increasing involvement of ‘levels’ other than the
    national. Together, these two challenges may lead to the hypothesis that national
    authorities are merely one of the relevant actors alongside private actors and
    international and regional public actors.
    As was explained in chapter 2, the national level is traditionally the focal point of
    both the institutional and the operational aspects of infrastructure investment
    decisions. Decisions to invest in infrastructure are made at the national level
    based on national interests and policy objectives. However, as a result of the                         105
    processes of internationalisation, the situation is becoming increasingly complex.
    Infrastructures have become more transnational and international in their opera-
    tion and investment decisions are increasingly dependent on international, and
    most notably European, regulations.
    For the Netherlands, the European Union has become by far the most relevant
    international organisation with regard to investment decisions in infrastructure.
    Its influence is, however, far from unequivocal. Indeed, a rich variety of policy
    objectives and measures affect national investment decisions in an equally rich
    variety of ways. Most of this chapter will therefore be devoted to the significance
    of the European Union on infrastructural policy. A distinction will be made
    between eu measures that support (or facilitate), and eu measures that constrain
    national investment decisions.
    It is useful to recall that what has been referred to as the ‘European regulatory
    space’ has traditionally been dominated by the nation-states. Ministries have
    the formal regulatory powers, although, in practice, they have enjoyed very
    close relationships with the state-owned companies. The eu has played almost
    no role in the regulation of network industries; for instance, the eu telecom-
    munications ministers met twice between 1959 and 1977; almost no eu sectoral
    legislation was passed, and network industries were seen as being beyond the
    reach of European primary law. Insofar as international coordination took
    place, it took the form of technical and administrative cooperation through
    intergovernmental organisations that were composed of national representa-
    tives and which had no powers to impose decisions on national members;
    examples included the cept in electronic communications and the ucpte for
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<pre>    infr ast ruc t ures
                        electricity – both of which had jurisdiction in both European and non-Euro-
                        pean countries.
                        However, since the 1980s, new European administrative structures have evolved
                        to regulate the network industries. In part, these types of organisations are a
                        response to the combination of three developments, namely the growth of eu
                        regulation, the privatisation of suppliers and the modification of national regula-
                        tory structures. A fourth but equally important factor are the endogenous
                        processes which have been generated in each previous phase of change in the
                        make-up of the eu’s regulatory space.
                        In this chapter, processes of functional internationalisation will first be analysed
                        in light of their impact on investment decisions (section 4.2). The role of the eu
                        in facilitating investment decisions in networks is the subject of section 4.3,
                        whereas the constraining role of the eu is addressed in section 4.4. Finally, the
                        increasing relevance of new governance modes will be analysed in section 4.5.
                 4.2    functional internationalisation of infr astructures
106                     The functional internationalisation of infrastructures (as opposed to internation-
                        alisation at the governance level) has progressed substantially in the last decades.
                        One of the driving forces for this was the eu Single Market system. Obviously,
                        one of the main objectives of this project was to stimulate productive economic
                        activities at those locations where they could be undertaken most efficiently.
                        Trade between the Member States was expected to ensure the subsequent distri-
                        bution of goods and services to consumers. This development has profoundly
                        affected the flows of goods and services between – and through – the eu Member
                        States. The growth of intra-community trade has clearly affected the orientation
                        of the several modes of transport. From systems that were predominantly
                        constructed to connect national centres of production, distribution and
                        consumption, in particular, the roadway and railway networks had to evolve into
                        networks that facilitated the growth in international trade flows. The functional-
                        ity of many ‘nodes’ in the systems including that of air transport and inland and
                        coastal shipping, like smaller airports and harbours, is changing in the sense that
                        they are becoming part of broader Pan European systems of ‘hubs and spokes’;
                        connecting a few large globally oriented centres with the smaller locally oriented
                        distribution centres in the hinterland. As a consequence, the particular role of
                        these global and local ‘nodes’ and the transport corridors between them has
                        become dependent by and large on the evolution of these global and local
                        systems. Thus, decision making regarding their function, the use of these
                        systems, the investments required or warranted, possible environmental and
                        other externalities, has shifted away from local and national policy-makers. The
                        international business community in collaboration with public authorities
                        aligned with a few dominant players are essentially determining the shape of
                        these intra-eu transport systems, thus influencing the performance of their local
                        branches and nodes. In the railway sector, examples include the Betuwelijn and
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<pre>                                                                infrastructures in a multi-level arena
the Zuiderzee, both of which are waiting to be linked to the German hinterland.
The role of several local airports, like Zestienhoven, Lelystad and Maastricht, is a
case in point in the area of air transport and reveals the difficulties of national
policy-making. The same logic applies to the position of several smaller Dutch
seaports, such as Delfzijl and Amsterdam, vis-à-vis their globally oriented
competitor, the Rotterdam-Antwerp node.
The liberalisation of ‘hard’ grid based services, such as electronic communica-
tions and energy, has seen a rapid increase in the international exchange of data
and communication and trade in electricity and gas. The water sector has obvi-
ously been less affected by this development as it remains based on local systems.
The electronic communications sector has shown that the evolution of the
system reveals that it has shown similarities in growth with the ‘hubs and
spokes’ structures in transport systems, with particular locations getting a
specific role, linked up to the overall system as network centres via primary glass
fibre arteries, or just connected to the secondary local networks. Again, decisions
on the technical role of these locations are generally beyond the reach of local or
national authorities.
The role of the energy networks is changing even more fundamentally. This is a                         107
consequence of the fact that the national energy supply is becoming an increas-
ingly internationally oriented undertaking. In the past, most eu Member States
maintained their own energy supply system, by and large, reflecting their access
to raw energy resources, like coal, water, natural gas or their acquired control
over nuclear energy, while accepting the costs incurred as a fact of life. In this
context, limited non-commercial exchanges of power as part of international
support and balancing agreements took place, coordinated between the national
networks and power producers. Of course, natural gas has been transported
throughout Europe since the mid-1960s. However, a major role was reserved for
only a few countries with significant levels of indigenous production and a rela-
tive favourable location vis-à-vis exporters, like the Netherlands, Norway and the
ussr. Over the past decade and a half, the role of natural gas has rapidly increased
in new areas, like the Iberian Peninsula. These international flows of gas were
fully coordinated over the whole of the value chain, by the participating public
and private operators in the various segments of production, transmission, distri-
bution and marketing, often in forms of joint ownership of the facilities involved.
eu market integration today is creating a development in which the production of
energy carriers – essentially power but also oil products – is happening wherever
it is most efficient. As a consequence, increasingly large flows of power and other
energy are being transported internationally, while in some countries the local
production of energy resources, like gas and coal, and power are in decline. This
structural shift in energy supply patterns is driving a functional change, trans-
forming the national energy transport networks with some international inter-
connection into an international system with national and local distribution
branches.
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<pre>    infr ast ruc t ures
                        Moreover, in addition to this structural shift in energy supply, international
                        flows are increasingly caused by pure trade transactions, in which commercial
                        firms trade quantities of power and gas back and forth along the network,
                        responding to opportunities for price arbitrage between separate pockets of
                        demand. In contrast to the past patterns of relatively coordinated flows of power
                        and gas through designated arteries from producers to consumers, the emerging
                        patterns are much less controllable and predictable regarding their use over the
                        shorter and the longer term. Again, the functionality and utilisation of (segments
                        of) the national power and gas systems will be determined by how embedded
                        they are within the international networks and by the facilities they are
                        connected to, not only at home but also elsewhere in Europe. This turns the
                        process of decision making on investments and (inter) operation of these systems
                        into a delicate undertaking. On the one hand, the functioning of the gas and
                        power systems and their performance will be, like that of other transport
                        systems, determined by external factors that are beyond the control of national
                        authorities. On the other hand, to ensure an adequate supply of power and gas to
                        national consumers, national authorities have to take these international factors
                        into consideration. An additional concern in this respect involves the extent to
                        which these national authorities take the potential international ambitions and
108                     interests of national firms into consideration in their decisions regarding network
                        management.
                        There is a real risk that developments at the functional level will not match the
                        level of internationalisation at the governance level, even if eu single market
                        policy indeed has encouraged these developments. Shuttleworth (2008) argues
                        that in the energy and gas sectors these mismatches may occur as a result of the
                        eu’s focus on non-discriminatory market access and transparency (see the
                        following sections) and inclinations of national governments to be guided by
                        national interests. Regional optimisation may thus be impaired, especially
                        regarding investment security, as investors are confronted with a high degree of
                        regulatory uncertainty and are poorly protected from national regulatory deci-
                        sions that impair the rights of investors to recover the costs of investment and a
                        normal rate of return. Only supranational regional authorities (i.e. the eu) with
                        the power to override national governments or regulators who continue to exer-
                        cise their powers in a way that is purely nationalist could be a satisfactory
                        remedy.
                 4.3    the european union facilitating investment
                        decisions in infr astructures
                 4.3.1  internal market- rel ated policies
                        At first sight, the European Union competences for intervening in infrastruc-
                        tures appear limited. National decisions on investments have not been replaced
                        by a common European policy and a common budget from which the infrastruc-
                        tures are financed. However, the European Union influences national policies on
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<pre>                                                                     infrastructures in a multi-level arena
      infrastructures in a substantial way via its internal market and competition poli-
      cies. Obviously, a common market without internal borders to ensure free move-
      ment of goods, persons, services and capital is to a large extent dependent on the
      availability of physical infrastructures. Free movement of goods, for instance, not
      only requires the abolition of import duties and other barriers, but also adequate
      road and railway infrastructures to facilitate the transport of such goods in prac-
      tice. For this reason, ever since the 1950s transport has always been a separate
      policy field in the European Union and its forerunners. However, the European
      Union may not have mandated the construction of infrastructures on the basis of
      internal market policy.
      The same is true for regional development, which is the second policy area that
      affects infrastructures. Territorial differences in economic development may
      cause a threat to overall political and social cohesion, which eu regional policy
      aims to counter. Investing in infrastructures is a key instrument for the develop-
      ment of regions that are lagging behind and it provides a powerful incentive for
      mitigating economic disparities between regions. Removing such disparities
      generally has a positive effect on the economy of the internal market. A direct
      impact on trade is therefore not a key feature of eu regional policies (unlike eu
      internal market policies). However, the Member States are the main actors who                         109
      shape regional policies as the activities of the European Union are limited to
      a) the coordination of the general economic policies of the Member States; and
      b) supporting national and regional policies by an intricate system of structural
      and cohesion funds and other sources of financial aid.
4.3.2 tr ans - european net work s (tens)
      Since infrastructures are extremely important for both internal market and
      regional policy objectives, the development of Trans European Networks (tens)
      has become a separate field of interest for the European Union. The Treaty of
      Maastricht introduced specific treaty provisions for the development of tens
      (Roggenkamp 1998). The scope of the policies that may be adopted in this regard
      is, however, limited. Encouragement is the key word rather than regulation, the
      exception being the harmonisation of technical standards for the interoperability
      of infrastructures (Article 155 ec). Otherwise, the tens policy is aimed at estab-
      lishing general guidelines and priorities as well as identifying projects of
      common interest. Such projects of common (European) interest may be finan-
      cially supported by the eu (the Betuwe railway line is an example of such a proj-
      ect of common interest as a link in the railway system between Rotterdam and
      Genua). Limited financial support may be available for carrying out feasibility
      studies or during the construction stage of an infrastructure project, but it can
      never replace or displace national financing initiatives.
      Individual Member States have a strong say in tens policies as their approval is
      required for measures that concern infrastructural projects within their territory
      (Article 156 ec). As the effect of such measures is limited and very much depend-
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<pre>    infr ast ruc t ures
                            ent on the individual member States, tens policies have not always been a
                            success (Larouche 2008). In the area of transport infrastructures (the so-called
                            ten-t policy), initial concrete goals with a time horizon of 2010 were set in 1996
                            by the Council and the European Parliament (Decision 1692/96/ec), but it soon
                            became clear that these goals could not be met. A revision of the initial guidelines
                            produced a more focussed approach (i.e., zooming in on specific projects, with-
                            out rejecting other projects) (see Decision of June 2007).
                            ten-e (Trans European Networks in the field of electricity and natural gas) poli-
                            cies have undergone a similar fate, but these have recently received a new impe-
                            tus as the need for a common energy policy has become apparent. Security of
                            supply, the need to combat climate change and to improve the consumer’s level
                            of choice and service are relevant motives in this respect. The European Council
                            of March 2007 called on the Member States to achieve 10% of electricity and gas
                            interconnection capacity by 2010. It called on the Commission to appoint Euro-
                            pean coordinators who will monitor and accelerate the implementation of proj-
                            ects of common interest. Such acceleration is necessary as planning and approval
                            processes in the Member States are often complex and lengthy. Thus, even
                            though the need for a stronger eu policy in this area has been acknowledged, eu
110                         tens policy still merely serves in a supporting role. Strengthening tens policies
                            is, however, high on the Commission’s agenda. In 2006, the Trans-European
                            Transport Network Executive Agency (ten-tea) was established and entrusted
                            with the management of the Community funds available for the promotion of
                            the Trans-European Transport networks. In the field of energy, a proposal for a
                            regulatory agency is awaiting adoption. This particular agency (the Agency for
                            the Cooperation of Energy Regulators – acer) will focus on overseeing cross-
                            border cooperation for the transmission of gas and electricity between Member
                            States. Nevertheless, the Commission’s proposal does not grant strong independ-
                            ent regulatory powers and thus doubts have been raised about the potential of the
                            acer to address issues of under-investment in cross-border power transmission
                            capacity and the lack of an effective coordination strategy between national regu-
                            lators.
                    Box 4.1        The Reform Treaty
                    The new title (XXI) on Energy (Article 194) of the Treaty on the Functioning of the eu provides for
                    an explicit competence for the European institutions to adopt measures related to the promotion of
                    the interconnection of energy networks. The inclusion of the promotion of interconnection as one
                    of the key objectives of eu policy on energy appears to have gone unnoticed by the signatory
                    governments. At the same time, the new article seeks to strike a balance between common Euro-
                    pean interests and individual Member States’ interests as the latter will retain the right ‘to deter-
                    mine the conditions for exploiting its energy resources, its choice between different energy sources
                    and the general structure of its energy supply’.
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<pre>                                                                      infrastructures in a multi-level arena
4.3.3 critical infr astructures policies
      Safety and security have, because of a growing awareness of terrorist attacks,
      provided for a new policy perspective on infrastructures. Indeed, infrastructures
      are extremely sensitive to acts of terrorism, but also to any other types of disrup-
      tions, accidents and manipulations. A growing dependency on infrastructures
      only adds to this vulnerability. Following the terrorist attacks in Madrid in March
      2004, the European Council asked the Commission to prepare an ‘overall strate-
      gy’ to protect critical infrastructures. The Commission proposed a European
      Programme for Critical Infrastructure Protection (epcip) and a Critical Infra-
      structure Warning Information Network (ciwin) (European Commission
      2004). In a 2005 Green Paper (European Commission 2005), the Commission
      explored several policy options, mostly aimed at improving communication,
      coordination and cooperation nationally and at the eu level, resulting in a
      proposal for a Directive (European Commission 2006b) on the identification of
      European critical infrastructures and a common approach to determine whether
      and how these infrastructures can be better protected. The Commission’s inten-
      tion to come up with a joint integrated risk management strategy of critical infra-
      structures cannot be limited to technical solutions, but will have to address the
      socio-economic aspects (e.g., who pays for what, what are the consequences for                         111
      the market, how are decisions made, etcetera), including the linking of security
      to well-being, prosperity, competitiveness and economic development as well.
      At the national level, these initiatives have met with considerable opposition.
      Both the Dutch government and Parliament have voiced concerns on the so-
      called subsidiarity issue, i.e., the question of whether or not the eu level is the
      most appropriate level at which to take these measures, even though the
      Commission awarded key responsibility to controlling the processes to the
      Member States.
      What is key is not only cooperation among Member States, but also among
      private actors, since the greater part of critical infrastructures, as defined in the
      draft Directive, is in private hands, including food supply infrastructures and
      electronic infrastructures, both of which fall within the ambit of the definition of
      critical infrastructures. Critical infrastructures are therefore marked by an ever
      increasing, plurality of stakeholders. If the rapid technological developments are
      added to the picture, it becomes clear that developing an integrated approach to
      risk management presents an enormous challenge in the future.
4.4   the eu constr aining investment decisions in
      infr astructures
      The eu may also constrain national decisions on infrastructures. Network indus-
      tries are economic sectors, and thus they fall under the ambit of the ec Treaty
      provisions on the internal market and on competition law (Larouche 2008). This
      implies that state measures concerning these industries must respect the four
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<pre>    infr ast ruc t ures
                        freedoms underpinning the internal market. Furthermore, state measures should
                        not distort competition on the market. European public values thus directly
                        influence national decisions regarding infrastructures. These public values are
                        expressed in legally binding ways as a result of which they are both imperative
                        and imposed top down. However, much depends on the exact type of state inter-
                        vention. Moreover, the regulation of both the internal market and competition
                        allow for exceptions in favour of other public interests.
                        State intervention in the area of infrastructures may take different forms. As they
                        exclude private parties’ involvement entirely, state owned monopolies are one of
                        the most interventionist instruments. Lighter forms of intervention may include
                        financial (subsidies) and legal (regulation) instruments. Article 86(1) ec lays
                        down the principle that state measures with regard to public undertakings and
                        undertakings with privileged rights are subject to internal market rules and
                        competition law. Since the early 1990s, Article 86(1) ec has become more intru-
                        sive as the ecj developed a stricter approach (Larouche 2008).1 There is, however,
                        an escape available to justify measures that may distort competition. Article 86
                        (2) ec states that national measures shall be allowed to remain if necessary to
                        enable its holder to fulfil its obligations concerning services of the general
112                     economic interest under economically acceptable conditions. The only acceptable
                        measures are those that are strictly necessary to fulfilling the public policy objec-
                        tives for which they were adopted. These tight constraints may be explained by
                        the possible dangers that monopoly rights may pose to the policy objectives of
                        the ec.
                        Other types of state intervention, such as the granting of subsidies and the use of
                        economic regulation are subject to legal supervision, although these instruments
                        allow for more discretion on the part of the Member States. Subsidies are subject
                        to eu state aid policy; Article 87 ec contains a more or less general prohibition on
                        state aid, but at the same time allows for numerous exceptions. State aid for the
                        development of disadvantaged areas that is closely connected to eu regional
                        policy, is permitted, for example (Larouche 2008) and may cover subsidies for
                        infrastructure projects. In recent years, state aid law has evolved so that it creates
                        a general framework for public authorities to inject public funds to support regu-
                        latory objectives. The ecj in its case law has given national public authorities
                        relatively unconstrained discretion in the development of their ‘public service
                        obligations’, but, in return, has imposed a relatively strict set of disciplines on the
                        use of public funds to compensate firms that are burdened with such obligations,
                        so as to ensure transparency and objectivity.
                        When it comes to economic regulation, the evolution of ec law in regulated
                        sectors confirms that ec law is a form of discipline for Member States. The scope
                        of the application of internal market regulation to national regulatory measures is
                        extremely wide, as the key concept of the ‘impact on trade between Member
                        States’ is consistently interpreted in an extremely broad manner. The internal
                        market policy objectives are not absolute as the possibility for the Member States
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<pre>                                                                 infrastructures in a multi-level arena
to adopt such measures is provided for, but their justification must be assessed on
the basis of the aim of the measure concerned as well as the proportionality of the
measure. This is the legal context for the trade-off between eu internal market
policy objectives and national policy objectives. Similarly, Member States are
prevented from using national measures as a shield for cartels or abuses of their
dominant position, which would be prohibited if private operators were to enter
the market.
Another type of eu involvement in national investment decisions arises in the
field of public procurement. Preventing national protectionism is an important
underlying motive for eu public procurement policy. Public tenders are subject to
various good governance principles such as transparency and non-discrimination
so that business undertakings from other eu Member States must have equal
access to public tenders.
All in all, eu law assumes a ‘control’ function over national law, providing citi-
zens and firms with the ability to challenge national choices made regarding
policy, instruments, enforcement, etcetera. Over time, as case-law evolves,
Member State actions in practice become subjected to ‘good governance’ require-
ments imposed via ec law, including openness, transparency, and non-discrimi-                           113
nation amongst operators and customers. ec law becomes a force to promote
better administration and to combat protectionism and arbitrary discrimination.
It provides a vehicle for a healthy – but not fatal – dose of scepticism towards
Member State action.
These various general principles of Community law provide an important frame-
work for Community control over national infrastructure investment initiatives
and constrain the latter through the imposition of various conditions, but they do
not replace national powers with Community or centralised procedures. In
general, they stimulate commercial market integration and do not lead to changes
in physical operation or new institutional arrangements. However, developments
within sector specific regulation reveal a different picture.
The eu’s expanding regulatory repertoire is binding on Member States and is
composed of three elements: First, liberalisation or ending domestic legal
monopolies, initially in specific market segments but later throughout an entire
industry. However, the eu did not simply ‘deregulate’, because the second
element includes the adoption of re-regulatory rules that govern market competi-
tion and set conditions for suppliers and public actors. Key elements included
rules about access to infrastructures, cost-based tariffs and universal service – i.e.,
rules which were designed to stimulate commercial integration.
The third element concerns implementation and is most directly relevant to this
chapter. eu legislation placed duties on enforcing liberalisation and especially re-
regulation on ‘national regulatory authorities’ (nras). It insisted that these nras
be kept apart from industry, thus ruling out ministries that both regulated and
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<pre>    infr ast ruc t ures
                        owned companies (originally the case in the Dutch electronic communications
                        and postal services and still the case in energy, transport and water).
                        Thus, in this first phase, eu regulation sought to open up national markets
                        through liberalisation and re-regulation but left the institutional architecture of
                        implementation up to Member States. There were few available instruments to
                        coordinate nras or to ensure consistent implementation of eu law, which is a
                        major issue for the eu given that most of its legislation was very broadly defined
                        in line with ‘the politics of compromise’ among Member States as well as
                        between eu institutions. However, it must be stressed that there have been only
                        limited attempts to define and coordinate or harmonise public values or ‘public
                        services’ – with one major exception – electronic communications – where the
                        introduction of the concept of universal service has, of course, harmonised
                        certain but not all public values associated with the provision of communications
                        services (Larouche 2008).
                 4.5    new t ypes of governance at the eu level: governance
                        through networks and agencies
114
                 4.5.1  introduction
                        With the emergence of the eu as an increasingly relevant governance level for
                        infrastructures, policies in this field have become genuinely multilayered. In the
                        previous sections, the centralised, top-down influence of the eu was elaborated.
                        However, newer modes of governance aim to take up the challenge of developing
                        non-hierarchical forms of decision making. As such, these forms of governance
                        seek to strike a new balance between national interests and responsibilities and
                        the need for diversity on the one hand, and the need to facilitate internal market
                        objectives to address cross-border issues which call for centralisation, on the
                        other hand. An example of this is the Council of European Energy Regulators
                        (ceer), which functions as an informal forum for cooperation among national
                        energy regulators and with eu institutions. Sabel and Zeitlin call this type of
                        governance directly-deliberative polyarchy (ddp) (2007). These networks may
                        sometimes also include private actors. The so-called Florence Forum, which was
                        set up to discuss the creation of a true internal electricity market, is an example. It
                        not only brings together national regulatory authorities, Member States and the
                        European Commission, but also transmission system operators, electricity
                        traders, consumer organisations, network users and the like. In section 4.5.2, we
                        will explore different types of networks, as they differ in practice in structure,
                        task and composition. The patterns in which they evolve will be analysed in this
                        section as well. Their hybrid nature allows networks to connect different levels of
                        governance and actors but their growing influence also gives rise to the emer-
                        gence of possible accountability gaps and democratic representation issues. These
                        issues as well as their merits will be evaluated in section 4.5.3.
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<pre>                                                                      infrastructures in a multi-level arena
4.5.2 different t ypes and developments
      The concept of network governance is a key concept for the explaining of non-
      hierarchical and decentralised modes of governance. As such it is generally
      applied in public administration science and specifically analyses developments
      at the eu level. Indeed, networks to date account for a significant part of activities
      in the field of infrastructures as well. Such networks may be informal or even ad
      hoc and entrusted with only limited powers. Examples include the European Gas
      Regulatory Forum of Madrid (‘the Madrid forum’) set up ‘to discuss issues
      regarding the creation of a true internal gas market’ and the aforementioned Elec-
      tricity Regulatory Forum of Florence (‘the Florence Forum’), which has a similar
      function in the field of electricity infrastructures. Forums are consultative in
      nature and have no legal powers or responsibilities. Their strength depends on a
      broad level of participation among the stakeholders. Public and private actors
      from the eu and national levels may be represented in these forums. Policy learn-
      ing through peer review or setting benchmarks and norms may be the most
      concrete results of these informal mechanisms. The networks of National Inde-
      pendent Regulatory Agencies (nira’s) are similarly informal in nature, but have
      a somewhat stronger institutional setting. As participation in these networks is
      limited to public sectoral regulators (thereby excluding inter alia government and                     115
      European Commission officials as well as representatives from the private
      sector), facilitates focussing on common issues and problems. In the water sector,
      the Common Implementation Strategy is an informal institution that was not
      provided for by the Water Framework Directive (Kaika and Page 2003), but
      which indeed has a key role in the implementation of the directive (Scott and
      Holder 2006). It helps the Member States at three levels: working groups, the so-
      called Strategic Coordination Group (composed of higher ranking civil servants)
      and biannual meetings of water directors. This proves that informal networks
      may supplement regulation and networks with more far reaching powers and not
      necessarily serve as alternatives in cases in which the latter options are, for what-
      ever reasons, not available.
      On the opposite end of the spectrum, one finds Federal European Regulatory
      Agencies (fera’s). These agencies would have independent powers to make
      rules and set standards for implementation throughout the eu, which would
      have to be transferred from the Commission and the national governments. To
      date, no such fera exists in the field of infrastructures, but the European Central
      Bank (ecb) provides an example in the monetary sector. The need for increased
      policy-making efficiency, especially in the complex and technical policy domains
      of infrastructures, as well as the desire to insulate national bodies from domestic
      pressures has created a demand for such agencies in these sectors as well.2 If the
      us experience in sectors such as electronic communications and energy were to
      be copied, lower-level regulatory agencies would continue to exist and to have
      powers in certain fields, notably intra-national issues, but questions that affect
      inter-(member)state trade would fall under the jurisdiction of the fera.
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<pre>    infr ast ruc t ures
                        Practice has shown the existence of many hybrid forms of cooperation. These
                        contain both ‘national’ and ‘European’ elements. European Regulatory Networks
                        (erns), for instance, are created through a ‘Double Delegation’ – the Commission
                        and national regulators. The element of Commission representation distin-
                        guishes erns from networks of nira’s, while the fact that national bodies
                        continue to exist and have to implement eu legislation, alongside instead of
                        subordinate to the ern, distinguishes them from feras. European Regulatory
                        Agencies (eras) are comparable to erns, but have a stronger institutional struc-
                        ture. They may have advisory, inspection or even decision-making powers. The
                        European Regulators Group for Electronic Communications Networks and Serv-
                        ices (erg) is an important example of this.
                        Networks of regulators evolve incrementally, while distinct patterns in this
                        evolution can also be distinguished. As Thatcher and Coen have suggested
                        ‘analysing eu developments as the product of incremental change, collisions and
                        compromises between organisations and endogenous processes may offer a
                        better paradigm to understand the institutionalisation of Europe than “grand
                        bargains” and “intelligent design”’ (Thatcher and Coen 2008). Indeed, there has
                        been no movement towards a neat and tidy ‘European regulatory space’ for infra-
116                     structure provision. However, some general trends may be discerned. The first
                        was the result of concerns in the 1990s about the lack of coordination among
                        national regulators, uneven implementation across Member States and the
                        adverse effects thereof on the European single market. This resulted in a rise in
                        informal networks and forum governance. Between the late 1990s and 2002,
                        restructuring European regulatory space again became the subject of considerable
                        discussion as the problems had still not disappeared. The first calls for independ-
                        ent ‘Euro-regulators’ (the above-mentioned feras) stem from that period
                        (e.g., Majone 1997). Another call was for greater eu Commission control. In the
                        practice of many network industries, the option often chosen involved a ‘double
                        delegation’ of functions and powers from the Commission and national iras.
                        The hybrid (neither national nor European) entities resulting from these double
                        delegations thus increasingly manifested themselves in an autonomous way
                        (Lavrijssen and Hancher 2008: 2). It allowed them to operate in a position that
                        distanced themselves from the political realm.
                        The current debates are dominated by the need to overcome obstacles in the
                        proper functioning of the internal market (entry barriers to national markets,
                        difficulties in cross-border trade due to diverse national standards, etcetera) on
                        the one hand, and Member States and national regulators stressing national
                        autonomy on the other. Both the Commission and the European networks and
                        agencies have called for an increase in their respective powers.
                        Energy and electronic communications are key sectors in this respect. Thus, in
                        electronic communications, for instance, the eu Commissioner for Information,
                        Viviane Reding, has proposed strengthening Commission powers over iras, as
                        part of a review of the 2002 regulatory framework. This proposal entailed inter
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<pre>                                                               infrastructures in a multi-level arena
alia empowering the European Commission to issue authorisations (i.e., licences)
that would allow service providers to operate throughout the eu. Later on, she
even went so far to propose the strengthening of the erg, either by transforming
it into a classic European Agency (which would advise the Commission), or into a
fera, with its own powers to make binding decisions concerning iras and
market players. But, some national iras and erns have been sceptical about addi-
tional Commission powers (see, generally, Larouche 2008). The Commission
took a new step in this process in November 2007 when it proposed transform-
ing the erg into a European Telecom Market Authority (etma), thereby choos-
ing a combination of the network (the board of the etma would be composed of
representatives of the national regulators) and the agency model. Although it was
presented in various media as a ‘super regulator’, establishing the etma does not
entail the granting of formal decision-making authority. Thus, the etma cannot
be considered a ‘federal’ European Regulatory Agency, but in preparing European
Commission’s decisions, it would nevertheless have considerable influence in the
decision-making process.
The desire for an increase in powers manifests itself in other sectors as well. In
energy, the European Regulators’ Group for Electricity and Gas (ergeg) has
argued for an ‘ergeg -plus’ as part of a ‘European System of Energy Regulation’                       117
with powers to enforce decisions through sanctioning mechanisms, to have an
enhanced role in advising on legislation and gathering data and to be awarded
additional resources. More generally, the European Commission and erns have
led vigorous debates in the mid-2000s about reforming institutions in several
sectors. Such reforms were deemed necessary for the opening up of markets.
Moreover, moving away from the consensus principle would mean that a deci-
sion could be made more effectively and the constraints to act according to the
‘lowest common denominator’ would be eliminated. The discussion on trans-
forming the ergeg into an ‘ergeg-plus’, is currently part of a broader discourse
on the creation and strengthening of European agencies (Lavrijssen and Hancher
2008). Lavrijssen and Hancher argue, however, that the change is in fact less
revolutionary than it appears; it is basically a formalisation of the informal de
facto influence of the European networks into formal regulatory powers. The
increasing powers of agencies demand adequate accountability mechanisms.
The formalising of these powers provides for opportunities as it would make for
greater clarity regarding the different European and national responsibilities and
the political and legal accountability of the ‘networks plus’ (see section 4.5.3).
All in all, as Thatcher and Coen have indicated, the institutional patterns that
may be discerned across the various sectors are marked by incrementalism, grow-
ing centralisation, and increasing institutionalisation (Thatcher and Coen 2008).
A clear demarcation between eu and national responsibilities (since these
networks and agencies are comprised of actors from both levels) as well as
adequate accountability mechanisms is, however, indispensable.
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<pre>    infr ast ruc t ures
                 4.5.3  accountabilit y issues
                        Networks and agencies sometimes have far-reaching abilities to influence both
                        the European Commission and national authorities (Lavrijssen and Hancher
                        2008). The knowledge and expertise of these networks and agencies certainly
                        help to improve the quality of the decision-making process. At the same time,
                        however, accountability ‘gaps’ may arise, as the hybrid nature of these networks
                        and agencies may make it unclear whom they are accountable to. Although they
                        operate in the public interest, they are in practice rather distanced from and invis-
                        ible to the public. Even for the democratically elected institutions it is quite diffi-
                        cult to get a grip on these networks and agencies. Since networks do not consti-
                        tute eu institutions, they are not accountable to the European Parliament,
                        although the European Parliament may hold the Commission accountable for its
                        participation in networks (Lavrijssen and Hancher 2008: 15). Similarly, national
                        parliaments may hold national ministers accountable for their involvement in
                        networks, but the network as such remains outside the scope of overall accounta-
                        bility arrangements, thus resulting in a scattered and patchwork accountability
                        system. Agencies are better embedded in the eu institutional legal structure
                        which makes democratic control over their activities easier.
118
                        Things are further complicated by the fact that generic accountability require-
                        ments are difficult to set. Indeed, as may be concluded from the preceding
                        section, networks and agencies are so diverse that catchall accountability mecha-
                        nisms may not be imposed. In the case of informal networks, accountability of
                        the network as a whole is irrelevant. Instead, the individual participants of such
                        networks should be held accountable. Conversely, if these networks enjoy more
                        autonomy, accountability mechanisms should be tailored to this fact.
                        Moreover, as networks and agencies are highly dynamic, the need for accounta-
                        bility mechanisms evolves over time as well. As networks tend to centralise and
                        see an increase in their powers (see previous section), stronger demands will be
                        put on the possibilities of holding such networks accountable. The differences
                        between networks and their evolution over time imply that accountability mech-
                        anisms always need to be tailor made.
                        It is widely seen as a fundamental drawback of network decision making that it
                        departs from the key principles of representative democracy (Sabel and Zeitlin
                        2007). Deliberation and decision making among technical elites seem to be at
                        odds with majority decision making by directly elected representatives.
                        The legitimacy of networks is, however, strongly supported as well. By labelling
                        such forms of governance directly-deliberative polyarchy, Sabel and Zeitlin have
                        pointed to the legitimacy advantages of network cooperation (2007: 9). As a form
                        of deliberative governance, it is based on argumentation and may as such
                        contribute to redefining individual, but also common, interests, practices and
                        assumptions. This is facilitated by the fact that the participants have concrete
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<pre>                                                                    infrastructures in a multi-level arena
    experience in dealing with the issues at stake. Thus, an environment is created
    that allows for mutual learning, common disciplining and setting goals with
    considerable openness for corrective and adaptive action (Sabel and Zeitlin 2007:
    9). Peer review may be a strong accountability mechanism: confronted by the
    various solutions to similar problems, participants, but also politicians, are stim-
    ulated to publicly defend their policy choices. Instead of a principal-agent
    accountability mechanism, peer review becomes an alternative accountability
    mechanism.
    These forms of accountability, however, concern all internal mechanisms. The
    technocratic elite is accountable to other representatives of that same elite. In
    other words, these networks are largely left to control themselves (Kickert 1993:
    275). Interdependent as the participants are, the network constitutes a mutual
    accountability network (Scott 2000: 38). However, Sabel and Zeitlin argue that
    the effects of such accountability mechanisms have broader spill-over effects as
    well (2007: 46ff). Transparency and stimulating broad participation constitute in
    their view driving forces for these spill-over effects. In the case of the Florence
    Forum, for instance (mentioned in the previous section), broad participation is
    realised by the participation of both industry and consumer organisations. This
    could, however, as Harlow and Rawlings argue, risk them being ‘sucked into’ a                          119
    network of which the accountability function would be blunted by the mutual
    interest (Harlow and Rawlings 2007: 6). They therefore call for separate account-
    ability networks to be established, along the lines of networks of ombudsmen
    and courts. Such accountability networks should be characterised by shared
    expertise and have inter alia powers to undertake joint investigations. In the field
    of infrastructures, accountability networks in the field of financial audits and
    parliaments may enhance the legitimacy of decisions made and complement the
    internal accountability mechanisms within networks of experts.
4.6 conclusion
    Does internationalisation (especially Europeanisation) have the effect of making
    the national level irrelevant when it comes to infrastructure investment policies?
    It is this question that often dominates in the assessment of the effects of interna-
    tionalisation. In some instances, the effect of European Union policies may
    indeed be that national policies are not implemented. However, the effects of eu
    policies are generally much more subtle and complex than that. Moreover, other
    challenges that internationalisation poses may be overlooked when focussing
    exclusively on the issue of what is left to the national level.
    The first of these challenges is whether the level of physical and functional inter-
    nationalisation matches the level of internationalisation in terms of governance.
    Physical integration of infrastructures across Europe has led to a much greater
    mutual interdependence. Moreover, positive effects in terms of efficiency and
    enhancing security of supply (e.g., in the area of electricity) have been marked.
    Governance structures have also been internationalised, but not always to the
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<pre>    infr ast ruc t ures
                        same extent or in the same way. This may very well lead to mismatches between
                        the functional level and the governance level of internationalisation. When this
                        becomes the case, the efforts of the Dutch government should aim to strengthen
                        eu power in order to cope with the effects of physical internationalisation.
                        Secondly, internationalisation has led to the emergence of new governance struc-
                        tures. In coping with the tension between centralisation and decentralisation,
                        networks and agencies have thus become important governance modes. These
                        networks and agencies have an enormous potential in bringing together actors
                        from the different Member States and the eu institutions and thus in pooling
                        knowledge, expertise and problem-solving capacity. In other words, such
                        networks contribute much to connecting different actors and governance levels.
                        As such, they constitute an effective mechanism of dealing with increased inter-
                        nationalisation without totally losing one’s grip at the national level.
                        Networks and agencies require adequate checks and balances – mechanisms,
                        however, as some of them enjoy a considerable amount of autonomy and are able
                        to influence the decision-making process. The academic literature on the internal
                        accountability mechanisms of networks and agencies, whereby the individual
120                     participants are held accountable by the other participants, has analysed them and
                        made its recommendations. However, these modes of peer review are insuffi-
                        cient. Political accountability is a particular problem, as these networks are
                        mostly rather technocratic in nature. Because they are hybrids (composed of both
                        national and European representatives), it is difficult to set up external accounta-
                        bility networks. Ideas to this end might, however, be found in the creation of
                        parallel networks of accountability.
                        Thirdly, as stated above, the influence of the eu is much more multifaceted than
                        simply posing a possible obstacle to national investment decisions. On the
                        contrary, several eu policies aim to promote national investments in infrastruc-
                        tures, in the international interconnectedness, for instance, although these
                        policies are admittedly hardly imperative in nature. More generally – although
                        networks in different sectors are of a trans- or pan-European nature – the eu is
                        only engaged in investment decisions to a limited degree. Thus, internationalisa-
                        tion at the level of governance is far from reaching the stage where national insti-
                        tutions and mechanisms are entirely replaced by new European institutional
                        arrangements. In other words, pan-national institutional arrangements, which
                        could lead to the initial determination of the relevant public values as well as their
                        application to particular investments, have not yet been developed.
                        Even when it concerns eu policies that may pose obstacles to national infrastruc-
                        ture investments, the eu will most likely simply forbid national investments.
                        Rather, the eu will prohibit particular ways of investing, while offering the
                        Member States options to effectuate these investments in other ways. Thus,
                        Member States will retain discretion but they need to remain aware of the limits
                        thereof. It is, therefore, crucial to be aware of and to try to adapt to this European
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<pre>                                                             infrastructures in a multi-level arena
policy context. This policy context is mainly aimed at market opening, the non-
discriminatory functioning of markets, etcetera. Thus, the Europeanisation of
infrastructures and governance has caused new public values and interests to
emerge that need to be taken into account. In some sectors, especially electronic
communications, this has led to significant regulatory frameworks that have in
their turn altered the arenas considerably with regard to the emergence of private
actors, regulators and the like.
                                                                                                    121
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<pre>    infr ast ruc t ures
                 notes
                 1      Networks as a tool for both connecting levels and arenas, and checks and
                        balances.
                 2      See infra for the recent plans to establish such an agency in the field of electronic
                        communications.
122
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<pre>                                                        regime change and public values in infrastructures
5   regime change and public values in
    infr astructures
5.1 introduction
    Infrastructures are the precondition for the delivery of services that are indispen-
    sable to modern societies, e.g., services such as drinking water supply, the provi-
    sion of electricity, data communication and flood control. But the significance of
    infrastructures for society goes beyond the delivery of services. As Van der
    Woud’s study (2006) has shown, infrastructures have been the prerequisite for
    economic, social and cultural development in societies. Infrastructures serve a
    wide array of public interests and values; from sustainability; public health,
    safety and reliability; affordability and many more. The relation between these
    public values and the investment in infrastructures is evident. Since the mid-19th
    century (Disco 1990), infrastructures have been a major policy tool for govern-
    ments in the realisation of these broader public values and, over the last
    centuries, governments have sought to direct and develop societies through
    infrastructures.
                                                                                                           123
    With regime change that has occurred since the 1980s, however, emphases on
    efficiency gains, improvement of the service and on the short-term were intro-
    duced. Chapter 2 described this movement as an emphasis on ‘Type I’ market
    failure. Recently, attention has again been drawn to wider public values, which
    were described in chapter 2 as ‘Type II’ market failures. This renewed attention
    is partly a reaction to the narrower focus stemming from the previous stage of
    regime change, but it is also due to new external challenges, e.g., climate change
    and the future depletion of fossil fuel resources (International Energy Agency
    2007). These challenges require systems innovations in many infrastructures,
    e.g., road and railway transport that is more sustainable; the strengthening of
    dikes; energy provision that relies on non-fossil fuel sources; co 2 storage and
    natural gas storage.
    Since public values are the heart of the matter in infrastructures, governments
    have continued to play a role in ensuring that ‘physical’ infrastructures are guar-
    anteed now and in the future. The processes of regime change (as discussed in
    chapter 2) have altered the role of the state with respect to infrastructure provi-
    sion, however. Instead of producer/operator, the state has now become a ‘direc-
    tor’ (Tweede Kamer 1999-2000, 27018, no. 1). This shift has an impact on the way
    in which public values are articulated, balanced, realised and monitored (see also
    Teisman 2008; Larouche 2008).
    In this chapter the public values thus serve as a normative perspective for the
    analysis of change (chapter 2, 3 and 4). The purpose of this chapter is to first
    identify the impact of regime change on public values so far. This chapter builds
    on chapter 2, which noted that regime change up till now has concentrated on
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<pre>    infr ast ruc t ures
                        ‘Type I’ market failures: the institutional arrangements focus on static efficiency
                        issues. Here it was argued that despite the fact that efficiency is an important
                        value, it is not the only value that is relevant in relation to infrastructures.
                        Sustainability, equity and innovation, for example, are also infrastructure-related
                        public values. Chapter 2 pointed out that these values – unlike static efficiencies
                        requiring dynamic arrangements – are currently undervalued in institutional
                        arrangements. Considering this assessment, this chapter proposes some new
                        institutional arrangements that can deal with these new issues, which were listed
                        under ‘Type II’ market failures in chapter 2.
                 5.2    what are public values in infr astructures?
                 5.2.1  public values or public interests?
                        The conglomeration of concepts of public values, the common good, public inter-
                        est and other related concepts – though not synonyms – have, as Bozeman
                        (2007: 1) has pointed out, been identified as the worthy goal of government ever
                        since Aristotle’s Politics (‘common interest’); St. Thomas Aquinas’ Summa
                        theologiae (‘common good’) and Locke’s Second treatise of government (‘public
124                     good’). All these terms and concepts are reflected in the current debate in the
                        Netherlands and elsewhere on the role of infrastructures. This report follows
                        Bozeman’s distinction between public values and public interests (2007): Public
                        interest is an ideal construct, whereas public values have specific, identifiable
                        content. The public interest refers to the outcomes that best serve the long-run
                        survival and well-being of a social collective construed as a ‘public’ (Bozeman
                        2007:12). A society’s 1 public values are those providing normative consensus
                        about a) the rights, benefits, and prerogatives to which citizens should (and
                        should not) be entitled; b) the obligations of citizens to society, the state and to
                        one another; and c) the principles on which governments and policies should be
                        based. The term public value should not be equated with government responsi-
                        bility. To say that a public value is held by a society says nothing about the
                        responsibilities for providing for this public value.2 It is, however, true that many
                        of the public values refer to externalities for which the market will not provide a
                        solution. In most instances, some kind of monitoring or enforcement from the
                        state will remain necessary. The relation between public values and the role of the
                        state is discussed in detail in the last section of this chapter.
                 5.2.2  the debate in the early stages of regime change
                        The preliminary steps in regime change formed the context for the discussion on
                        public values in the late 1990s and early years of the 21st century. Until that time,
                        public values in infrastructures, their trade-offs as well as the mechanisms to
                        achieve them had remained largely implicit and obvious. Now that organisations
                        were increasingly placed at arm’s length from the state, public values and the
                        mechanisms to realise or enforce them had to be made explicit.
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<pre>                                                     regime change and public values in infrastructures
This quest for more explicitness is reflected in the first reports that showed the
renewed interest in the topic. The wrr report Het borgen van publiek belang
(2000), for example, concentrated on the question of how public interests can be
safeguarded. The decision on the definition and the priority attached to specific
public values (the ‘what’ question) is principally an assignment of the political
realm, a point also made in this present report.3 The wrr identified four mecha-
nisms to secure public values: rules (enshrined in laws or contracts); competi-
tion; hierarchy and institutional competition (enhancement of values and norms
within an organisation engaged in the operational processes). Focussing on the
mechanisms, the wrr did not list the public values that were at stake. In the offi-
cial response by the government to the wrr report (Tweede Kamer 2000-2001,
27771, no. 1), it was argued that it was desirable, though impossible to provide a
list of explicit public interests given the differences between the societal sectors,
which varies from social security, to the police, housing and infrastructures. For
the same reason, this report will not prescribe which public values should be
realised in each infrastructure.
Another example of the debate in the early years of renewed attention is the
Ministry of Economic Affairs publication on ‘liberalisation and privatisation of
infrastructures: public interests and market structures’ (Tweede Kamer 1999-                            125
2000, 27018, no. 1).4 This document focussed on different market structures
(competition between infrastructures, competition on the infrastructure,
competition for the market, and benchmarking) and ways to secure public values
within the various market modalities. The following public interests in infra-
structures were identified: universal provision of services; protection of the
bounded consumer; security of supply; quality; environment; safety and public
health; efficient (free) market processes and efficient regulation. The report
sketched how certain public values could be embedded in laws, contracts or
permits, for example. Another influential report was the Ministry of Economic
Affairs and Ministry of Finance publication De calculus van het publiek belang in
which the economists Teulings, Bovenberg and Van Dalen provided a detailed
step-by-step plan on how to determine and prioritise public interests.5 The
calculus was criticised by public administration scholars in the publication
Calculeren voorbij de calculus (De Bruijn, Ten Heuvelhof and Van Twist 2004),
where it was argued that public values can not be ‘calculated’. Instead, public
values are ambiguous, relative and contested. Many other studies followed, some
in line with Teulings, Bovenberg and Van Dalen, some in line with their oppo-
nents’ view.
What these reports have in common is that they aimed to contribute to the reali-
sation of public values at a time when the initial steps of regime change were
being taken. They did not evaluate regime change or its impact on the realisation
of public values as such. This report can be viewed as a renewed analytical
attempt to connect the realisation of public values to institutional arrangements,
given that regime change has developed in all infrastructures, albeit in a non-
linear process. This chapter also aims to incorporate academic and practical
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<pre>    infr ast ruc t ures
                        insights on the impact of the institutional arrangements that have developed in
                        the course of regime change thus far. This is how it seeks to include an evaluation
                        of the early stages of regime change and the set of instruments developed earlier
                        to achieve public values. Our approach is analytical and based on the theoretical
                        characteristics of the institutional arrangement, we carry out a conceptual analy-
                        sis. An empirical illustration is provided in chapter 6.
                 5.2.3  public values and investment in infr astructures
                        Investment in infrastructures is the precondition for the realisation of the public
                        values that are directly linked to a specific infrastructure. Water mains and the
                        sewer system, for instance, are a precondition for the realisation of public health;
                        similarly, dikes are necessary to protect the public from floods. But infrastruc-
                        tures also serve wider societal goals, e.g., economic development and sustainabil-
                        ity. Some policy reports (e.g., Raad voor Verkeer en Waterstaat 2004a-b) list
                        investment as one of the public values that needs to be realised, along with inno-
                        vation and sustainability. This report views investment not as a public value in
                        and of itself, but as an instrument to achieve wider long-term public values such
                        as sustainability, innovation, long-term accessibility and reliability.
126
                        Investment in infrastructures is necessary for all infrastructures, but it is espe-
                        cially important in stimulating the system innovation that is required in many
                        infrastructures. Electric cars, for example, may be the future (Versteegt and
                        Verbraeck 2004) but their development will not happen unless there is an infra-
                        structure in place. The run-back of energy by green house farming is also a theo-
                        retical possibility, but in order to make it happen it must be made technically
                        feasible as well. The storage of co2 will only become a reality if an infrastructure
                        for transporting the co2 from producer to storage is developed. Infrastructures
                        thus facilitate crucial system innovations, of which the transition to a low-carbon
                        economy is probably the most critical shift at present.
                 5.2.4  the dynamics of public values
                        In the various sector-specific publications we find slight variations regarding the
                        quite stable collection of public values. The values most often cited are: universal
                        service, NF consumer protection, overall efficiency, environment and conserva-
                        tion, quality of service, continuity of supply, affordability, research and develop-
                        ment, efficient (free) market processes and efficient regulation.
                        A tempting line of reasoning could be that since the public values worth realising
                        are known, the state or other actors only need to define them, and leave it to the
                        (public or private) actors to realise them or otherwise enforce them, through
                        laws, contracts, concessions or permits, for example. This chapter argues that,
                        albeit seemingly persuasive, this line of reasoning which leans exclusively on the
                        hierarchic mechanisms of laws, contracts and permits, is not viable. The difficul-
                        ties are hidden in the characteristics of public values.
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<pre>                                                    regime change and public values in infrastructures
Public values are ambiguous
Public values, such as ‘affordability’ and ‘sustainability’ or ‘continuity of supply’
are ambiguous. After all, what does affordability mean in practice? Immediate
questions arise: Affordable for whom? How will they be used in the infrastruc-
ture? How affordable is affordable enough? How can affordability be translated
into norms that can be enforced? How do we measure affordability? It is a long
way from the formulation of this abstract notions to the implementation of
concrete norms that can be used in daily operations.
Prioritisation shif ts over time
The collection of public values may be fairly stable, but that does not mean that
the prioritisation of public values is stable as well. Prioritisation may shift as a
result of new actors entering the infrastructure that are more successful in claim-
ing or articulating public values. But prioritisation may also shift as a result of a
change in the political tide. The recent attention being paid to sustainability was
not foreseen five years ago. Technological developments are yet another source of
change in prioritisation. The arrival of mobile phones, for example, made the
public value of universal service less prominent on the infrastructure agenda.
And there are, of course, incidents and accidents that push certain public values
into the foreground. After the uk experienced a series of train accidents, for                         127
example, the one at Ladbroke Grove in West London on 5 October 1999, where 26
persons were killed6, safety became suddenly more important. The same is true
for the flood control: the willingness to invest in dikes increased considerably
after the near flooding experienced in the 1990s.
Public values or par ticular values?
It is often not easy to make a distinction between particular or sector interests
and ‘public values’. This issue refers to the question of who or what is the public,
which has important implications for the solidarity mechanisms: should all
inhabitants pay for the flood control or only those living on the flood plains? Is
the protection of these citizens a public value, or is it just a limited interest of that
particular group of inhabitants?
Public values refer both to process and to content
Some of the public values listed above refer to substantive public values, directly
related to infrastructures, e.g., security of supply. Other values are related to the
ways in which actors involved in infrastructure provision should behave. For
example, according to the report of the Ministry of Economic Affairs quoted
above, the state should guarantee efficient free market processes. Other proce-
dural values that are often found in publications on public values (Jørgensen and
Bozeman 2007) are transparency, stakeholder involvement, honesty and
integrity. But achieving a procedural public value may occur at the expense of
achieving substantive public values, as Veeneman and Van de Velde have showed
for the transport sector (2006). And this leads to our final point.
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<pre>    infr ast ruc t ures
                        Public values are inherently relative
                        The realisation of one public value, e.g., drinking water quality, may compete for
                        the resources that are also needed to achieve another public value, e.g., affordabil-
                        ity: increased investments in quality will increase drinking water bills. Thus, the
                        realisation of public values always requires a trade-off.
                 5.2.5  concluding remark s: an approach toward public values
                        The dynamics inherent in public values (5.2.4) cannot be frozen; neither in laws,
                        contracts nor in any other way (see also Kenniscentrum voor ordeningsvraag-
                        stukken 2006: 70). The focus in this chapter has therefore not been on how the
                        dynamics regarding public values can be eliminated. Instead, the approach has
                        been how public values can be realised, given these dynamics. It answers this
                        question with special attention paid to three elements. The first is the impact of
                        regime change on the realisation of public values thus far. Secondly, this chapter
                        devotes attention to the role of the state in this new context. And thirdly, how
                        can public values be realised in this new context and which institutional arrange-
                        ments are necessary?
128
                 5.3    institutional arr angements to realise public values
                        In the traditional situation of infrastructures, i.e., prior to regime change, the
                        state was responsible for almost the entire transaction chain regarding invest-
                        ment in infrastructures. The state, in various forms and at various levels, was
                        responsible for the realisation of public values associated with infrastructures.
                        Chapter two has described a situation that, since the 1980s, all Dutch infrastruc-
                        tures have undergone changes as a result of regime change, albeit at various paces
                        and to various degrees. The question here is how public values have been
                        achieved thus far under these new conditions and whether this is still a viable
                        way considering future challenges.
                        We have seen different responses in the various infrastructures to the with-
                        drawal of the state from infrastructure operations. The general response has been
                        the imposing of regulations to reform and restructure the infrastructures. In
                        addition to regulation, in some but not all infrastructures, an independent regu-
                        lator has been introduced to implement the regulatory requirements regarding
                        the public values, e.g., in the electronic communications sector, electricity, gas
                        and railway sectors. Some infrastructures do not have an independent regulator,
                        but they have increased the institutionalisation of self-regulation, e.g., the drink-
                        ing water sector. Another response has been to make public values explicit in
                        contracts. These various responses to regime change have implications for how
                        public values are defined, protected, realised and monitored. In this section, the
                        interplay between the various institutional arrangements and the risks and
                        opportunities for the actual realisation of public values is described.
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<pre>                                                          regime change and public values in infrastructures
5.3.1 independent economic regul ation and public values
      Independent economic regulation can be found in the infrastructures for gas,
      electricity, electronic communications and railways. How are public values
      realised once independent economic regulation has been set up? Independent
      regulation was set up to realise certain aims, e.g., reasonable tariffs. But, given the
      inherent necessity of trade-offs between public values (5.2.4), the protection of
      one public value will influence the realisation of another public value.
      The classic model of economic sectoral regulation has taken a largely open-ended
      approach, avoiding the pitfalls of attempting to predetermine the public values in
      any formulaic manner. This is the response to the characteristics of public values
      listed in 5.2.3. The open-ended approach seeks to realise public values in three
      ways (see European Policy Forum 2007). First, public values are (indirectly)
      realised via the the regulator’s duty to promote market competition. Secondly,
      with incentive-based regulation, efficiency incentives are provided for the regu-
      lated firm, without the regulator having to get involved in management deci-
      sions, and these efficiency improvements are also seen as ways to provide both
      consumer and social benefits through lower prices and quality of service
      improvements, for example. Thirdly, specific social concerns have also been                            129
      reflected in the statutory duties of regulators (for example, universal service obli-
      gations). The open-ended approach has focussed on preventing legislators and
      regulators from getting bogged down in attempts to reach comprehensive defini-
      tions of public values.
      Tasks of three independent regulators: Shor t-term and procedural
      In the table below, the responsibilities of three independent regulators are
      described with regard to public values. The table shows two things. First, regula-
      tors do not have the statutory tasks that allow them to interfere with the invest-
      ments or the innovation of the infrastructure organisation. They focus on short-
      term efficiency, the consumers and competition. Secondly, the list of statutory
      duties of the three regulators shows the significance of procedural public values,
      which apply to the decision-making process.
      Whereas substantive public values regard the qualities of the infrastructure itself
      (such as capacity, security of supply, safety, etcetera), procedural public values
      seek to enhance the quality of the decision-making process. Involvement of rele-
      vant stakeholders and openness are some examples of procedural public values.
      The implicit assumption is that optimising the parameters of the decision-
      making process will result in optimal investment decisions as well. As the arenas
      in which investment decisions are taken, as well as the infrastructures them-
      selves, are becoming more dynamic and complex, procedural public values
      become an increasing necessity.
      The rise of procedural public values occurs in all infrastructures. In the drinking
      water sector, two significant procedural values will be inserted into the coming
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<pre>    infr ast ruc t ures
                   Table 5.1         Summary of economic regulators’ statutory duties 7
                                                     DTe                           Opta                    Vervoerskamer
                    Statutory duties                 Yes                           Yes                     Yes
                    Further/Protect the interests
                    of consumers                     Yes                           Yes                     No
                    Further/Protect the interests
                    of citizens                      No                            Yes (internet security) No
                    Protect specified vulnerable     Yes (retail tariffs for small No                      No
                    groups                           consumers)
                    Promote competition              Yes                           Yes                     Yes
                    Facilitate market innovation     No                            Yes                     No
                    Encourage market investment      No (but they do have to       Yes                     No
                                                     provide a reasonable/fair
                                                     return)
                    Maintain security of supply      Yes (they have to enable      No                      No
                                                     the companies to maintain
                                                     security of supply)
                    Maintain the competitive         No                            No                      No
130                 position of nl
                    Facilitate the development       No                            No                      No
                    of self-regulation
                    Promote public awareness         Yes, but it’s not explicitly  Yes                     No
                                                     statutory as it falls under
                                                     promoting the functioning
                                                     of markets
                    Provide advice to the            Yes                           Yes (draft legislation, Yes
                    government                                                     frequency allocation)
                    Enhancing efficiency             Yes                           Yes                     Yes
                    Market monitoring                Yes                           Yes                     Yes
                    Fixing tariffs                   Yes                           Yes                     Yes
                              Drinking water act. Much attention was paid to the explicit provision that drink-
                              ing water companies should be fully publicly owned, thereby reflecting the
                              notion that public involvement in the drinking water sector is a public value in its
                              own right. Secondly, the comparison of the output of drinking water companies
                              may be considered a public value in the obligations of these companies to take
                              part in benchmarking, thereby fostering transparency as well (chapter 5 of the
                              Drinking water Act Draft). Meanwhile, transparency and stakeholders’ involve-
                              ment are both major public values in the electronic communications sector.
                              Substantive public values are not only increasingly accompanied by procedural
                              public values, but they are also more frequently operationalised by procedural
                              safeguards. In the railway sector, international interoperability is a significant
                              (substantive) public value. Rather than setting concrete substantive norms, eu
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<pre>                                                           regime change and public values in infrastructures
      directives contain extensive provisions on how to adopt so-called technical spec-
      ifications for interoperability (tsis) (eu directive 2001/16/ec on the interoper-
      ability of the trans-European conventional rail system). Such procedural safe-
      guards may even be found in the Act on Water dams (for instance, the obligation
      of the network manager to periodically report to the provincial authorities on the
      condition of the dikes – Article 9 Wet op de waterkering).
      Pros and cons of independent regulator for the realisation of public values
      This model seemed to work well for about fifteen years, and, meanwhile, many
      public values such as transparency and efficiency have improved. But exogenous
      challenges (e.g., climate change, the depletion of fossil fuel resources) have put
      this model under pressure (e.g., Helm 2007). Investment, innovation and sustain-
      ability have moved to the forefront and these pressures seem to be leading regu-
      lators to involve themselves much more deeply into the size and composition of
      the investment programmes of regulated firms than originally envisaged (Euro-
      pean Policy Forum 2007). As we have observed, one of the answers to these chal-
      lenges has been the increase of the significance of procedural public values – such
      as public participation with regard to water management (e.g., obliged by the
      Water framework directive). This may be adequate for the replacement and main-
      tenance investments. It is, however, not sufficient to stimulate system innova-                         131
      tion since regulators only have a limited set of public values that they can monitor
      and enforce. Monitoring and the enforcing public values – such as innovation –
      that are necessary for the transition to a new kind of infrastructure, are typically
      not part of their legal mandate. Instead, independent regulators are focused on
      the short term and on the consumer.
5.3.2 contr acts and concessions and public values
      Another way to realise public values under conditions of regime change has been
      to make them explicit in contracts. This is obviously the case in infrastructures
      that have undergone major changes as the result of regime change (electricity,
      gas, rail): actors that used to be vertically integrated are now unbundled. The rela-
      tions between the heterogeneous actors are now institutionalised through
      contracts. Contracts, for example, between the responsible firms are made for
      building, operating and maintenance when one firm still owns the assets but as a
      result of unbundling, operation has been entrusted to another – as in the
      (regional) gas and electricity sectors.
      But for the infrastructures in which regime change has been relatively limited,
      contracts have also become more important. The drinking water sector, for exam-
      ple, has undergone limited regime change, with maintenance often being
      contracted out. In the dikes and roads sectors, designing, building, operations
      and maintenance functions are often contracted out and the evolution of smart
      contracts that are more integrated and output based have become a major focus
      for Rijkswaterstaat over the last five years (De Jong 2003).
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<pre>    infr ast ruc t ures
                        Increasingly, public values have become part of the contracts. In the waste sector,
                        for example, a company owned by a municipality was recently bought by a
                        private equity. In a contract between the city of Rotterdam and an investment
                        ‘consortium’ (Hancher, Dicke and Jorritsma 2008) they agreed to not sell the avr
                        company until 2010. Secondly, they agreed not to sell any of avr’s business units
                        separately until 2009. And thirdly, they agreed to keep the company’s headquar-
                        ters in Rotterdam. The municipality ensured that its tariffs for avr’s services
                        would not increase disproportionately by signing a 25-year contract with the
                        company just before it was sold.
                        Pros and cons of the use of contracts for the realisation of public values
                        The realisation of public values involves four issues. The first and foremost risk
                        for public values is that contracts are eventually terminated. Public values that are
                        put into contracts, for example, as in the avr case described above, run the risk
                        that they will no longer be safeguarded upon the end of a contract. Secondly,
                        there is the potential risk that contracts create a bias towards values that can be
                        easily described and quantified (e.g., quality in terms of the percentage of trains
                        running on schedule) versus ‘soft’ public values that are much more difficult to
                        quantify (e.g., the need for innovation). Another issue which is analogous to the
132                     first model, is that only those public values that are mentioned in the contract
                        will be honoured. But contracts are by definition never complete (chapter 2) and
                        this incompleteness refers especially to the long-term public values. Finally,
                        contracts are more flexible than laws. The advantage is that the prioritisation of
                        public values can be adapted to changing circumstances or political preferences.
                        But the downside is that this may lead to tinkering, increasing the uncertainty for
                        the infrastructure organisation. The conclusion must be that there are advantages
                        to contracts for some public values (chapter 2), but they also have serious draw-
                        backs (see also the report by the Kenniscentrum voor ordeningsvraagstukken
                        2006).
                 5.3.3  self- regul ation and public values
                        In some infrastructures, only very limited regime change has occurred and there
                        was no apparent need to establish an independent economic regulator. Drinking
                        water companies, for example, have through self-regulation actively sought to
                        improve efficiency, quality and transparency in the infrastructures. Activities
                        initiated under the heading of self-regulation may vary from the introduction of
                        benchmarks that are made public (drinking water companies) or the active
                        exchange of information and expertise.
                        Self-regulation and the pros and cons for the realisation of public values
                        Self-regulation has a potentially positive effect on the realisation of public values.
                        There is the risk however, that the infrastructure will rely too much on the mech-
                        anisms to safeguard public values that matched the traditional situation, but no
                        longer fit into the new reality in which the infrastructure organisation has
                        become more commercial. It is especially the challenges that stem from hybrid
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<pre>                                                         regime change and public values in infrastructures
      organisations that are not being properly addressed: the public values as well as
      the mechanisms to realise public values have remained largely implicit, while the
      orientation of the infrastructure organisation has shifted towards a commercial
      outlook. This commercial outlook may result in more trade-offs of public values
      than would have occurred in the traditional situation. This situation results in an
      arrangement in which efficiency and profits become the main incentives, while
      the public values involved are not part of the incentive structure. An example
      here is the drinking water sector. A study (seor-ecri 2007b) showed that drink-
      ing water company profits have risen over the past few years. Political parties,
      especially the Socialist Party, have expressed their concerns that the commercial
      motive has overshadowed major public values such as affordability.8 The ques-
      tion was raised whether infrastructures also needed to be monitored by an inde-
      pendent regulator. The debate in Parliament (Tweede Kamer 2006-2007, 30895,
      no. 3), however, resulted in the conclusion that no independent regulator was
      necessary, given the service quality and water costs for the average household in
      the Netherlands.
5.3.4 concluding remark s: the need for review of the initial
      responses                                                                                             133
      These three initial responses to the realisation of public values under the new
      conditions of regime change seem to be ripe for review from a public values
      perspective. Following Van Dijk (2008), Helm (2007) and European Policy
      Forum (2007), and in line with chapter 3, this report identifies three major
      causes.
      Politics versus technocratic decisions
      Public values and their prioritisation require political choices. In the past 15 years,
      it has been observed (European Policy Forum 2007) that the regulator has
      become more and more involved in what were once considered the management
      areas of the investment program; meanwhile, the government has also returned
      to reassume some of its regulatory functions. This is mainly because social and
      environmental concerns are becoming pervasive and because resolving any
      conflicts between objectives (in the energy mix, for example) seems to require
      political rather than technocratic decisions.
      Focus on ser vice values, not infrastructure values
      In the institutional arrangement with an independent regulator, the focus has
      been on the safeguarding of the public values in the delivery of services, most
      notably the efficiency gains that should be translated into lower prices for the
      consumer. The independent regulator is not focused on the public values that are
      important in infrastructures (see De Pree 2008). Especially the long-term public
      values that are hard to quantify (investment, innovation, sustainability) have not
      been part of the mandate of the independent sector regulators. Values beyond the
      regulator’s legal mandate tend to be ignored because they are not enforced else-
      where in the system (Algemene Rekenkamer 2006).
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<pre>    infr ast ruc t ures
                        Focus on national values instead of international values
                        Chapter 2 explained the difference between the technology or function of the
                        infrastructure, on the one hand, and the governance of the infrastructure, on the
                        other hand. Chapter 4 described the pace of the internationalisation of the func-
                        tion of the infrastructure that does not run parallel to the internationalisation of
                        governance. The independent regulator is part of this tension: the sector regula-
                        tor’s statutory duties focus on national territories. In practice, the sector regula-
                        tor focuses on the national consumer. This focus has important implications for
                        the safeguarding of public values that are not confined to the national boundaries
                        or public values not related to the national consumer, as chapter 6 will show in
                        detail for electricity and gas. For the potential conflicts between national public
                        values and international (system) values, there are as yet no institutional arrange-
                        ments in place to deal with these new public value conflicts (see also Shuttle-
                        worth 2008: 3).
                        The conclusion here is that all three initial responses need to be reviewed. The
                        focus in all models tends to be on short-term efficiency, the national consumer,
                        and primary service delivery. None of these models can accommodate long-term
                        public values relevant to infrastructures, e.g., sustainability and innovation. The
134                     next section discusses the options for this kind of review.
                 5.4    options for the review of the institutional
                        arr angements
                        What are the options for improving the current institutional arrangement with
                        regard to future challenges? There are two options that are most frequently
                        debated. First, to review the tasks and the role of the independent regulator 9, or
                        to establish independent regulation in infrastructures where it is not existent yet.
                        The latter was for example proposed by the Consumentenbond, the Vereniging
                        Eigen Huis and the Vereniging voor zakelijke watergebruikers (vemw),10 as based
                        on an analysis by seor-ecri (2007a) in the drinking water sector. The introduc-
                        tion of independent regulation for the road sector was also proposed by the Raad
                        voor Verkeer en Waterstaat (2007). A second option that is often heard by the sp
                        and fnv,11 for example, is to allow the state to assume some of its former func-
                        tions. This section explores the pros and cons of these options.
                 5.4.1  review of the independent regul ator
                        There are two main options in the area of safeguarding public values using the
                        model of the independent regulator. (These options are largely taken from the
                        European Policy Forum 2007.) The first is to add public value duties to the duties
                        of the existing regulators, the second is to reformulate the duties of the regulator
                        and to extend regulatory agencies into infrastructures where they are at present
                        operating.
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<pre>                                                      regime change and public values in infrastructures
1a     Make the independent regulator also responsible for new public
       values
The proposal is to maintain the competitive markets focus of the existing model
and to rely on the regulator to absorb the new public value duties into their pres-
ent functions. They are then treated in the traditional way as definable ‘add on’
responsibilities around the continued chief focus on consumer interests and
competitive markets (European Policy Forum 2007).
Pros and cons of add-on responsibilities
When weighing these possible options, it is desirable to take stock of what has
been achieved by independent sector regulators thus far. They are more capable of
gathering information more effectively than the government, they provide
centres of specialised expertise, they have become sources of epistemic authority
in their field and among their peer groups, and they provide information to the
public that is less distrusted than information provided by governments and
other sources such as the business sector. They provide a more stable setting for
those they regulate. They also have an incentive to inform the public and regula-
tors of the reasons for their actions and to follow procedural disciplines that may
be absent for governmental departments. They have achieved credibility with the
public. This option endorses the current approach and involves a decision as to                          135
whether the resolution of public interest ‘add-ons’ into their component parts, is
sufficient to realise their strategic public interest objectives. Another important
issue is that the very nature of the regulator’s role could become a political one:
instead of regulating tariffs, he has to make trade-offs between various public
values, e.g., affordability versus sustainability. The question is whether this kind
of increase of the discretionary room would fit the Dutch current institutional
make-up. Those in favour of such a revision (e.g., Algemene Rekenkamer 2006)
would argue that a less profound divide between politics and the technical
domain can be very fruitful for the realisation of public values that would other-
wise tend to be disregarded. But opponents to this revision would argue that an
increase of the regulator’s discretionary room in the Dutch system, is not politi-
cally legitimate where political decisions are concerned; after all, political deci-
sions should be made by bodies that are democratically legimitized.
1b     Hiving off competition tasks to a competition authority and making
       sectoral regulators responsible for infrastructure issues
A second response would be to modify the competition and market efficiency
focus of the existing model and place the new types of public interest concerns
at the centre of the regulator’s task. The regulator’s statutory duties would need
to be overhauled to reflect the new, more socially oriented mandate, and politi-
cal priorities might need to be clarified in the case of conflicts between broad
objectives. The task of promoting competition could be hived off to the compe-
tition authorities. This approach could also imply that regulatory agencies are
introduced into infrastructures where they are not as yet operating. Recent
pleas for independent regulation in the drinking water sector (Van Damme
2006; seor-ecri 2007a) and in the transport sector (Raad voor Verkeer en
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<pre>    infr ast ruc t ures
                        Waterstaat 2007) show that this issue is currently also being debated in the
                        Dutch context.
                        Pros and cons of the reformulation of regulator y duties
                        This approach could potentially reflect the new public interest concerns more
                        clearly and could provide greater guidance in cases involving conflicts between
                        various public interest goals. But hiving off any pro competition responsibilities
                        would remove an important procedural and analytical discipline and possibly
                        overburden the competition authorities with relatively trivial complaints about
                        the quality of services. Though this solution addresses the changing constellation
                        of the actors (multiple and hybrid actors), it does not address the issue of multiple
                        levels (see chapters 3 and 4).
                        5.4.2      bringing the state back in
                        The arguments used for ‘bringing the state back in’ refer to the issue of the realisa-
                        tion of public values involving choices that are essentially political in nature.
                        ‘Bringing the state back in’ could take a variety of forms, from greater use of minis-
                        terial directives, to using state shares to more actively monitor and safeguard public
136                     values (for a more elaborate discussion of this topic, see chapter 7), or to reintroduce
                        the responsibilities of the regulator back into various departments of the central
                        government and within the general duties of government itself.
                        Pros and cons of bringing the state back in
                        The persuasive argument that can be made in favour of independent regulation
                        conflicts with any attempt ‘to bring the government back in’ into the general
                        operations of infrastructures. No one truly desires a return to various ministerial
                        stop-gap measures and unclear departmental interference. Chapters 1 and 2
                        discussed the investment in dikes and sewerage (infrastructures where regime
                        change has been limited and where the state still plays a major role) and it
                        revealed that state involvement in operations is by no means a guarantee for
                        sufficient levels of investment. The sewerage sector is especially known for its
                        lack of investment in the past decades. Since the 1980s, efforts have been made to
                        counter this lack of investment (rioned), but the shortage of investment is
                        currently mainly due to increased quality standards and rapid deterioration and is
                        estimated at € 2.9 billion (Gerritsen and Sterks 2004). Moreover, this option is
                        not a solution for problems involving internationalisation (chapter 4), especially
                        the tension that exists between the function and governance of infrastructures.
                        The examples above refer to the direct involvement of the state in operations and
                        the Council does not favour this solution for reasons previously stated. But there
                        is another way in which the state can be included in the infrastructures, namely
                        through its capacity for introducing various actors within the infrastructures
                        (chapter 3) and by designing institutional arrangements that provide checks and
                        balances, most notably for balancing the short-term and long-term interests but
                        also with regard to the generation of expertise and vision in the long term.
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<pre>                                                           regime change and public values in infrastructures
5.4.3 t wo options combined
      Although the Council recognises that the two approaches for reviewing the inde-
      pendent regulator (add responsibilities or hive off competition issues to a sepa-
      rate regulator and introduce sector-specific regulation for a broad trade-off of
      public values) can improve the realisation of public values in infrastructures, the
      Council is aware that this solution in itself will be insufficient for the realisation
      of public values other than static efficiency. The causes for this imperfection were
      provided in chapter 2: institutional arrangements in infrastructures will always
      have to deal with strategic behaviour, both by the regulator and the regulated
      (Ten Heuvelhof 2008), contracts will always be incomplete (Van Dijk 2008), and
      information asymmetry will always exist (Van Dijk 2008). These characteristics
      can never be ruled out. Their impact on public values, however, can be mitigated
      by two measures. First, redundancy, i.e., designing a web or network of various
      mechanisms to realise or negotiate public values instead of relying on one single
      mechanism to realise a particular public value, has proven to be a viable solution
      (De Bruijn, Van Eeten and Ten Heuvelhof 2006). Secondly, more attention can be
      devoted to the long-term values requiring dynamic safeguarding mechanisms. In
      recent years, there has been an emphasis on the mechanisms of laws, contracts
      and competition. Less attention has been devoted to institutional competition                           137
      and the internalisation of values. It is precisely the latter category of mechanisms
      that can help achieve those public values that are hard to quantify. In this ‘softer’
      category, one could consider measures such as corporate governance (Hancher,
      Dicke and Jorritsma 2008), quality of the board’s members (Stout 2007) and the
      strategic use of the ownership of shares in infrastructure companies (Kenniscen-
      trum voor ordeningsvraagstukken 2006). Both redundancy and the need for
      dynamic mechanisms result in a plea for broadening the repertoire of mecha-
      nisms to realise those public values that cannot be realised (directly or indirectly)
      by focussing on static efficiency.
      Bringing the state back in is another viable option, but not in the sense that the
      state should necessarily own the infrastructures or that the state should be
      involved in its daily operation. There is, however, a major task for the state with
      regard to facilitating horizontal coordination of the multiple and heterogeneous
      actors (chapter 3) acting on multiple levels (chapter 4) in order to generate a
      coherent vision of the future of infrastructures. And there is an important task
      for the state in designing an institutional arrangement that provides checks and
      balances. In this sense, ‘bringing the state back in’ is not isolated from the option
      of independent regulation. In the two approaches for reviewing independent
      regulation (add-on responsibilities or hive off the competition elements), it is
      also suggested that the state be brought in again. Chapter 7 will discuss the mix of
      tools that can help improve the quality of independent regulation by bringing the
      state back in.
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<pre>    infr ast ruc t ures
                 5.5    conclusion
                        Public values are intrinsically relative and always require a trade-off. In the initial
                        stages of regime change, institutional arrangements have been developed that
                        favour the short-term efficiency goals over long-term public values. This does
                        not necessarily mean that there is an actual public value failure (Bozeman 2007);
                        but this chapter has identified considerable risks regarding the achievement of
                        public values other than static efficiencies, especially with regard to those infra-
                        structures in which a system innovation is required as a result of climate change
                        and the depletion of fossil fuel resources in the coming decades.
                        Although there is no easy institutional solution to the problems engendered by
                        the initial stage of regime change, the need for review is clear. Issues of invest-
                        ment, innovation and sustainability need to be as much part of the incentive
                        structure of the infrastructure organisation, as short-term efficiency.
                        This chapter presented two options that placed long-term values centre stage:
                        introducing and/or enhancing independent regulation or ‘bringing the state back
                        in’. The Council advocates a reform of independent regulation, in a way so that
138                     incentives also include dynamic long-term values. In the process of that reform,
                        the state can and should be brought back in. This shift does not refer to the opera-
                        tional processes but to the role of the state in organising horizontal coordination
                        and designing an institutional framework with strong checks and balances, start-
                        ing with the balance between the public values that are related to (short-term
                        static) efficiency issues and those public values that require a long-term, dynamic
                        perspective, most notably sustainability and innovation.
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<pre>                                                                                         notes
notes
1   Bozeman also distinguishes ‘individual public values’: the content-specific pref-
    erences of individual concerning, on the one hand, the rights, obligations and
    benefits to which citizens are entitled, and, on the other hand, the obligations
    expected of citizens and their designated representatives (Bozeman 2007: 14), but
    that is not the subject of this chapter.
2   The 2000 wrr report Het borgen van publiek belang made no distinction
    between values and interests since the focus was different. In that report, the
    distinction between values that did or did not require government intervention
    was central (the ‘how’ question). Public values as employed in this Report is a
    sub-category of the societal interests in this earlier publication.
3   Others (Teulings, Bovenberg and Van Dalen 2003) have argued that this descrip-
    tive approach should be replaced with a more normative approach.
4   In both reports, public interests are those (societal) interests that require inter-
    vention by the government in order to be realised. This Report employs a differ-
    ent definition, as will be explained in section 5.3.
5   Available at: http://www.nidi.knaw.nl/en/output/2003/kov-report-
    03me18.pdf/kov-report-03me18.pdf.                                                          139
6   ‘The accident is bound to renew questions about rail safety as a public inquiry
    hears details of the Southall collision 26 dead in West London train crash’, on
    Guardian Unlimited, 5 October 1999, available at:
    http://www.guardian.co.uk/traincrash/Story/0,2763,201548,00.html. See
    also: ‘Veiligheid van Britse Spoorwegen staat ter discussie’, Het Financieele
    Dagblad, 6 October 1999.
7   This table is based on mission statements, competences and official documents
    from the various regulators’ websites. The researchers’ description of the
    economic regulators’ statutory duties was later checked and refined by the three
    regulators.
8   Weblog Jan Marijnissen 2007, available at:
    http://www.janmarijnissen.nl/2006/10/10/de-kosten-van-drinkwater.
9   opta, e.g., in Het Financieele Dagblad, ‘Fusie van toezichthouders nodig’,
    21 January 2008.
10  See: www.consumentenbond.nl/actueel/nieuws/nieuws2007/consumen-
    ten_drinkwater.
11  fnv wil hoorzitting over marktwerking, 23 maart 2007, available at:
    http://www.fnv.nl/defnv/actueel/nieuws/marktwerkingeuropa.asp.
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<pre>    infr ast ruc t ures
140
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<pre>                                                    regime change and investment in energy infrastructure
6   regime change and investment in energy
    infr astructure
6.1 introduction
    This case study will apply the analysis developed in the previous chapters, to
    examine how investment decisions in infrastructures in the Dutch electricity and
    gas sectors have been affected by regime change thus far, and consider the likely
    impact of new exogenous factors on energy infrastructure development. The aim
    is to highlight the issues in one particular sector in which the process of regime
    change is relatively advanced.
    Two sets of European directives were aimed at creating an internal market for
    electricity and gas within the European Union. Investments in infrastructures at
    the national level were not dealt with at all in these measures and in particular,
    the regulation of interconnectors between Member States or with third countries
    was left essentially to national policy and regulation. The latest package of
    proposals submitted by the ec Commission in September 2007 will, if finally
    adopted, expand the scope of European regulation considerably. Indeed the ambi-                       141
    tion is to secure the operation of the major electricity and gas networks as an
    integrated whole – as a true European gas and electricity grid network. Although
    ownership and financing of investments will remain a national matter, most
    other operational aspects will be coordinated at the European level through a
    combination of instruments. These include the creation of a new European
    Agency, the Agency for the Cooperation of Energy Regulators (acer), which is
    comprised of representatives from the 27 national regulators in the eu. Moreover,
    the national tsos (Transmission System Operators) is necessary to coordinate
    their operations via two European-wide bodies.
    Dutch energy market liberalisation essentially mirrors the experience of other
    Member States, but in some aspects it went further than the eu rules. Today,
    multiple national and foreign firms are involved in the production, transport,
    distribution and supply of energy to end users who, since 2004, have had the
    freedom of choice to select their own electricity and/or gas supplier. The diver-
    gent interests of these different actors have led to contested public values, which
    are pursued on multiple national, eu-wide and regional levels. Market integration
    and corporatisation have resulted in increased trade within and between the
    Member States,1 raising the pressure to further develop existing networks, cross-
    border interconnector capacity and other facilities. Finally, institutional integra-
    tion seems to be turning the transfer of some key competences to the European
    level into an imminent reality. Yet, there is an ongoing debate on which compe-
    tences will survive within the national system and what will be shifted to Brus-
    sels. As explained below, regulatory or institutional integration is necessary not
    only to underpin the functioning of the market, but also to guarantee technical
    operations and physical integration. Moreover, in achieving security over one’s
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<pre>    infr ast ruc t ures
                        energy supply and meeting the challenges of climate change, the current regula-
                        tions have their limits, and this is specifically acknowledged in the European
                        Commission’s third package.
                        We will demonstrate in the following sections that, in the current context, the
                        liberalisation of the energy market, in combination with ownership unbundling
                        and shifts in public/private ownership relations – altogether constituting the
                        notion of regime change – has turned long-term investment in the electricity
                        and gas sectors into a series of splintered transactions. The investment climate is
                        characterised by some degree of uncertainty and distrust due, at least in part, to
                        a regulatory regime that does not clearly allocate risks and rewards among the
                        actors. Moreover, it is plagued by conceptual, practical as well as political
                        conflicts between the firms in the industry and the consumer, or the ‘agents’,
                        and the multiple national and European authorities, as the ‘principals’. Finally,
                        there is a notable absence of a coherent long-term vision on infrastructural
                        development among these several actors: many large scale infrastructure
                        investment decisions can only be treated as exceptions to the current regulatory
                        regime and are dealt with on the basis of ad hoc solutions, or exemptions to
                        the main regime.
142
                        In the final section of this case study, we will explain why this could lead to
                        longer-term risks given the challenges posed by climate change and the rising
                        external dependency on gas in particular. There is currently no apparent evidence
                        of under-investment in the Dutch sector in terms of meeting the short-term
                        objectives, including safety or reliability of supply (see Van Dijk 2008).
                        Although, both in the electricity and the gas sector, there are situations in which
                        either higher gas or electricity prices or the inability to connect facilities to the
                        grid may point out difficulties in the timely extension and expansion of the
                        capacity of the various systems. However, it is precisely because of their long lead
                        times and the fact that current investments have a long-lasting impact on future
                        patterns of energy supply and demand, that we consider the challenges to elec-
                        tricity and gas infrastructures as pressing. We will briefly outline these chal-
                        lenges in the next section, before turning to examine the process and impact of
                        regime change in more detail.
                 6.2    energy infr astructure and public values
                        A trinity of public values constitute the established foundation for the future
                        development of the sector: reliability, sustainability and efficiency (‘betrouwbaar,
                        schoon en betaalbaar’). Given the developments in the energy sector over the last
                        ten years or so, any longer-term energy policy perspective must deliver these
                        three objectives simultaneously. Indeed, the challenges are closely interrelated.
                        Reliability of energy supply, quantified in terms of the costs of supply failures,
                        has a clear impact on the economics of energy supply. A failure to realise sustain-
                        ability has incurred obvious external costs to society. The disregard for reliability
                        issues will ultimately reduce the options available for achieving a sustainable
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<pre>                                                      regime change and investment in energy infrastructure
      energy system at acceptable costs. An uneven development of environmental
      sustainability will jeopardise the reliability of energy supply options.
      Energy infrastructure plays a fundamental role in meeting these three objectives.
      It will determine the nature of energy supply and demand, in terms of primary
      and secondary energy carriers, the degree of resource diversity and the flexibility
      of the energy system in the shorter as well as the longer term. As a consequence,
      choices with respect to the infrastructure directly influence the public values
      associated with the reliability, sustainability and efficiency of an energy system.
      Van der Woud’s contention (2006: 17) that infrastructures determine spatial,
      economic and social development remains valid, particularly in a period of transi-
      tion.
      Infrastructure policy should thus embody many elements of the timing and coor-
      dination required to achieve the evolution towards a sustainable energy system.
      Indeed, it is by developing, constructing and operating these infrastructures in a
      specific manner that this transition process can be guided and stimulated, or even
      obstructed. Path dependency is an important factor. The long-term, sunk nature
      of infrastructure investments has a lasting societal impact; a lock-in effect. This
      can have a positive outcome, if the choices head in the right direction, but path                     143
      dependency can also block positive developments over the longer term.
      That energy policy is not just a production-consumption issue, with a neutral role
      for networks, is something that many policy-makers tend to ignore. In the fol-
      lowing sections, the evolution of the Dutch perspective on energy infrastructure
      governance and its influence on the coordination of infrastructure development,
      and its impact on public values are examined. It is necessary, however, to first
      provide a brief account of the nature of regime change in the Dutch energy sector,
      highlighting the aspects addressed in the previous chapters: multi-level processes
      of coordination, within a multi-actor context with contested public values, caus-
      ing splintered transactions in an environment characterised by uncertainty,
      rivalry and distrust.
6.3   regime change in the dutch energy sector
6.3.1 the past
      Traditionally, the Dutch electricity and gas sectors have been characterised by a
      highly integrated and centrally coordinated structure in which the industry
      enjoyed the exclusive rights to supply their ‘captive customers’ and to import and
      export electricity and gas. In exchange for this exclusivity, these companies were
      entrusted with various public service obligations and duties – to ensure a secure
      and reliable supply at acceptable costs to the various categories of users and to
      guarantee power connections and supplies to consumers on demand. Natural gas
      was supplied when a connection was economically ‘justified’. Whereas public
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<pre>      infr ast ruc t ures
                    Figure 6.1   The sectoral and horizontal regulatory regimes and business and consumer
                                 stakeholders
                                                         Government and Parliament
                                                                     ▼
                                                                sectoral
                                                            governance regime
                                   ▼                                                                    ▼
                             other ministries                                                      horizontal
                                                   ▼                                 ▼
                              (environment)                                                     regulatory regime
                                                                     ▼
                       Other Governance Agencies             Core Regulatory              Regulatory Agencies
                       • National, eu and Local                  Agency                   • NMa
                       • Environment departments               (NMa/dte)
144
                                                                     ▼
                                                          Regulated Companies
                                                   ▼          • Incumbents         ▼
                                                             • New Entrants
                                                             • Multinationals
                                                                     ▼                  ▼
                                                   ▼         Consumer-Citizens
                                                    • Average individual consumer-citizens
                                                • Poor, vulnerable dependent consumer-citizen
                                                         • Sceptic/compliant consumer
                                                            • Business as consumer
                    Adapted from Wilks and Doern (2007)
                            ownership by municipalities and provinces was the rule in the electricity sector,
                            ownership of the gas sector was a more complex interdependency of public and
                            private actors in the so-called ‘Gasgebouw’ structure that was established follow-
                            ing the discovery of the Groningen gas field in the 1950s (Correljé, Van der Linde
                            and Westerwoudt 2003).2 Tariffs for electricity supplied to industrial and domes-
                            tic consumers were based on a type of return regulation rate (see also Van Dijk
                            2008), while gas was supplied at prices reflecting the equivalent costs of the use
                            of oil products. Prices were subject to a limited degree of ministerial control. The
                            electricity and gas companies were able to pass on the costs of new investments
                            directly to their customers, who had no alternative but to accept the tariffs.
                            Furthermore, these tariffs were ‘bundled’ – a consumer paid a combined tariff for
                            transportation and distribution as well as the fuel component.
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<pre>                                                     regime change and investment in energy infrastructure
6.3.2 regime change: new primary actor s , new interest groups
      Over the past 20 years, the electricity and gas sector in Europe has been subjected
      to a continuous process of regime change. Initially, in the Netherlands, this
      process was aimed at rationalising the industry, by merging and combining the
      large number of local, municipal utilities into larger regional entities. But since
      the mid-1990s, following the Derde Energienota in 1996, policy became geared
      towards a liberalisation of the energy market, driven by the European Electricity
      and Gas Directives. The Dutch approach also foresaw a partial privatisation of the
      industry. The Electricity Act (1998) and Gas Act (2000) and later amendments
      formalised a thorough restructuring of the sector and introduced formal freedom
      of choice for all consumers by July 2004.
      The main consequences of this restructuring were that the operation of the
      national as well as the regional networks was separated from the production and
      supply companies in both the electricity and the gas sector. National electricity
      and gas transmission functions became the responsibility of two Transmission
      System Operators (tsos), respectively, TenneT 3 and Gas Transport Services
      (gts)4. TenneT was acquired from the electricity production companies. The
      traditional GasUnie was split up into Gasterra, continuing its gas trading activi-                   145
      ties as a joint venture of Shell, ExxonMobil and the Dutch state, while gts and
      some other assets were assembled in a new GasUnie. The ownership of TenneT
      and the new GasUnie was transferred to the Ministry of Finance. This restructur-
      ing has had important consequences as will be shown below in an account of the
      investments in the gas network.
      There are currently 16 publicly owned regional distribution system operators
      (dsos), distributing gas and electricity to the consumers. Gas and electricity
      production and wholesale supply as well as the retail electricity and gas supply
      has been opened up to private and public firms alike. Over the last ten years a
      continuous process of market consolidation has taken place, resulting in a signifi-
      cant concentration of the incumbent players in the electricity and gas retail
      sectors. At the same time, a considerable number of new, smaller entrants have
      become active in electricity and gas trading and the supply of both the large and
      other consumers. They buy their gas and electricity from a variety of sources, in
      the Netherlands and abroad.
      Municipalities and provinces are in principle free to privatise their supply firms,
      however, that means that the network companies are to be split-off completely,
      while they must remain in public hands, as required by the Wet Onafhankelijk
      Netbeheerder (Act on Independent Network Management 2007). Finally,
      consumer organisations began to appear as important actors in the market, as is
      illustrated in the following Table 6.1.
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<pre>    infr ast ruc t ures
                  Table 6.1        Interest representation of actors in Dutch energy sector
                    Actor                       Interest associations        Interest associations       Interest associations
                                                they participate in at       they participate in at      they participate in at
                                                National level               European level              International level
                    dte (regulatory                                          - Council of European
                    authority)                                                 Energy Regulators (ceer)
                                                                             - European Regulators’
                                                                               Group for Electricity and
                                                                               Gas (ergeg)
                                                                             - The Forum of Florence
                                                                               (electricity)
                                                                             - The Forum of Madrid
                                                                               (gas)
                    Infrastructure:  TenneT        Vereniging van            - European Transmission     Union for the Coordina-
                    Transmission                   Energienetbeheerders        System Operators (etso) tion of Transmission of
                    System                         in Nederland (enbin)                                  Electricity (ucte)
                    Operator
                    (tso) lng        GasUnie/ Vereniging van                 - Gas Infrastructure Europe
                    terminals,       Gas           Energienetbeheerders        (gie)
                                     Transport
                    Gas storage      Services      in Nederland (enbin)      - International Gas Union
                                     B.V. (gts)                                (igu)
146
                    Exchanges                                                easee
                    apx Power NL
                    apx Gas NL
                    endex
                    Traders                     - Dutch Traders Association - European Federation of
                                                  ‘Vrijhandels Organisatie     Energy Traders (efet)
                                                  voor Elektriciteit en Gas’ - Eurelectric
                                                  (voeg)
                                                - EnergieNed
                                                - Ephrin (producers who
                                                  supply households and
                                                  small businesses)
                    (Gas) producers and         - Nederlandse Olie en Gas    - International Association - International Gas Union
                    wholesalers                   Exploitatie en Productie     of Oil & Gas Producers      (igu)
                                                  Associatie (nogepa)          (ogp)                     - Eurogas
                                                - EnergieNed/Ephrin
                    Large consumers             - Vereniging Energie- en     - The International Federa-
                                                  Watergebruikers (vemw)       tion of Industrial Energy
                                                - EnergieNed                   Traders (ifiec)
                                                                             - Eurelectric, cefic en
                                                                               Business Europe
                 6.3.3      regime change: polic y, public values and supervision
                            Government
                            Regime change also introduced important changes in the governance of the sector,
                            which now falls under the authority of three ministries. The Ministry of Economic
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<pre>                                                  regime change and investment in energy infrastructure
Affairs has general policy responsibility for Dutch energy supply, including con-
sumer and competition issues. Within it, the Department of Energy merged with
the Department of Energy and Telecom, reflecting a more pronounced market.
Every four years, the Minister issues the Energierapport, setting the priorities for
the next period. Moreover, the Ministry is in charge of collecting state revenues
from gas production; the ‘gasbaten’.5 The Ministry of Housing, Spatial Planning
and Environment (vrom) has the responsibility for environmental and spatial
planning issues involved in the operation of the energy sector. The Ministry of
Finance now holds the shares in both national network companies, TenneT and
GasUnie, and requires a ‘normal’ commercial dividend on its shareholding in both
networks. A fourth department that has been gaining influence in energy policy is
the Ministry of Foreign Affairs. It is especially involved in the broader field of the
European energy policy, dealing with substantial energy related issues and the link
with climate change policy and the increasingly important function of developing
energy relations with third countries, external to the eu.
The Dutch government and Parliament are advised by the Energy Council, the
aer, an independent advisory body founded in 1976. The aer consists of ten
members, appointed on a personal title, not representing any organisation from
from sector-related social groups. The Council addresses a variety of energy-                           147
related issues, providing advice on issues requested by the government or chosen
by the Council itself.
The Office of Energy Regulation
The 1998 Act created an electricity regulator, dte, which subsequently also
assumed responsibility for the regulation of the gas sector under the direction of
the Minister of Economic Affairs. In July 2005, the dte became a ‘chamber’ of the
Dutch Competition Authority (the nma). With regard to the enforcement of the
Electricity Act 1998 and the Gas Act 2000, in addition to various advisory and
monitoring tasks, the dte was specifically charged with, inter alia, the following
duties: 6
– Determining the tariff structures and conditions for the transmission of elec-
   tricity;
– Determining guidelines for tariffs and conditions with regard to access to gas
   transmission pipelines and gas storage installations and, if necessary, to issue
   binding instructions;
– Agreeing to the connection, transmission and supply of tariffs for electricity,
   including the discount factor (price cap) aimed at promoting the efficient oper-
   ation of the electricity grid operators;
– Agreeing to the transmission and supply tariffs for gas, including the discount
   (price cap) aimed at promoting the efficient operation of the gas network oper-
   ators;
A number of public service obligations or public values in relation to electricity
and gas supply have been provided in the Electricity Act and the Gas Act. TenneT
and gts and the regional networks have the responsibility to operate, maintain
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<pre>    infr ast ruc t ures
                        and develop their installations in an efficient, safe, reliable and environmentally
                        friendly manner. TenneT and gts have the statutory duties to provide a certain
                        degree of security of supply and transportation, explicitly referring to the protec-
                        tion of domestic customers in the event of a default by suppliers or a failure of
                        production and transmission capacity. 7
                        Production companies are no longer subjected to public service obligations, but
                        the dte is now primarily responsible for ex post monitoring of compliance with
                        the conditions of the supply licences, which all energy companies that supply
                        directly to small consumers must obtain in advance.8
                        Regime change has deliberately induced the unbundling of potentially competi-
                        tive production, trading and supply activities from infrastructure management.
                        Moreover, as regards the several competitive activities, a host of new firms have
                        entered the market. Finally, the disaggregation of the energy sector and the
                        pattern of governance resulting from regime change have stimulated the emer-
                        gence of numerous new and diverse secondary organisations. These organisa-
                        tions provide input into the ongoing societal debates on the restructuring of
                        the electricity and the gas industry, the environmental challenge, consumer and
148                     business interests, energy supply security, etcetera. In part, they are driven by
                        their alignment with specific primary actors (generators, traders etcetera) and in
                        part by their technical expertise and/or broader societal conviction.
                 6.3.4  regime change: new markets and new tr ansactions
                        Following regime change, most electricity and gas is still traded in bilateral
                        markets, via contracts between, on the one hand, Dutch and foreign power gener-
                        ators and Gasterra and some foreign gas producers and, on the other hand, retail
                        supply companies, large consumers and traders. However, electricity and gas is
                        currently being traded by a variety of Dutch and foreign parties on an ad hoc
                        basis, although in much smaller volumes.9
                        It was obvious that various additional instruments were required to enable the
                        tsos to balance the supply and demand of electricity and natural gas within their
                        systems. Given the need to maintain a rather strict balance, it is necessary to
                        compel users of the transport system to carefully balance their transactions.
                        Eventually, however, it is the task of the tso to maintain the technical balance of
                        the network and the latter provides specific balancing services, including quality
                        conversion services for gas.10 This induced gradual growth and a refinement of
                        the steering instruments employed by the tsos.
                        Over the longer term, increased traffic on certain parts of the national transport
                        system may lead to congestion, while new suppliers and customers may want to
                        connect to the systems at specific points, like the Maasvlakte or Delfzijl. If expan-
                        sion can be economically justified, the tso should invest in expanding network
                        capacity, to meet the demand for the transport of gas 11 or electricity 12.
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<pre>                                                 regime change and investment in energy infrastructure
Prior to liberalisation, the demands for balance were satisfied by a recurrent mix
of bottom-up and top-down planning practices. A central generating board (sep)
and GasUnie, coordinated the sales of the electricity and gas distribution compa-
nies, the transport capacities required on the (inter)national electricity and gas
networks, and the production of electricity and natural gas. Policy making, nego-
tiation and planning determined the financial flows throughout the system,
remunerating the parties for their investments and allocating the rents between
the public and private entities involved.
As a consequence of regime change, however, this coordination process has been
replaced by a set of transactions which, in principle, should reflect an efficient,
scarcity-driven, market-based process. In other words, efficiently established
‘market’ values for the commodities exchanged between the parties and the asso-
ciated needs for transport, conversion and storage should become the determi-
nants for actors’ behaviour in terms of engaging in commercial transactions or
investing in production and handling capacities. As far as possible, these values,
or prices, should be set in real, liquid, wholesale and retail electricity and gas
markets in which as many buyers and sellers interact as possible.
However, as was shown in chapter 2, the natural monopoly characteristics of                            149
many of the infrastructures imply that many of the transactions take place
outside a competitive market context and require supervision and regulation, to
ensure that the monopolist operators ‘post’ the right price, or tariff, for their
transport, balancing or other services, while providing these at an acceptable
quality. These tariffs also have to be right, in the sense that they stimulate parties
to make efficient choices in obtaining services and commodities. At the same
time, however, the tariffs for such services have to be right, in the sense that the
investors, either the tsos or other parties, receive acceptable remuneration, invit-
ing and allowing them to invest in the right capacities of the right infrastructure
components.
A common assumption is that these tariffs have to be ‘cost based’. But how
should these costs be determined? Indeed, by imitating the competitive selection
and optimisation process in ‘real’ markets, the regulated or controlled tariff (or
price) for a specific transaction must strike a balance between the values attached
to it by the seller or investor and by the buyer; otherwise the transaction or
investment will not materialise. The various actors, obviously, assess these
values regarding the anticipated costs and revenues associated with a transaction
and their perception of the profits vis-à-vis the risk involved.
Large conceptual and practical problems arise precisely in the regulatory practice
of establishing (or accepting) these tariffs for a number of reasons, such as:
– Difficulties with the establishment of capacities, quality and reliability in an
   unambiguous manner (see, for example Pinon and Cuijpers 2006);
– Difficulties with the establishment of values and (marginal) costs, particularly
   over the long run (see Shuttleworth 2008);
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<pre>    infr ast ruc t ures
                        – The impact on valuation of the need for coordination of complementary and
                           dependent transactions, which is caused by the physical and site specificity of
                           dedicated assets (Williamson 1983);13
                        – The presence of substitutes and the competition for services, like transport or
                           storage, and the choe between regulated tariffs or market valuation
                           (Brunekreeft 2005);
                        – The impact on the valuation of uncertainty and the dependency on external
                           developments, like such as shifts in oil prices, environmental policy and tech-
                           nology development.
                        In addition – and partly as a consequence of these conceptual problems – all kinds
                        of practical and unanticipated problems may arise, including principal-agent
                        issues and business practices that invalidate earlier insights. Examples include:
                        – Strategic The strategic behaviour of owners, operators, customers, regulators
                           and policy-makers;
                        – The struggle between the haves and the have-nots, with respect to access to
                           specific facilities;
                        – Technological risk, such as the failure of technologies, or the emergence of new
                           ones;
150                     – The emergence of new substitutes for services, assets and commodities;
                        – Changes in all kinds ofvarious secondary rules on safety, the environment,
                           spatial planning;
                        – Regulatory risk and the experimentation with different regulatory approaches
                           in regulation.
                        As a consequence, the development and operation of new markets or service
                        arrangements is by definition conceptually problematic and controversial. Obvi-
                        ously, new possibilities, authentic values and genuine objectives are ‘discovered’
                        in the process of regime change. Indeed, this is one of its main goals! However,
                        emerging values, principles and practices are easily contested and disagreements
                        can be – and are – strategically used by the various parties involved (and the
                        concerned organisations) to defend their interests and objectives. This causes
                        rivalry and distrust among the primary actors (i.e., the firms in the industry),
                        the public entities (i.e., the ministries, the regulator and the tsos) and the wide
                        broad range of secondary actors (e.g., research institutes and consultants) that
                        have emerged in the ‘new’ energy market, as is shown above.
                        Following their adoption, the Electricity and Gas Acts have been amended on
                        numerous occasions, leading to a dense mass of supplementary legislation. The
                        controversial process of energy sector liberalisation has politicised the actors so
                        that public values have become contested (see chapter 5). The various actors have
                        attempted to influence the process of restructuring via a variety of mechanisms,
                        from interest group meetings, platforms and working groups, public hearings,
                        parliamentary action, court cases, lobbying activities, applied academic work and
                        consultancy studies, etcetera. Consecutive governments have considered it
                        necessary to ‘repair’ the consequences of the process of restructuring, creating a
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<pre>                                                       regime change and investment in energy infrastructure
      dense and complex set of regulations for the network operators and the industry
      (see chapter 2). This has further aggravated uncertainty, distrust and strategic
      behaviour among the participants (De Jong et al. 2005).
6.4   the regul atory regime in the energy sector:
      static efficiencies and unforeseen consequences
      The regulatory and commercial framework has continued to evolve in a piece-
      meal fashion amidst controversy. It is by no means been finalised (Correljé 2005).
      Compared to access and tariff modelling regulation, the regulatory framework for
      the governance of network investments is much less developed, as will be shown
      below (Shuttleworth 2008). These transactions are being dealt with in an ad hoc
      manner, under a considerable degree of uncertainty and regulatory reservation.
      Moreover, it is in these infrastructure-related transactions that the problem of
      applying short-term economic efficiency principles – the basis of the current
      regulatory approach – emerges to its fullest extent. It is a vacuum of realistic rules
      and stable signposts for longer-term investment that is jeopardising the longer-
      term development of adequate infrastructural systems for an efficient, sustain-
      able and reliable energy supply.
                                                                                                             151
6.4.1 regul ation of tariffs and net work s investment
      As has been previously stated, the two state-owned transmission operators,
      TenneT and gts, are regulated national monopolies. The distribution system
      operators (dsos) are regulated public monopolies for their respective distribution
      areas. nma/dte’s Network Companies Unit is responsible for their ex ante regu-
      lation, including tariff modelling and method decisions, the drawing up of proto-
      cols for network operators (e.g., setting out technical conditions and regulatory
      rules for accounting) and the assessment of quality plans. It is also responsible for
      monitoring network operator compliance with regulation.
      Regulatory supervision is currently primarily directed at the system tariffs and
      quality issues, in relation to network access and the provision of ancillary and
      balancing services. The regional network companies are regulated via a yardstick
      system. By and large, this system determines a standard return, which should
      provide the network operators with a level of remuneration that allows them
      to cover their costs and to compensate the providers of equity and debt capital.
      In other words, there should be sufficient profit generated by the network
      operator to carry out the necessary investments to guarantee security of supply
      but without the consumer having to pay too much. dte also monitors network
      quality.
      dte has a more indirect influence over investment strategies regarding the national
      gas and electricity transmission systems, through its power to accept or reject the
      network operators’ proposals for the regulation of tariffs. The current regime dic-
      tates that transport tariffs for users should be based on historical costs – basically
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<pre>    infr ast ruc t ures
                        for energy, maintenance and replacement and information technology – and a rea-
                        sonable return on the capital invested in the network. The thus calculated level
                        of costs establishes the allowable revenues to the network operator. On this basis,
                        the user tariffs are set for a period of between three and five years. From period
                        to period, the tariffs are lowered by a percentage considered reasonable by the
                        regulator – the X factor.1 4 Given a specific transport volume, the overall revenues
                        should decline. However, given the objective of maintaining their profitability,
                        the operators are expected to enhance their operational efficiency. As explained
                        in chapter 1, this type of regulation is designed to reduce and redistribute the
                        monopoly, which is typical of ‘Type I’ market failures (see Van Dijk 2008).
                        gts and TenneT have a mandate to invest in network expansion, if that is deemed
                        necessary and economically justified. Investment decisions are the management’s
                        responsibility. However, the system of revenue regulation implies that these new
                        investments should be accepted by dte in the so-called Regulatory Asset Base
                        (rba); the basis for the allowable revenues and user tariffs. Any expansion of the
                        networks is evaluated by the dte, on the basis of its economically efficient contri-
                        bution to the supply of electricity or gas to the Dutch consumers.15 If the decision
                        is positive, the investment costs can be socialised in the tariffs. The tso’s board
152                     eventually checks the commercial justification of the investments, taking into
                        consideration the returns on investment levels set by the Ministry of Finance.
                        Although there is scope within the current method of energy network regulation
                        for the regulator to allow additional income to reward an ‘exceptional’ invest-
                        ment, this system is currently based on an ex post rather than an ex ante evalua-
                        tion by the regulator. This is a consequence of the logic of the Energy and Gas
                        Acts, which provide that the tariffs are based on a number of elements and that
                        these relate to costs and benefits in a particular regulatory period. Hence, the
                        costs for a large investment can only be taken into account if the benefits are also
                        apparent and the regulatory system creates uncertainty as to whether the
                        network operators (national and regional) will be allowed to claim a higher tariff
                        and recoup the necessary investment by socialising these costs.
                        There are ‘exceptional’ situations in which investors, including tsos and the
                        dsos, may opt for an exemption of their specific infrastructure investments from
                        dte tariff and access regulations. This essentially involves situations in which the
                        investors consider the regulatory regime not appropriate considering the risks
                        involved. Under certain conditions, shaped by the amount of risk involved and
                        the potential infringement of competition, the national regulator may allow
                        firms to engage in long-term contracts for the use of these facilities at unregu-
                        lated or negotiated tariffs. These new investments in infrastructures involve lng
                        and storage facilities, as well as cross-border interconnectors where more than
                        one regulatory regime is involved. The investment risk must be ‘ring-fenced’ and
                        the costs, as well as the eventual revenues, accrue to separate companies set up
                        for the purpose of developing the project. The exemptions granted by the regula-
                        tor need to eventually be approved by the European Commission.
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<pre>                                                       regime change and investment in energy infrastructure
      This particular regulatory and ownership pattern creates a complex principal-
      agent relationship between the tso, the regulator, the Ministry of Finance and
      the Ministry of Economic Affairs and the customers of the tsos, in which diverg-
      ing objectives, values and criteria for justification easily conflict, as will be shown
      below. Investment decisions are primarily based on financial-economic criteria.
      Even if broader societal objectives like security of supply are pursued, regulatory
      scrutiny and approval will reflect criteria that are primarily market based and
      oriented towards the short-term objective of securing lower tariffs for Dutch
      consumers.
6.5   future energy sector challenges
6.5.1 changing supply patterns
      Approximately 15 to 20% of the electricity consumed in the Netherlands today is
      imported. This situation is likely to be reversed in the future. Recent scenarios
      indicate that the country will continue to depend on electricity imports until
      circa 2011. But by 2014, the announced investments in coal-fired power genera-
      tion and the consequent surplus generation capacity will transform the country
      into a net exporter, particularly in Europe’s northwestern regional electricity                        153
      market. TenneT will have a key role in this regional market but it has to invest
      substantially in additional interconnection capacity in order to capitalise on this
      position (TenneT 2007a and b). Two new interconnectors that will address this
      goal have recently been agreed upon.16
      In the gas market, the Netherlands is a major gas exporter to other parts of
      Europe. Germany, Belgium, France, Italy and more recently the uk are some of its
      natural gas customers. Over the medium to longer term, however, this pattern
      will change because of the gradual decline in Dutch gas production, which will,
      in turn, lead to increasing external dependency. Declining output of high
      calorific (H) gas from off-shore fields is expected beginning in 2009. The subse-
      quent flexibility in the production of low calorific gas (L) from the large Gronin-
      gen field will also decline, despite the current large investments in compressors
      to maintain a sufficient peak production capacity. Eventually, the base-load
      capacity of the field will also be affected by this depletion. This implies that
      additional volumes of gas will have to be imported to supply the present L gas
      consumers, consisting mainly of domestic households and smaller commercial
      users.17 Moreover, gts is responsible for the adequate supply to foreign
      customers of Dutch gas in Germany, Belgium and France. In addition to the
      gradual increase in gas imports to satisfy the indigenous demand of Dutch
      consumers, increasing volumes of ‘foreign’ gas are being transported through the
      Dutch gas infrastructure to supply customers in other countries like the uk,
      Germany, Belgium and France.
      The consequences of these developments for the proposed gas supply infrastruc-
      ture are potentially far-reaching. First, a substantial increase in imports and the
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<pre>    infr ast ruc t ures
                        transit of H gas will require considerable investments in gas import pipelines and
                        lng terminals and in the expansion of the main cross-country transmission
                        network to accommodate these new gas flows. Moreover, to replace the current
                        flexible indigenous production of gas to allow for the seasonal pattern of gas use,
                        underground gas storage facilities must be constructed and connected to the
                        network. The main challenge in this respect is the step-by-step development of
                        the required facilities and the associated infrastructure in an environment where
                        gas is still produced and exported, while gradually making the transition to an
                        import-based system.
                 6.5.2  the challenge of climate change
                        Renewable energy, despite proclaimed government ambitions, currently supplies
                        only 2% of total energy for the Netherlands. To reach the government’s current
                        objectives of 20% renewable energy by 2020, significant steps need to be taken.
                        This implies major developments. But also the way renewable energy is used will
                        have to be altered radically. Most of the renewable energy is currently used to
                        generate electricity and some to produce steam and heat. Simple calculation
                        shows that it is almost impossible to achieve the 20% renewable energy goal in
154                     the electricity sector. Given the fact that current electricity use represents
                        approximately 30% of the Netherlands’ primary energy consumption, two-thirds
                        of the electricity production will have to be based on renewable resources! As
                        most of the existing power plants will not be dismantled before 2020, the renew-
                        able capacity will have to provide most of additional power demand. If the aver-
                        age growth rate of about 2.5% annually over the past decade continues, demand
                        will increase by circa 30% by 2020. Even if all of the new capacity were to be
                        based on renewable energy sources, and despite the current plans for investments
                        in coal-fired generation, the stated goal could never be reached. This has to do
                        with the fact that it is still quite difficult to accommodate large influxes of wind
                        and solar energy. Even the seemingly moderate objective of 20% renewable
                        energy by 2020 will require radical measures in the power industry, but also in
                        other end-user segments, like domestic and commercial space heating and hot
                        water supply vDe Vries et al. 2008). An important issue in this respect is the
                        future exploitation of the Dutch subsoil as a sink for co2.
                        Although these objectives may be ambitious, the policy and the instruments
                        proposed thus far appear weak, when it comes to the staying power of traditional
                        forms of energy supply. The prevailing focus on a reduction of direct supply costs
                        in electricity and gas production and distribution via the market mechanism as a
                        major instrument for coordination, more or less inevitably, paralyses a large-
                        scale development of renewable alternatives. These will remain niches and pilot
                        projects, as a consequence of economic, technical and institutional path-depend-
                        ency and lock-in effects. Even a gradual transition towards a more sustainable
                        future energy system is today in urgent need of a more complete vision, which is
                        based on instruments and approaches that are effective as guiding posts.
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<pre>                                                        regime change and investment in energy infrastructure
6.6   examples
6.6.1 the gas sector
      In response to the changing supply pattern (see paragraph 6.5.1 above), a substan-
      tial increase in imports and the transport of Hydrogen gas is foreseen, which, in
      turn, requires considerable investments in gas import pipelines and lng termi-
      nals and the transmission network. Moreover, to replace the current flexible
      indigenous production of gas, allowing for the seasonal pattern of gas use, under-
      ground gas storage facilities must be constructed to accommodate the physical
      and economic implications of long-distance gas supply. As current gas fields in
      Russia will go in decline in the near future, new gas will have to be produced
      further away from the eu market. Moreover, in order to optimise the use of
      highly expensive production and transmission, the capacity available must
      preferably be subject to a high degree of utilisation. As a consequence, the
      required supply flexibility will have to be ‘created’ near the end-user market.
      It is in the context of the future, which includes an enhanced import dependency
      on supply via long-distance pipelines and lng imports and the particular charac-
      teristics of the existing Dutch gas infrastructure that the strategy of the Dutch                       155
      ‘gas roundabout’ has emerged. This concept foresees the continued use of the
      existing Dutch infrastructure plus newly constructed lng facilities, storage facil-
      ities and transmission pipelines into the future (Ministry of Economic Affairs
      2006). This system, combined with a commercial infrastructure to trade and
      handle the gas flows, should allow the Netherlands to play a continued strategic
      role in the eu gas market, despite its gradually falling indigenous production.
      This ‘flexport’ approach should allow for greater security of supply in the North
      West European gas market, while continuing to create added value with Dutch
      assets (see Correljé 2006). The main challenge in this respect is the step-by-step
      development of the required facilities and the associated infrastructure in an
      environment where gas is still produced and exported, while gradually making
      the transition to an import-based system with the required flexibility. Neverthe-
      less, we conclude that the Netherlands seems hesitant to embrace a clear role, as
      part of this vision, in realising this ‘second life’ of the Dutch gas system.
6.6.2 conflicting polic y and regul atory objectives
      Examples of conflicting policy and regulatory objectives include the dte’s reluc-
      tance to set up a regulatory framework for interconnectors, entry and exit capac-
      ity at the borders, lng facilities and transmission and transit pipelines. The dte,
      in evaluating the infrastructure projects, looked primarily at the short-term tariff
      implications for Dutch consumers and did not consider the larger options and
      opportunities. This ignores the public interest involving a prolonged exploitation
      of the Dutch gas resources and longer-term security of supply, facilitated by a gas
      roundabout within the context of a Northwest European gas market.
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<pre>    infr ast ruc t ures
                        Expanding the gts network
                        Seen from the gas roundabout perspective, the ‘national’ role of gts as a local
                        Transmission System Operator should be extended towards a regional infrastruc-
                        tural facilitator in a broader market. The H gas network was to be expanded for a
                        number of reasons. These included, firstly, a decline in production in the smaller
                        Dutch fields, causing a rise in imports into the Netherlands and secondly, the
                        enhanced need for transport into and through the Netherlands gas system.
                        Indeed, the flows of gas through the gts system are expected to increase, follow-
                        ing the completion of the Balgzand Baction Line (bbl), new lng terminals and
                        possibly a new pipeline from Norway and the development of storage facilities.
                        To examine the additional need for transmission capacity, gts undertook an
                        ‘Open Season’ procedure, collecting a significant number of parties interested in
                        signing long-term capacity contracts. To secure the inclusion of the required
                        investment in the regulated tariffs as a significant and exceptional investment,
                        GasUnie asked dte to recognise the need for the project and to provide an ex ante
                        letter of comfort. In the course of 2006, gts presented three scenarios to dte,
                        involving, firstly, a ‘national’ scenario, with a € 470 million investment, neces-
                        sary to provide security of supply for Dutch consumers and meeting gts’ legal
                        duties. A second – ‘international’ – scenario with a € 1.75 billion investment,
156                     would meet all foreseeable transport needs in full, while a third scenario, at € 1.27
                        billion would also meet all demands, but with less emphasis on transit. Accord-
                        ing to the scenario, about 40 to 50% of the new capacity would be used for transit
                        (Gas Transport Services B.V. 2006).
                        In September 2006, dte declared that it could not legally provide such an ex ante
                        letter of comfort, because the project would not be activated in the same year as
                        the request. dte, however, provided an informal opinion, stating that it would
                        only accept part of gts’s investments and only accept a € 740 million investment
                        as sufficiently justified, at that stage. In consultation with the Central Planning
                        Bureau (cpb), dte was not convinced of the societal benefits of the proposed
                        scenarios and the cost estimates, while there was also uncertainty about actual
                        levels of usage of the transport capacity for transit. In the final event, the € 740
                        million compromise was justified on the grounds that it would solve most of the
                        immediate problems, while cost recovery was guaranteed on the basis of the
                        outcome of the Open Season procedure. So there would be no risk involved for
                        Dutch consumers. dte left open the option to eventually accept the full € 1.27
                        billion investment, if gts were to present a convincing case.18
                        gts argued that this compromise was unworkable for several reasons. First of all,
                        if additional investments had to be undertaken, above the minimum to meet its
                        statutory duties, it would be efficient to do it immediately. Secondly, the new
                        import capacity for domestic use and transit might be justified, as gts had been
                        able to sell the planned capacity by way of long-term contracts via the open
                        season procedure and there was no risk that capacity would go under-utilised.
                        Thirdly, the risk of losing potential foreign customers was significant, as gts
                        would not be able to guarantee these large users the transport capacity at the time
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<pre>                                                 regime change and investment in energy infrastructure
they would need it. An additional problem in this respect was that gts was not
allowed to offer them long-term contracts, at fixed tariffs. These aspects affected
the eagerness of these parties to invest or participate in the lng facilities and the
proposed storage facilities, the operation of which would be dependent on the
availability of transport capacity.19
In response, the GasUnie voiced its dissatisfaction with the Minister of Economic
Affairs. In March 2007, the Minister responded by saying she recognised the diffi-
culties as impediments to develop the gas roundabout to secure gas supplies over
the longer term. She announced that she would develop a new, expanded frame-
work for the regulation of gts, to facilitate the necessary future investments in
the network. This included the possibility to conclude long-term transport
contracts at fixed tariffs, which would underscore € 1.1 billion investments by
GasUnie, with the possibility of further expansion of the capacity if additional
gas were to be transported from Norway to the Netherlands. Moreover, it was
also decided that the Dutch tariffs would be raised if necessary, so that they
would not be lower than those of foreign alternatives. Moreover, an increase in
returns on investment was announced for new projects from a low of 5.5% pre-
taxes, to 7% with a payback period of 20 years.
                                                                                                       157
A new element that arose was that potential investment plans would have to be
evaluated by the dte in a quick test. If current tariffs were insufficient to cover
the investments, the Ministry of Economic Affairs would have to re-evaluate the
project via a broader Social Cost Benefit Analysis. These new rules must still be
added to the Gas Act and to the new tariff regulations. These principles would
have to be amended every five years, to adjust to contextual changes (see Tweede
Kamer 2006-2007, 29023, no. 37). As such, even a quick test of single projects,
may take too much time for the gts and will only tend to exacerbate controver-
sies regarding the details of the valuation procedures. Yet, it is possible that the
societal Costs and Revenues approach (Maatschappelijke Kosten and Baten
Analyse) could be turned into a continuous evaluation that takes advantage of the
progress among the broader insights regarding gas and energy market develop-
ments and the associated reduction of uncertainty. This, however, could provide
a framework for the establishment of a kind of continuous quasi-Long-Term
Marginal Cost assessment, to be included in the regulations if adapted and
adjusted.
This account highlights the divergence between the objectives of the regulator,
dte, the Ministry of Economic Affairs and the GasUnie. The first, operating in
the ‘Type I’ market failure context of a consumer-driven short-term economic
orientation, fighting tariff increases arising from the international transit of gas,
clashed with the larger objectives of the latter two. The ministry has set a goal for
the development of a new role for the Netherlands in the eu gas market over the
longer term. GasUnie is actively seeking to position itself as an international gas
transporter – as has been illustrated by the acquisition of beb in northern
Germany – and a facilitator of broader Dutch gas industry development. Its
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<pre>    infr ast ruc t ures
                        expansion into the northwestern European gas market is a clear example of func-
                        tional and territorial change in the gas system, which requires institutional
                        change. This is illustrated by the investments of GasUnie – not gts – in the Gate
                        lng re-gas facility along with Vopak and Essent, and in the acquisition of the
                        former beb gas network in the northern Germany. This, obviously, requires
                        another perspective on the regulation because of the increased interactions with
                        foreign customers and other infrastructure providers. Interestingly, the relation
                        with the latter incorporates both the need to achieve a high level of cooperation,
                        to facilitate the efficient movement of gas throughout the whole of the market, as
                        well as competition, as they will provide shippers with alternatives for their
                        transport demands.
                 6.6.3  underground stor age s ystems and tr ansport: where natur al
                        gas and carbon meet
                        Another illustrative case concerns the future development of the use of the
                        Dutch subsoil for the storage of natural gas and co2 and the associated need to
                        facilitate the construction of a transport infrastructure. Whereas the develop-
                        ment of underground gas storage (ugs) and co2 storage are, thus far, treated as
158                     separate issues in the policy and regulatory debate, this case will illustrate that
                        they are not. Decisions on the use of empty gas reservoirs, the development of
                        the associated infrastructures and the governance of these are strongly related.
                        This account shows the impact of the way in which struggles between different
                        ways of conceptualisation of particular facets, like substitutes, access, competi-
                        tion, legal ownership and control, etcetera, cause uncertainties and delays in
                        investments. It also shows how ‘new’ policy issues may become rather complex,
                        as they connect activities areas, actors and bodies of rules that, so far, have existed
                        in a relatively unconnected manner. Indeed, this often involves technical,
                        economic and institutional coordination. The establishment of a regime for the
                        conversion of (partly) depleted gas fields into underground gas storage facilities
                        and their operation becomes an extremely complicated matter, particularly if a
                        coherent vision is lacking.
                        The demand for natural gas varies over time. Demand is partly driven by factors
                        that shift over the shorter term, like economic and other activities, the time of the
                        day, week days and weekends, etcetera. In addition, however, there is seasonal
                        variation that emerges as a consequence of the fact that natural gas is used as a
                        fuel in space heating, in domestic households, public buildings and businesses,
                        including greenhouse horticulture. Gas supply systems have to respond to both
                        short-term shifts in demand, as well as to seasonal cycles. Seasonal flexibility can
                        be defined as ‘the prospects in the gas market for balancing the supply of gas and
                        the seasonal variations in demand’. Meeting seasonal gas demands requires that
                        relatively large amounts of gas be made available over the winter season, with a
                        specific daily and hourly supply capacity. Approximately 25% of the annual aver-
                        age consumption of gas should be stored during summertime and be made avail-
                        able during the winter season (Clingendael International Energy Programme
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<pre>                                                   regime change and investment in energy infrastructure
2006). Obviously, the temperature-related use of gas and the relatively long
duration of the heating season, reduce the opportunities for demand-side meas-
ures, with the exception of power producers that can choose between a number
of different (i.e., gas, coal, nuclear) units.
The flexible provision of short-term (i.e., peak) gas and seasonal gas requires the
construction of additional supply capacity, including the production of storage
facilities and transport capacity. So, in addition to the costs of gas supplies as a
commodity, there are the extra costs of the capacity investments. The question as
to how the capacity investments are made and by whom and the way in which
these extra costs are recouped from users are crucial issues in determining
whether a gas system will develop the capacity needed to provide the required
flexibility over the shorter and longer term. An additional argument to construct
– even more – underground storage is to provide security of supply in cases
involving up-stream supply problems (i.e., strategic storage).
The provision of seasonal flexibility close to the location of consumption is much
more efficient than providing it near the gas well, as it reduces the need for addi-
tional transportation capacity. It is difficult to control gas production at large dis-
tances and adjust it to shifts in consumption. Aquifers and mid-sized gas fields are                     159
particularly useful for the storage of the larger volumes required to satisfy winter
demand. The overall investment costs for this type of storage are high, because of
the cushion gas needed to maintain working pressure. But the costs per cubic metre
of storage in gas fields are lower than in smaller alternatives, like salt domes. As salt
domes have a larger input and delivery capacity, they will be used mainly to supply
daily and hourly demand variation of a shorter duration.
Currently, most seasonal flexibility in Lgas is supplied by adjusting the output of
the Groningenveld, owned by the nam, and a number of on-shore fields that are
able to produce some swing capacity. For most on-shore and off-shore H gas
fields it is less economic to produce flexibly. In addition to production flexibility,
there are relatively smaller storage facilities, like the Alkmaar facility (owned by
taqa), the cavern storage facilities constructed by GasUnie and Nuon at Zuid-
wending and those of Essent and Nuon in Germany, which are used to provide
peak supplies to the Dutch system.
As argued above, the future provision of sufficient short-term and seasonal stor-
age capacity is a complicated issue, affected by a range of interrelated technical,
institutional and economic factors. Potential investors are confronted with
numerous fundamental uncertainties, the clarification of which requires that
substantial decisions be made; the contours of the investment climate have to be
set and credibly secured, otherwise the investment will not occur.
Three sets of factors play a role. First: lack of incentives. In the theory of competi-
tive markets, the revenues of suppliers of flexibility, like ugs, are created by the
differential between summer and winter prices for gas. In the current market,
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                        seasonal flexibility is provided by means of Gasterra all-in contracts, in which an
                        extra capacity charge allows users to purchase more or less gas within a certain
                        time frame. As compared to the tariffs inherent to these contracts, the necessary
                        investments in one’s ‘own’ capacity may appear rather expensive. Moreover, in
                        these all-in contracts there is no difference between the tariff for short-term flex-
                        ibility and seasonal flexibility, whereas the costs incurred by new third-party
                        investors for these different types of facilities show a significant differential.
                        Costs for creating seasonal storage are considerably higher than for smaller facili-
                        ties, because of the required cushion gas. Low tariffs will not justify the timely
                        construction of new capacity or stimulate users to develop alternative means to
                        handle their seasonable variation. However, given the need to gradually adjust to
                        the new supply situation, in which storage will become increasingly important,
                        there is a need for an approach that allows the several parties to ‘discover’ the
                        value of flexibility (nma/dte 2007). These issues not only touch upon the actual
                        values, but also on the underlying principles for the tariffs and the (policy) objec-
                        tives. A case in point is the treatment of the required cushion gas as unproduced
                        gas, or as a capital investment, in providing the necessary pressure in the ugs, as
                        a substitute for extra compressor capacity.
160                     Moreover, the question is whether storage is an essential facility a monopoly
                        access to which should be regulated by dte, or is it a potentially competitive
                        activity, in which any firm can invest? Access regulation reflects the shorter-term
                        objective to create a liquid market in which flexible gas would be provided at rela-
                        tively low regulated tariffs, facilitating the entry of new traders, who will be able
                        to supply their customers with competitively priced gas. But, such tariffs may
                        keep the relevant parties from sufficiently investing in new storage capacity. In
                        that sense, over the longer term, it may inhibit the development of the right type
                        of capacity, at the right time. This would jeopardise not only the Dutch security
                        of supply, but possibly also the development of storage capacity for foreign use,
                        in the context of the gas roundabout. It is obvious that these different objectives
                        relate to specific insights and interests among the several market parties, like
                        traders, producers, tsos, suppliers, etcetera, and their representative organisa-
                        tions. However, they also pertain to the different policy objectives and perspec-
                        tives of the Dutch government, even within the Ministry of Economic Affairs.
                        An important aspect is the way in which dte will deal with requests for exemp-
                        tions from the current access and tariff regulations and the timely construction of
                        ugs to the gts network. These decisions will be influenced to a large extent by
                        the rules established by the European Commission, and influenced by European
                        interest organisations.
                        Second: ownership and control over future underground storage facilities. This
                        relates to both the desire to invest in ugs, as well as the accessibility of adequate
                        fields to potential investors. Here again, different actors have different perspec-
                        tives, suggesting different approaches and principles. Many of the Dutch fields
                        are operated under licenses pertaining to the nam, within the context of the
                        Gasgebouw. Because of its ample access to flexibility, from Groningen and other
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<pre>                                                       regime change and investment in energy infrastructure
      fields and its operation of the ugs in Norg and Grijpskerk, it can not be expected
      that the nam is under great pressure to invest in storage capacity over the near
      term. The nma, moreover, maintains that Gasterra has a dominant position in the
      supply of L gas flexibility; a situation that would invite tariff regulation, which, in
      turn, would reduce the interest of other parties.
      There are other fields in the Netherlands that could serve as underground storage
      facilities, like Bergermeer, which has been converted into a ugs by taqa.
      However, an important issue in this respect is the way in which interested parties
      can be given access to fields that are in the end-phases of their production and
      under what conditions this should occur. These rules depend on provisions in the
      Mining Act and new definitions of the notion of ‘ownership’ and the exploitation
      rights in the act. This also applies to the possibility of enforcing third-party
      access to existing ugs facilities, like Norg and Grijpskerk, or fields that could be
      converted but of which it could be argued that by some standard their potential
      capacity is not used to the fullest extent. The institutional framework for mining
      activities is currently under review. It is obvious that the future development of
      ugs capacity and the exploitation thereof will depend crucially on the way the
      Mining Act will be amended. This requires the development of a vision that
      deliberately takes into account the long-term character of this policy and the                         161
      trade-off between satisfying short-term market interests, or the longer-term
      public values of a prudent exploitation of the Dutch subsoil. An evident element
      in this discussion is the relation between the development of a regime for co2
      transport and sequestration, as will be shown below.
      Third: who should invest and what incentives should be available? Besides
      Gasterra, not many Dutch parties may be large enough for these kinds of under-
      takings. Joint ventures run the risk of being prohibited from cooperating by the
      nma. Foreign incumbents, like Gaz de France, Centrica, e.on/Ruhrgas and rwe,
      may prefer – possibly upon the insistence of their governments – to create ugs in
      their home countries. Producers like Gazprom don’t seem to be very welcome in
      downstream activities these days. In the us market, most of the ugs are
      constructed and operated by the regulated intrastate transport companies and not
      by the merchants and traders. However, these transport companies have leased
      chunks of capacity to these traders by means of long-term contracts. This
      requires a sound perspective on the acceptability of these long-term contracts
      and of the owner of the Dutch tso, GasUnie’s potential role in a joint venture
      with other parties.20
6.6.4 the development of co 2 sequestr ation facilities
      An attractive perspective for the reduction of carbon dioxide (co2) emissions
      while continuing to use fossil fuels, is the large scale development of co2 captur-
      ing and sequestration (ccs). ccs is often considered as the medium-term solu-
      tion in reducing co2 emissions, until inherently sustainable forms of energy
      provision have become technically and economically feasible. In short, a ccs
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<pre>    infr ast ruc t ures
                        system captures co2 emissions at power plants and industrial or other fossil
                        fuel-consuming facilities, after which it is transported to geological sites, like
                        depleted oil and gas reservoirs and aquifers, for permanent sequestration.
                        An evaluation of the development of the governance and regulatory system of the
                        necessary infrastructure, in connection with the design of the trading schemes
                        and the principles of valuation for co2 as the ‘commodity’, provides an interest-
                        ing case of the way in which the infrastructure fits into the broader picture and
                        among the favoured design principles of the ccs system. When we widen the
                        perspective, we have to take into consideration that ccs will have to be coordi-
                        nated with the activities and interests of the upstream oil and gas industry. This
                        raises institutional as well as important economic issues.
                        The ccs solution in combination with phenomena like carbon trading schemes is
                        highly topical, both in the eu 21 and elsewhere. It can be observed, however, that
                        most of this attention is focused on the co2 pricing and trading schemes, including
                        access and storage rights; monitoring and verification requirements; environmen-
                        tal and safety impacts; and the allocation of responsibilities and liabilities. In this
                        respect, there is some attention for the interferences of ccs with the operations of
162                     the oil and gas industry, which eventually will have to provide the space for storage
                        in abandoned oil and gas fields (Department of Industrial Primary Industries
                        2008). Yet, seldom is there any reference made to the design, the development and
                        the exploitation of the pipeline infrastructure that will be required to move the
                        co 2 to the storages, after it has been captured at enery consuming facilities. Some
                        studies of the costs of these systems have been undertaken (McCoy 2008), but it
                        must also be acknowledged that public involvement might not be excluded in the
                        realisation of this infrastructure. An eu Commission study commissioned by the
                        ecn on the regulatory framework for ccs suggests that: ‘Contrary to individual
                        pipelines, the extent of realising entire networks could go beyond the interests
                        and budgets of individual industries and it may thus represent a classical collective
                        action problem’.22 The ecn study addresses issues of ownership and control over
                        the layout of such a network, its financing, operation and possible ppp arrange-
                        ments for co2 transport infrastructure.
                        It is argued that ‘the design or layout of a co2 pipeline network could be done by a
                        public authority or by (cooperating) private parties. Private parties can readily
                        decide on 1:1 connections between capture and storage location that they plan
                        themselves. However, it is uncertain if efficiency gains through large “backbone”
                        connections would materialise without public intervention. An additional argu-
                        ment for a public role might be that economically disadvantaged or remote areas
                        could be linked to an eu-wide pipeline network.’
                        As regards the possible need for public funding, reference is made to the Trans-
                        European Energy Networks (tens). Community aid is allowed only on projects
                        of ‘common interest’, promoting effective operations, the development of the
                        internal (energy) market, the rational use of energy resources, the development
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<pre>                                                 regime change and investment in energy infrastructure
of less-favoured regions, the security of energy supply, and sustainable develop-
ment in general.23 The study raises two questions, namely, whether ccs opera-
tions in general or only a limited subset should be considered of common interest
and, also, to what extent private parties will be able to finance the envisaged ccs
demonstrations projects and the required pipeline infrastructure themselves. The
financial position of utilities and oil and gas industries might need to be consid-
ered before scarce public resources are granted, while upper limits for public
support would be set in conjunction with the tens framework: 10% of total
investment costs.
It is argued that pipeline infrastructure would be operated by a private entity,
either the operator of the capture plant, the storage site, or a third independent
party. The question is whether public ownership of a pipeline network would be
imperative. Private parties participating in a Public Private Partnership for ccs
pipeline infrastructure could take on responsibility for constructing, operating
and co-funding the projects. But public parties could play a role in laying out a
network across multiple borders of Member States in the eu, and provide some
funding. Whether a network would need to be owned by the private or the public
sector would need to be agreed to. The choice for any particular form of aid may
be made on a case-by-case basis, depending on the viability of a particular project                    163
and the magnitude of required funding.
Consideration of these marching orders for research makes it clear that the devel-
opment of a framework of governance for the ccs infrastructure, i.e., the pipes, is
still in a preliminary stage. This represents a clear contrast with the economic and
institutional design of the trading schemes and the valuation of co2. Apparently,
the role of infrastructures are considered to follow’ the development of trade and
valuation. Furthermore, it has also been suggested that private firms should
become the prime movers in designing, funding and operating the systems. Only
when there are pressing reasons – market failures – should a public role be consid-
ered. Indeed, the design principles from which the analysis originates, are essen-
tially the same as the principles underlying the regulation of gas and electricity
networks. It should be noted that, at the time, one of the arguments for regime
change in these networks was that they had become mature systems, in which
the problems of system development had been solved. This has not yet become a
valid argument with respect to the ccs infrastructure.
This is all the more so because there seem to be numerous upstream and down-
stream uncertainties and risks involved for potential investors, which may reduce
their appetite for investing in these systems.
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<pre>    infr ast ruc t ures
                    Box 6.1          The Rijnmond area
                    The issues above are well illustrated by an enlightening study on co2 capture and sequestration in
                    the Rijnmond area that addresses the infrastructure aspect from a local perspective (Hanegraaf,
                    Santen and Knippels 2007). In addition to the usual arguments about the need for a robust system
                    of emission trading, the study provides a swot analysis of the Rijnmond business case for a clean
                    fossil energy system, incorporating css. Moreover, it also suggests specific roles for the several
                    groups of actors, active at different institutional layers: the eu, the national government and local
                    authorities and businesses. Whereas this study takes a local perspective, it nevertheless provides an
                    insight into the complications, while it implicitly underlines our argument of a situation of splin-
                    tered transactions.
                    Strengths: Local characteristics, such as the presence of potential storage capacity at less than 300
                    km from Rotterdam; a large number of emission points; the availability of low temperature heat to
                    capture co2; the commitment of the municipality; the presence of a co2 network; and the location
                    of the area, within Europe.
                    Opportunities: The eu and national objectives for emission reduction; the involvement of citizens
                    and the political realm; rising oil and gas prices; improved conditions for firms to locate their busi-
164                 nesses if there is a network in the area; the need for css as part of an eu energy strategy; and the
                    generation of knowledge, economic growth and employment emerging from a competitive advan-
                    tage in clean fossil technology. As such, these arguments unambiguously point to the classical lead-
                    ing role of infrastructure investment in generating local economic and social development and
                    innovation. Interestingly, these opportunities represent cases of a ‘public good’, in which the
                    revenues from infrastructures will be shared by all, without, however, justifying the investment, as
                    such, among single and homogeneous actors.
                    Weaknesses: Willingness of private investors to engage in a network is seen as limited due to large
                    initial investments; long payback periods; no firms that are seriously interested in capturing their
                    co2 emissions; and no established rules for permanent co2 storage. These observations point to the
                    fact that there is a circular lock-in situation, where the absence of infrastructures prevents trade,
                    commercial and other aspects from evolving, and vice versa.
                    Threats: From the undeveloped market and trading system and the low price of co2, leading to size-
                    able business uncertainties. But another important cause for these uncertainties is the need for the
                    alignment of a number of arenas that have thus far been functioning by and large in isolation from
                    each other. The separate institutional frameworks of these arenas are maladapted or contradictory,
                    in terms of the commercial, technical and legal rules and norms guiding the activities and the inter-
                    ests of the firms involved. co2 storage is not adopted in the emission trading system; there are no
                    firms that are willing to invest in capturing co2; there are neither rules nor established commercial
                    practices to reserve depleted oil and gas fields for co2 storage; and there may be competition with
                    Underground Gas Storage (ugs), the position of which remains equally unclear. In essence, it could
                    be argued that a clear definition of ‘ownership’ is still missing in this market. Unless this issue is
                    settled, it is difficult to expect any significant investments. Indeed, without a network, even the
                    need to lobby for the (re)establishment of clear rules is limited.
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<pre>                                                                  regime change and investment in energy infrastructure
 Without entering into the discussion on the validity of these arguments, a focus on the stakeholder
 analysis and the tasks assigned to the various actors underlines the fragmentation of the actor
 network, while providing clues about potential value conflicts between these actors. As indicated
 earlier in this chapter, many of these conflicts are about apparently neutral technicalities and norms
 – the actual meaning of which only becomes clear when parties have to behave accordingly and
 must then experience the consequences for their competitive position in the (emerging) market.
 The developers of the Rijnmond plan have concluded that actions are necessary in the relatively
 short term. It is understood that a relatively large part of the initiatives essentially deals, firstly,
 with the establishment of commitment and trust among the parties; secondly, the achievement of
 agreements and certainty on the institutional framework, including the necessary rules for owner-
 ship and control, responsibilities, justification, technical and business norms and procedures;
 thirdly, planning and claiming future reservations for space, interconnections and other forward-
 looking elements of the evolving system; and fourthly, the facilitation of the expansion of the
 system towards other (types of) users (see Hanegraaf, Santen and Knippels 2007: 60-62).
 It is also apparent that there is a multi-level structure of responsibilities and authorities, which
 trickles down from the eu to the local level of the businesses involved and their activities. The
 stakeholder analysis included in this report illustrates that a variety of firms, normally competitors
 for markets and sales, have to become allies. Their willingness to engage in an initiative like the                    165
 Rotterdam ccs network is likely to be considered a risky venture, in which rivalry and uncertainty
 play a large role. It is, however, also apparent that the parties involved actively seek to establish
 some kind of level of common guidance in undertaking these investments, with a clear objective to
 coordinating their investments and the operation of the system. Under certain conditions, they
 may engage in the cooperative behaviour required to yield a collective good, as long as they are
 assured that their competitive position is not affected, relative to their rivals. This situation repre-
 sents a typical prisoner’s dilemma, in which the only way out is the establishment of some degree
 of trust, cooperation and certainty regarding future developments.
6.7        experiences from abroad: austr alia
           The experiences of two of the forerunners of liberalisation, the uk and Australia,
           illustrate that they are also wrestling with the same kinds of issues. A brief
           overview of the evolution of policy and institutional arrangements in Australia is
           interesting given that the Australian market is recognised as one of the most
           competitive and efficient in the world (see International Energy Agency 2005),
           but where ongoing concern remains as to how to meet future challenges of
           sustainable growth and the complex risks associated with the greenhouse chal-
           lenge, which have further dictated the momentum of reform. Responding to
           these complex risks will be even more important given the size of the investment
           required to underpin future energy demand.2 4
           The Australian experience demonstrates how institutional integration can have a
           direct impact on transmission investment, transferring certain crucial decision-
           making powers away from the regional or state regulatory level,25 but without
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<pre>    infr ast ruc t ures
                        affecting the ownership of network assets. It also shows why additional institu-
                        tional and regulatory measures to secure transmission planning and investment
                        have been required. Transmission is critically important in Australia due to the
                        distribution of its population. Both under-investment and over-investment can
                        undermine the advantages of commercial market integration.
                        Regime change in Australia
                        Liberalisation and privatisation in some, but not all, states has led to the creation
                        of national bodies, including the National Grid Management Council (ngmc)
                        which developed a National Electricity Code (nec), which, in turn, was adopted
                        at the state level. Private investors now dominate the network sector although
                        government ownership is also present in a number of states. The states also
                        incorporated two bodies, the National Electricity Code Administrator (neca)
                        and the National Electricity Market Management Company (nemmco), which
                        operates the National Electricity Market (nem).
                        The transmission network is regulated by the accc – the Australian Competition
                        and Consumer Council. These institutional arrangements have since 2005 been
                        further rationalised with the creation of the Australian Energy Market Commis-
166                     sion (aemc) and the Australian Energy Regulator (aer). As part of the accc, the
                        aer should provide a consistent approach to economic regulation across the vari-
                        ous states. Since January 2007, the Australian Energy Regulator (aer), functions
                        as a one-stop shop, regulating the operation and development of the transmission
                        and distribution systems for gas and electricity. It is also the economic regulator
                        for the wholesale market and is responsible for enforcing the National Electricity
                        Law and National Electricity Rules. The new legislation aims to increase certainty
                        and reduce regulatory costs. The aer is committed to further minimising regula-
                        tory risk, through clear up-front requirements and consultative processes and a
                        more prescriptive approach to revenue cap regulation.26 The Energy Market
                        Commission (aemc) is engaged in regulation making and market development in
                        the National Electricity Market and, since 2006, in the gas market as well.
                        The need for coordination
                        In February 2006, the Council of Australian Governments (coag) established an
                        Energy Reform Implementation Group (erig) to review certain elements of the
                        operation of Australia’s energy sector and to suggest further reforms supporting
                        more efficient energy markets. In particular, erig was asked to report on reform
                        recommendations for achieving a fully national transmission grid, including the
                        most suitable governance arrangements. coag aims to achieve a truly national
                        approach to the future development of the national electricity grid, taking care of
                        the interests of asset owners, and the need to promote investment in transmis-
                        sion services. erig figured that the goals of Australia’s energy sector must be to
                        ensure that investment in energy assets generates competitive returns, while the
                        market and economic signals and incentives should permit all of the relevant effi-
                        ciency dimensions to be sustained – the right amounts of investment at the right
                        time, which encourages innovation in the energy sector. As such, Australia’s
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<pre>                                               regime change and investment in energy infrastructure
national energy market should be guided at the highest level, by broad policy
objectives covering efficiency and reliability that are set nationally.
In its final report, ‘Energy reform, the way forward for Australia’ in January 2007
(Energy Reform Implementation Group 2007), erig stressed the importance of
timely and efficient delivery of transmission services as crucial to meeting the
emerging challenges posed by climate change and growing energy demand.
Hence, the key policy question was how to ensure that the economic regulatory
regime, incentives, pricing and approval processes would all work together with
the overall planning and governance structures to achieve an efficient mix of
generation and transmission investment in the future.
As such, it identified the need to improve incentives for both the efficient opera-
tion of the existing transmissions system, as well as the efficient investment in a
nation-wide market context, together with the need to coordinate investment in
the transmission system on a national basis. The lack of clear incentives to ensure
an efficient development of a nation-wide transmission system has resulted in
missed opportunities.
National Transmission Network Development Plan                                                       167
Thus the report recommended the establishment of a National Transmission
Network Development Plan (ntndp), aimed at delivering the longer-term effi-
cient development of the grid on an integrated, national basis. A project-by-
project assessment should be made and stakeholders consulted prior to any major
network augmentation project being constructed. This demonstrates that the
most efficient alternative has been adopted to meet reliability standards, and
deliver market benefits, while fitting under the umbrella of the ntndp. The
ergig considered that the potential benefits from better coordinated develop-
ment of the national grid were sufficient to warrant the establishment of a
national planning function. Two options were considered:
– a National Transmission Planner, as a strategic national planner to collate,
    analyse and disseminate information and deliver strong and well informed
    independent advice on efficient investment across the entire national market;
    or
– a National Transmission Service Procurer, as a not-for-profit corporate entity
    responsible for undertaking national planning, making augmentation invest-
    ment decisions and procuring those services either by negotiation or tender.
The first option was recommended as it is more consistent with the current insti-
tutional and regulatory arrangements, and would maintain the current accounta-
bility of grid network owners for investment and operating performance, while
complementing existing regulatory programmes. The National Transmission
Planner would be incorporated into the nemmco and would be reviewed after 5
years to establish whether in addition to its advisory and coordination functions
it should also be given powers to procure transmission services.
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<pre>    infr ast ruc t ures
                        Furthermore, erig stressed the centrality of governance arrangements as a criti-
                        cal pre-condition for the continued improvement of the sector. As the Group
                        stated, good governance principles – ensuring no conflicts of interests, clearly
                        allocating responsibilities, getting incentives right – are easy to enumerate but
                        difficult to implement. Although reforms instituted over the past two decades
                        had proved effective, further refinement is needed so that independent and sepa-
                        rate institutions can be held more responsible for planning, market operation,
                        market regulation and the drawing up of regulations as well as sharpening the
                        separation between these organisations and the political level in order to guaran-
                        tee the independence of regulators from political interference. Hence, it recom-
                        mended that the Ministerial Council for Energy (mce) should be confined to
                        broad policy making and detailed intervention in the regulatory sphere should be
                        eliminated. At the same time, the regulatory authorities should not be engaged in
                        strategic reviews – the political level, that is the mce, should take responsibility
                        for strategic review and evaluation, if necessary assisted by expert groups.
                 6.8    conclusion
                        In this chapter, we have examined the nature of regime change and have illus-
168                     trated how vertical unbundling and the provision of open access to the competi-
                        tive parts of the industry has created a fundamentally different industry environ-
                        ment, involving new types of actors, like the network operators, the regulator,
                        new entrants of a diverse nature in production, supply and trading activities and a
                        large number of interest organisations.
                        We also addressed the changes to the pattern of governance and principal-agent
                        relations resulting from regime change. As regards control and ownership, we
                        showed that a hybrid pattern emerged. The operations of the private and public
                        gas and electricity producers and (retail) traders are predominantly driven by the
                        commercial logic of the market, despite continuing public ownership in many of
                        these firms. The unbundled regional distribution networks are regulated, but
                        yield significant revenues for their shareholding provinces and municipalities.
                        Two, fully unbundled, publicly owned national transmission system operators
                        are confronted with multiple principals, the Ministries of Economic Affairs and
                        of Finance. The networks are also supervised by a single regulator, nma/dte,
                        with extensive powers over the transmission and distribution, system operators’
                        tariffs and access conditions. Supply and trade activities are also under nma/dte
                        supervision, with a strong focus on competition issues in the wholesale market
                        and on consumer protection.
                        Various components of energy policy making now fall under the responsibility of
                        four different ministries. Sustainability issues, co2 trade, the promotion of
                        renewable energy, security of supply, competition and regulatory issues, energy
                        efficiency, the mining regime, etcetera, are being discussed at the local, the
                        national, the European and the supra-national level, including the Kyoto and Bali
                        agreements and relations with foreign suppliers.
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<pre>                                                 regime change and investment in energy infrastructure
Moreover, we have shown that a large number of associations and platforms have
emerged to articulate and bundle the technical, economic and strategic insights
and interests of the several groups of stakeholders in the energy sector, at the
national and the international level. Those organisations provide vital, but also
conflicting, input into the ongoing debates on the restructuring and regulation of
the industry, the environmental challenge, consumer and business interests,
security of energy supply, etcetera.
It was also illustrated how regime change has caused splintered transactions,
both with respect to the split between the commodity, the transport and services
that need to be delivered, and the long-term development of the systems. In the
current context, every ‘simple’ commodity transaction involving the supply of
electricity or gas to a customer requires a complex chain of associated tailor-made
transactions for transport, handling and ancillary services. Regime change has
introduced a different logic for the technical and economic coordination of the
activities in the industry, which both short-term commercial transactions and its
longer-term development. The negotiated agreements of the past have been
replaced by the competitive logic of the market, bringing in commercial rivalry
and economic incentives as predominant drivers for the behaviour of economic
actors. This may cause difficulties and lead to transaction costs in the day-to-day                    169
execution of energy trade, requiring an interrelated set of commodity, transport
and services transactions, involving several parties with differing objectives.
However, the framework for the governance of network investments is not yet
well developed. The principle of actual historical cost underlies the regulatory
rationale for revenue allowance, tariff setting and remuneration of existing infra-
structures. The future expansion and adjustment of the networks requires the
operationalisation of some notion of long-run marginal costs and revenues, given
the specific objectives of network development and the evaluation thereof. It
would reflect the investors’ and users’ perception of the value generated, as
compared to the risk involved. As demonstrated, large practical and conceptual
difficulties make it hard to reach agreement on these objectives, the investments
required and the valuation thereof by investors, users and the regulator. More-
over, this process is characterised by fundamental uncertainties and the strategic
behaviour of owners, operators, customers, regulators and policy-makers.
Within an environment of commercial and strategic rivalry and distrust among
the firms in the industry, public entities like the ministries, the regulator and the
tsos, and the wide range of secondary actors, decision making on the develop-
ment and operation of new infrastructures remains problematic and controver-
sial. Emerging objectives, values and technical and commercial principles and
practices are easily contested and politicised. For example, in the context of an
energy system that is rapidly internationalising within the eu and beyond, it
appears difficult to agree on the territorial scope of operations, transactions and
regulatory intervention. Whereas a regulatory period of five years is considered
too long as it blocks timely adjustment to changing market circumstances,
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<pre>    infr ast ruc t ures
                        investors think it is too short, as it does not provide the certainty required for
                        investments. Another subject of discussion is the balance between the wish to
                        avoid imposing excessive risks on consumers through socialised tariffs, and
                        exposing investors to regulatory risk.
                        Resort is taken to unpredictable exemption procedures for exceptional invest-
                        ments such as cross-border interconnectors. Lack of harmony is strategically used
                        by the various parties involved (and their organisations) to defend their own
                        interests and objectives. As a consequence, substantial network investments are
                        being dealt with on an ad hoc basis, often driven by ‘crises’ and/or court cases,
                        under a considerable degree of uncertainty and regulatory reservation. The basic
                        regulatory focus on immediate cost reduction and the creation of competition is
                        jeopardising the longer term development of adequate infrastructural systems for
                        a sustainable and reliable energy supply.
                        This brief account of the energy sector has illustrated that the creation of an
                        adequate investment climate requires the development of a broader view on the
                        interrelationship of short-term competition and regulatory issues and the way in
                        which these should be fine tuned, in order to achieve the right framework for
170                     future developments. Many of the decisions to be made in the future will be
                        affected by current choice and approaches. The absence of a viable longer-term
                        perspective and the prevalence of short-sighted ambitions will undoubtedly
                        affect the freedom to effectively rearrange matters at a later stage.
                        In many aspects, timing and coordination are crucial to achieve balanced progress
                        in the right direction. Lack of coordination, either by an effective market or by an
                        adequate intervention on the part of the relevant public authorities, will mean
                        that society will incur extra costs, either due to the lack of a technical, economic
                        and institutional fit between the components of the energy sub-systems, or the
                        fact that issues of equity will cause serious societal resistance against the neces-
                        sary adjustments to the system. Postponing action may narrow the choice of
                        effective instruments to realise these three objectives.
                        Lessons for other sectors?
                        The development and operation of infrastructures as natural monopolies
                        – whether in energy or transport or water supply or flood management – will
                        always require some degree of public intervention and regulation to meet public
                        values in terms of an efficient exploitation. So, public decision making will
                        always have a direct role in establishing the relevant economic and technical
                        criteria. This offers an opportunity to influence the pattern of supply and
                        demand of goods and services provided by the infrastructure in question, as well
                        as the longer-term development of the infrastructure itself, in such a way that the
                        broader public values associated with these vital goods and services can be safe-
                        guarded. With a relatively moderate encroachment of public authorities in the
                        private or commercial domain, it may constitute a powerful tool to internalise
                        the external effects of the sector in question. This, of course, can occur in combi-
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<pre>                                             regime change and investment in energy infrastructure
nation with market-based instruments, like levies, tradable property or emission
rights and subsidies, having direct economic impact in the way market actors
evaluate specific transactions (Larouche 2008).
This way of looking at infrastructures – whatever the sector – is by no means
new. However, it has the virtue of recapturing the traditional practice of publicly
coordinating the parameters within which competitive markets with private
actors are allowed to develop.
                                                                                                   171
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<pre>    infr ast ruc t ures
                 notes
                 1      Of course, the traditional eu natural gas industry was also international.
                        However, it consisted on a set of separate, coordinated value chains from the
                        suppliers to the consumer countries.
                 2      Most of the gas production concessions constitute a 50/50 public/private part-
                        nership, involving Energie Beheer Nederland (ebn) and a consortium of private
                        firms. GasUnie – the single wholesale gas trader and exporter and owner of
                        the national gas transmission system – was jointly owned by Shell and Exxon
                        (50%) and the Dutch state (10%) and ebn (40%). In the up-stream gas produc-
                        tion, national and export pricing practices were meant to yield the opportunity
                        values, as set by the value of alternative fuels, like heating oil and fuel oil.
                        A share of about 70% of the profits, or more, was transferred to the State, as the
                        ‘Gasbaten’.
                 3      TenneT transports electricity throughout the Netherlands, by providing access to
                        the national high-voltage grid to electricity producers, regional grid operators
                        and large consumers. Any party that meets a set of strict conditions can make use
                        of the high-voltage grid. TenneT tso b.v. carries out regulated activities. These
172                     are statutory tasks related to managing the national transmission grid and main-
                        taining the required balance between supply and demand in the Dutch electricity
                        grid. Several regulated activities of an operational nature are delegated to
                        subsidiaries like tso Auction b.v., which organises the auctioning of import and
                        export capacity on the five cross-border connections. TenneT’s main regulated
                        services are: 1) the connection service, involving the management of the 23
                        connections to the Dutch high-voltage grid of a few large consumers, power
                        generators, foreign grid companies and local grid companies; 2) transmission
                        services, by providing access to the Dutch national high-voltage grid to market
                        parties; and 3) system services, maintaining the electrical stability of the systems
                        and handling unexpected demand fluctuations or supply disruptions. TenneT
                        does not produce any electricity itself and does not ‘own’ the power – it merely
                        makes the transmission grid available. See also: http://www.tennet.nl/english/
                        tennet/organisation/services/services.aspx.
                 4      gts is responsible for the management, the operation and the development of the
                        national transmission grid on an economic basis. gts main regulated services are:
                        1) to create and maintains connections to its about 50 ‘entry’ and 1,100 ‘exit’
                        points. At an entry point, the gas can be physically injected into the system. At an
                        exit point, the gas can be physically removed from the system, to supply a
                        regional gas network, a large consumer or an export station; 2) to provide and
                        ensure sufficient transport capacity to its shippers; 3) to balance the grid; 4) to
                        provide quality conversion and flexibility services. On behalf of its public tasks,
                        gts is responsible for security of supply issues, including peak-period delivery
                        and supplier of last resort deliveries and the supply in extreme cold weather
                        conditions. It also facilitates the small fields policy, which involves the extraction
                        of natural gas from small fields. gts is not allowed to carry out activities such as
                        production, delivery or the purchase of gas by means of which it enters into
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<pre>                                                                                         notes
   competition with other parties unless this relates to the performance of activities
   for its legally mandated tasks. See also: http://www.gastransportservices.com/
   corporate/518325.
5  The roles of these departments in energy policy making is supported and facili-
   tated by a number of (national) research institutes, councils and other advisory
   bodies, like cpb, ecn, rivm and the Energy Council.
6  Source: http://www.dte.nl/engels/about_dte/dtes_mission/Tasks/index.asp.
7  Besluit van 13 april 2004, houdende regels inzake voorzieningen in verband met
   de leveringszekerheid (Besluit leveringszekerheid Gaswet), Staatsblad van het
   Koninkrijk der Nederlanden, jaargang 2004, no. 170, The Hague: Sdu.
8  The NMa/dte participates actively in the informal European Stakeholders
   Forums as well as the European energy regulators network (ceer) and the Euro-
   pean Energy Regulators group (ergeg), discussed above in chapter 4.
9  Via the Amsterdam Power Exchange (apx) and the Title Transfer Facility (ttf),
   apx Gas nl, while endex provides power and gas futures trading.
10 The Dutch gas system connecting small consumers via the local networks and
   some regions in Germany and Belgium is geared to supply low calorific, Gronin-
   gen quality, gas. It is sometimes necessary to convert H gas with a higher calorific
   value into Groningen gas, blending it with other gases or nitrogen.
11 gts makes extensive plans to anticipate market developments, provide new serv-              173
   ices and invest in the provision of pipelines, compression capacity and the storage
   of natural gas. The company, therefore, studies problems affecting the main
   transport network and looks for appropriate solutions. gts also advises the
   network owner, GasUnie, on possible adjustments and carries out preparations
   for new construction and maintenance projects in the transport network. gts has
   a consultation procedure to gain information from the market players to plan
   effectively.
12 TenneT manages the 23 connections to the Dutch high-voltage grid. A connec-
   tion consists of a transformer and a substation bay and most have grids of a lower
   voltage level. The dte lays down the conditions under which connections with
   the high-voltage grid can be established. In principle, anyone can apply to
   TenneT for a connection, and TenneT is obliged to accept every application. The
   materialisation of the connection must be committed to paper by TenneT and the
   applicant in an agreement regarding the connection. It is not possible to derive a
   right from an application to connection unless the agreement of the connection
   has been signed by both parties.
13 Williamson identifies four dimensions of asset specificity: Site specificity, an
   asset available at a certain location and movable only at great cost; physical asset
   specificity, a specialised asset designed for a single purpose; human asset speci-
   ficity, highly specialised human skills; dedicated assets, discrete investment in a
   plant that cannot readily be put to work for other purposes.
14 The current regulatory framework for transport tariffs for gts is set out in a letter
   from the Minister of Economic Affairs (Tweede Kamer 2006-2007, 29023, nr. 37).
15 The planning criteria for the design of the tso grids are set out in the Grid Code,
   which must be approved by the regulator. Since December 2005, the tso must
   also publish a Quality and Capacity Plan, which must meet the criteria laid down
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<pre>    infr ast ruc t ures
                        in relevant Ministerial regulations in relation to quality aspects for Electricity
                        Grid and Gas Network management. The regulator is empowered to assess these
                        plans. This planning process also applies to the dsos (see Art. 4 ew and Art. 5
                        gw).
                 16     See: http://www.dte.nl/nederlands/elektriciteit/transport/openbaar_dossier_
                        aanvraag_norned_kabel.asp (Norned) and http://www.ez.nl/content.jsp?
                        objectid=152636&rid=148996 (BritNed).
                 17     Important uncertainties exist in this respect. There is the issue as to when
                        production levels and the flexibility of Groningen will start to decline. This is a
                        function of the geology of the field and investments by the nam to maintain its
                        capacity and the post-2016 production quota, as imposed by the government.
                        Another intriguing question is whether the domestic consumers will have to
                        modify their appliances to allow for H gas consumption, or whether H gas will be
                        converted into L gas on a large scale.
                 18     ‘Informele zienswijze uitbreiding H-Gas transportsysteem’, dte, September
                        2006, letter from dte and Gas Transport Services.
                 19     In addition to this dispute, there were conflicts between dte and gts about the
                        method of revenue regulation for the transport tariffs and about the way in which
                        GasUnie purchased and provided flexibility services to its customers. In 2006,
174                     these conflicts were resolved in court, in favour of GasUnie.
                 20     Indeed, GasUnie – not gts – has invested commercially in the bbl pipeline to the
                        uk, the cavern storage Zuidwending and a lng gasification plant, with Vopak.
                 21     http://www.ecn.nl/en/ps/research-programme/transition-technologies/ccs-
                        regulatory-framework/.
                 22     http://www.ecn.nl/en/ps/research-programme/transition-technologies/ccs-
                        regulatory-framework/.
                 23     Articles 2, 3, 4 and 6, Decision 1364/2006/ec.
                 24     Government sources estimate that net electricity demand will rise from 186 twh
                        in 200??? to 284 twh by 2020. The Australian Energy Networks Association
                        (ena) has indicated that energy network businesses (gas and electricity) invest
                        approximately 5 billion Australian dollars annually.
                 25     As a confederation, regulatory competence for the electricity market is shared by
                        the Federal (national) and state governments. Thus state regulators are primarily
                        responsible for retail supply and distribution while the national government has
                        jurisdiction over interstate trade.
                 26     Initial regulatory proposals are submitted by the regulated company which is
                        expected to have all the supporting documentation in place in order to allow the
                        aer to reach a rapid decision. It has been given extensive new powers including
                        the power to gather information but, at the same time, there are new accountabil-
                        ity mechanisms to ensure that information is gathered for bona fide regulatory
                        purposes. The aer must produce an annual report of its activities as well as a
                        more future-oriented analysis of ‘the State of the Energy Market’.
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<pre>                                                                       conclusions and recommendations
7   conclusions and recommendations
7.1 introduction – the challenges ahead
    This report has established that the role which infrastructural provision must
    play in the future requires a new perspective which recognises their core, strate-
    gic role in facilitating wider economic and societal change. Among the future
    challenges that require vast investments are the transition to sustainable mobil-
    ity, a knowledge-based economy as well as a low-carbon economy – all of the
    revised Lisbon agenda goals. These goals show that the infrastructures involved
    are not just important for the delivery of services such as gas, electricity, drinking
    water, transport or electronic communications. Infrastructures are increasingly
    pivotal for facilitating change and as such, in realising general, long-term collec-
    tive public values for society at large. It follows that government strategy must
    now devote renewed attention to securing a facilitating, strategic role for infra-
    structures and recognise that investing in infrastructures is absolutely vital for
    achieving long-term public values.
    This report, in this perspective, has also identified challenges and potential risks               175
    that are at least in part, intrinsic to the process of regime change examined in
    previous chapters. Specifically, as chapters 1 and 2 have emphasised, the essential
    focus of regime change has been i) on short-term and static efficiencies and ii) on
    the products and services delivered over the infrastructures, and not the infra-
    structures themselves. But in order to maintain a high quality of service delivery
    and, at the same time, meet these new challenges, a renewed focus on the role of
    infrastructures in not only serving consumer interests but also in meeting longer-
    term societal values including sustainability, mobility and innovation, is impera-
    tive. The enormous costs as well as the increasing urgency for large-scale invest-
    ments to accomplish this process cannot be underestimated (for example, the
    iea estimates for energy transport networks alone this is in the region of € 200
    billion).1 However, substantial investments in the trans-European infrastruc-
    tures, that provide the true backbone for Europe’s single market in transport,
    electronic communications and energy supply, figure high on the eu policy
    agenda. The challenges ahead, especially in climate change, require a transition
    of a magnitude that has brought eu Energy Commissioner Andris Piebalgs to
    speak of a ‘Third industrial revolution’.2 Given the key role of infrastructures in
    achieving this transition, the Council recommends the Dutch government to
    devote its urgent attention to securing and promoting relevant and strategic
    opportunities to ensure that the investment in infrastructures necessary to meet
    these challenges takes place in a timely, efficient and effective manner.
    The Council believes that it is time to move the political debate on the future of in-
    frastructures beyond ideological strife over the pros and cons of the classic para-
    digm of state control, public ownership and strategic shareholding. It is also neces-
    sary to shift gears in the policy debate beyond a limited focus on the merits of
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<pre>    infr ast ruc t ures
                        sectoral regulation, to a political discussion about robust future solutions in the
                        face of impending challenges. Yet this should not be seen as a plea for a return to a
                        top-down industrial policy in which the various infrastructures are merely an
                        instrument for achieving economic and social development. On the contrary, as
                        stressed in this report, infrastructures deserve a focus in their own right.
                        This concluding chapter presents recommendations for developing a strategic
                        policy framework for investment in infrastructures, and the necessary institu-
                        tional arrangements to realise and implement this policy. Considering the
                        analysis of the effects of regime change identified in this report, it puts forward
                        recommendations for the foundations or pillars on which new institutional
                        arrangements could be developed to secure optimal levels of investment in infra-
                        structures and to accomplish a policy framework which will not only serve to
                        maintain a high level of quality of service delivery in the short term but also the
                        realisation of longer-term societal values.
                 7.2    regime change
                        Given the specific economic and technical characteristics of infrastructures, as
176                     diverse as water, energy, roads, dikes and electronic communications, some
                        prudence in drawing general conclusions on the impact of regime change on each
                        individual sector is called for. Moreover, sectors will inevitably face different
                        challenges at different points in time. The depreciation period for investment in
                        dikes for example is often spread over a period of 100 years, and for water pipes
                        some 40 to 60 years, whereas, due to the speed of technological change, invest-
                        ments have a much shorter life span in the energy and particularly the electronic
                        communications sector. What is also relevant is the fact that the processes of
                        internationalisation have a divergent impact on the various sectors, so that the
                        remaining scope for national manoeuvring varies.
                        As discussed in detail in this report, and in the accompanying wrr study
                        New Perspectives on Investment in Infrastructures, in the last two decades, most
                        infrastructures have been subjected to some degree of regime change as policy
                        emphasis has shifted to the role of infrastructures to deliver goods and services in
                        the consumer interest, concerns for greater efficiency, lower prices and enhanced
                        consumer choice became the focus of attention.
                        Five often interrelated modes of regime change have been identified in this
                        report: liberalisation, privatisation, internationalisation, unbundling and corpo-
                        ratisation. Liberalisation concerns the opening up of an infrastructure to allow for
                        competition in supplying goods and services to consumers. Privatisation involves
                        a transfer of ownership from the public to the private domain. Internationalisa-
                        tion refers to the processes involved in a transfer of functional operations and in
                        some cases, governance aspects of infrastructures to a supra-national level.
                        Unbundling concerns the splitting up of vertically integrated undertakings into
                        functionally and sometimes legally separate units. Lastly, corporatisation
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<pre>                                                                        conclusions and recommendations
      involves a trend towards the management and operation of publicly owned infra-
      structures according to commercial or market based ‘principles’.
      In virtually all of the national infrastructures, the impact of regime change can
      be identified, albeit, that these various modes of regime change have been intro-
      duced in the various infrastructures sectors at different times and to varying
      degrees. The original motivation behind regime change, often catalysed by Euro-
      pean single market initiatives, was founded on the belief that the introduction of
      competition and market-based principles would lead to increased efficiency and
      hence lower prices, as well as freedom of choice for the end-user of the services
      provided over infrastructures. Although the accessibility and affordability of
      essential infrastructures are preconditions to that end, the primary emphasis in
      policy and regulation has been on service delivery. Indeed, with respect to service
      delivery, some studies show that important improvements have been made, for
      example, the creation of customer choice (energy and electronic communica-
      tions) and efficiency gains in electronic communications, energy and public
      transport (Ministry of Economic Affairs 2008). Thus far, however, neither an
      academic nor a political consensus has been established on the definable merits or
      risks of regime changes. The different and often conflicting evaluations of regime
      change make it clear however, that regime change is not a clear-cut route with                    177
      ready-made institutional solutions. This report does not seek to offer a final
      verdict on the merits of regime change. Its purpose is rather to stress that there is
      more to regime change than choice, service delivery and efficiency.
      It is now evident from two decades of experience both in the Netherlands and
      elsewhere, that regime change is not a neat trajectory from A to B, but is a prag-
      matic process, instead, that is characterised by continuous but non-linear evolu-
      tion and institutional transformation. Privatisation has been postponed or
      cancelled in some sectors (energy, airports); previous policies of structural sepa-
      ration may now be reversed (rail). Political debate about the merits of the privati-
      sation of airports, harbours and railways, or the introduction of competition in
      road transport have continued unabated. Regime change has proved a journey to
      an unknown destination for many of the actors involved. Even in privatised
      sectors, industry is confronted with major uncertainties as to the impact of
      regime change on future investment (London Economics and Price Waterhouse
      Coopers 2006).
7.2.1 the changing role of government under regime change
      The role of government has undeniably changed in many infrastructures, as the
      dominant role of the public sector as owner, planner, financier and operator of the
      majority of the national infrastructures has given way to market-based principles.
      A principal contention of this report is that the very process of regime change has
      created fundamental dilemmas for future infrastructural provisions. This has
      been referred to as the ‘mission paradox’ (Larouche 2008). As part of the regula-
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<pre>    infr ast ruc t ures
                        tory bargain at the root of regime change, the state has relinquished direct
                        responsibility for the operation of infrastructures to a multitude of actors. At the
                        same time, even if policymakers and regulators are increasingly required to let go
                        of an infrastructure and allow it to evolve in response to customer demand and
                        market forces, they must still be able to ascertain whether a sector performs in
                        order to meet public policy objectives and to guarantee public values, in particu-
                        lar longer-term values. A strong market needs a strong state (Council of State
                        Vice-President Tjeenk Willink in a hearing in the Dutch House of Representa-
                        tives, May 2008).3 The aggregation of individual private interests cannot be easily
                        equated with the collective public interest. A process for establishing clear public
                        policy objectives remains critical.
                        A second dilemma is that, as a consequence of regime change, new and heteroge-
                        neous actors, pursuing different commercial objectives, are involved in decision
                        making on investments: private, hybrid and new public actors have all entered
                        the scene. Moreover, these actors operate on various levels (regional, national and
                        European). Inevitably, decision making on investments takes place in a frag-
                        mented landscape, with the potential result that important investment decisions
                        could be postponed if only as a result of the sheer complexity of the decision
178                     making process. The challenge now is to harness markets to deliver on externali-
                        ties and public goods. This way of looking at infrastructures – irrespective of the
                        sector concerned – is by no means new. It has the virtue, however, of recapturing
                        the traditional practice of publicly coordinating the parameters within which
                        competitive markets and a myriad of commercial actors should function.
                 7.2.2  regime change: from a ‘t ype i’ to a ‘t ype ii’-str ategy
                        Regime change to a large extent has lived up to its objectives. It has led to free-
                        dom of choice for the consumer (for example, in the electronic communications
                        infrastructure) and to increased efficiency, e.g., as the result of the introduction of
                        a benchmark in the drinking water infrastructure. Efficiency levels in most infra-
                        structures have increased, even if this is not always evident to the end-user when
                        other factors have contributed to the final price (for example, rising oil prices and
                        increased indirect taxation have overshadowed the impact of efficiency gains on
                        the final price that electricity and gas end-users pay).
                        At the same time, the 1990s offered remarkably benign economic circumstances.
                        In the energy sector, for example, there was considerable excess supply and fossil
                        fuel prices fell to historically low levels. Inflation levels reached an all-time low as
                        did the interest rates and the cost of borrowing. A regulatory system that was in
                        effect an asset-sweating exercise, was right for the time, and delivered what
                        the advocates of liberalisation had demanded – low prices. But twenty years on,
                        the limitations of the first stage of regime change are becoming apparent (see,
                        for an assessment of the impact in the different sectors, Ministry of Economic
                        Affairs 2008). First of all, the regulation of most natural monopolies is based on
                        a methodology that creates a bias towards short-term interests at the expense of
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<pre>                                                                       conclusions and recommendations
    long-term investment requirements 4 (Better Regulation Taskforce 2003; Chang,
    Koski and Majumdar 2003; Burns and Reichmann 2004; Alesina et al. 2005 and
    Guthrie 2006). Static efficiency measures, risks undermining public values such
    as accessibility, affordability, reliability as well as wider economic and societal
    concerns, including environment and public health may not be sufficiently
    secured through the regulatory mechanisms, at the goal of which is the maximis-
    ing of static efficiencies. Gradually the realisation is beginning to dawn that in
    infrastructure utilities it is investment and the quality of the capital stock that is
    significant – and having enough of it.
    The process of regime change remains incomplete, despite the benefits that it has
    delivered in a more benign economic environment in terms of efficiency gains
    and increase of the choice for the consumer. The new agenda is about externali-
    ties and the public goods of network provision – security of supply, sustainability
    and innovation. The initial drive of regime change has been tailored to address
    a) the improved functioning of the market; b) increased efficiency and
    c) improvement of the service delivery for the national consumer. In this report,
    these are referred to as ‘Type I’ public values. ‘Type II’ public values, on the other
    hand, refer to long-term public values that are not associated with today’s
    consumer but involve the interests of the (future) society at large. These ‘Type II’               179
    values run the risk of being inadequately addressed in the current institutional
    regime because there are no real stakeholders involved as yet. These ‘Type II’
    values comprise of two categories: the values that are inherent to the service that
    is transported over infrastructures, such as long-term security and adequacy of
    supply and even the costs thereof. But of equal importance are the values
    connected to the multiplier effect of infrastructures, meaning that infrastruc-
    tures are important for the economic, cultural and social development of a soci-
    ety, such as innovation, sustainability or public health.5
    These are the market failures which also currently matter at this time and not just
    monopoly and market power, or so-called ‘Type I’ market failures. What is now
    needed is a strategy that effectively addresses these new ‘Type II’ market failures.
    The second stage of regime change must resolve these problems, and in this stage
    it is the return of policy that matters.
7.3 public values in infr astructures
    The public values to be pursued in this second stage of regime change are not
    easily defined. The challenge of the first stage of regime change was by compari-
    son, more clear-cut. The short-term goals of enhanced efficiency could be realised
    through specific regulatory mechanisms (see Van Dijk 2008). The second stage of
    regime change constitutes an altogether more complex challenge. Not only will
    long-term and sometimes contradictory, public and private interests have to be
    reconciled, but a policy strategy for infrastructures will also need to embrace a
    multitude of public values – values that are not always easy to specify or quantify
    in unambiguous terms. Moreover, they are increasingly dynamic and their priori-
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<pre>    infr ast ruc t ures
                        tisation may shift over time, as the recent resurgence of sustainability concerns
                        has shown. Governments need to respond to and facilitate these dynamics, but
                        without losing direction or allowing policy to become volatile, as this may create
                        mistrust and uncertainty and will, in turn, undermine investor confidence in
                        the longer term (see below). In the context of ‘Type II’ market failures, a strategic
                        policy framework in which substantive public values can be articulated and
                        balanced becomes an imperative.
                        Although government responsibility in many cases may be considered the appro-
                        priate response (and defining and balancing public values is first and foremost a
                        political prerogative), the Council is fully aware that both market failures and
                        government failures have contributed considerably to public value failure in the
                        past (Bozeman 2007). Van Dijk (2008: 8) and Ten Heuvelhof (2008) have argued
                        in the accompanying wrr report that in publicly owned or controlled infrastruc-
                        ture organisations pressure from the capital market on the company to hold
                        down capital and operating costs is often absent; the soft-budget constraint (i.e.,
                        the absence of a risk of bankruptcy) undermines this process. Moreover, the risk
                        of political opportunism to adapt policy in the interests of insider constituencies
                        may deflect cost containment strategies. Finally, and as we noted in chapter 2,
180                     regulatory tinkering or ad hoc solutions can compound uncertainty and distrust
                        as to the feasibility of realising a return on sunk capital in the longer run.
                        In full cognisance of the well-recognised risks of government failure, on the one
                        hand, and given the risks of ‘Type II’ market failures (i.e., the ineffective or ineffi-
                        cient realisation of long-term values), on the other hand, the Council recom-
                        mends the elaboration of a policy framework and related institutional arrange-
                        ments to facilitate long-term investment, based on three broad pillars. This
                        approach is not intended to elevate the state as the exclusive guardian of public
                        value. Instead, the role of the state is to ensure that the necessary institutional
                        arrangements are in place to deliver these values.
                 7.4    a new actor and a multiple- level constell ation:
                        consequences of the diagnosis
                 7.4.1  heterogeneous actor s and multiple levels
                        An important if often neglected consequence of the process of regime change in
                        certain sectors at least, is the emergence of splintered arenas, especially where
                        strict functional and legal unbundling has become the rule – as in energy and rail
                        transport infrastructures. Different actors are responsible for different elements
                        or stages in the decision-making chain, with the result that investment decisions
                        may well be either delayed or abandoned because of the sheer complexity of
                        the actor setting. This changed actor constellation, as discussed in chapter 3, has
                        important consequences for the role of the state. The key position enjoyed by
                        government in a heterogeneous actor and multi-level constellation enables it to
                        function, even in infrastructures as diverse as electronic communications or rail
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<pre>                                                                          conclusions and recommendations
      transport, as a ‘network manager of the heterogeneous actor and multi-level
      networks’ (Teisman 2008; Larouche 2008). A primary task of government
      should, therefore, be to monitor whether and where interests diverge and to take
      precautionary measures (for an explanation of these measures, see section 7.5).
      Internationalisation poses different challenges. With regard to Europeanisation,
      the issue regarding to what extent it is still possible to pursue policies at the
      national level is often raised. Surely, this is a highly relevant issue as eu legisla-
      tion often curtails the national scope in infrastructural decision making. Uncer-
      tainty may arise with respect to the nature of eu involvement. It is therefore vital
      to understand the various ways in which the shadow of the eu influences domes-
      tic infrastructure decision and policy making. It must be emphasised here that
      the European Union does not pursue full-fledged infrastructure policies.
      However, by establishing frameworks of conditions, the eu is highly influential
      when it comes to decision making at the national level, which is – still – the
      dominant jurisdiction when it comes to infrastructure investments, planning,
      distribution of costs, and the broad balancing of public values which is a political
      process. In many infrastructures, however, technological and physical integration
      of infrastructures may, now or in the near future, be further advanced than the
      requisite governance mechanisms to reflect the division of responsibilities                         181
      between the national and eu level of political authority. De facto a ‘governance
      gap’ may arise.
      Moreover, at the eu level, the groundwork for important decisions is laid within
      relatively closed networks of experts bringing together national regulatory
      authorities, such as erg or ergeg (wrr 2007). Generally, this has proved a
      successful mechanism for bringing together expertise from both the eu and the
      Member States. The possibilities for a peer review, learning from the experiences
      of other Member States, as well as for a horizontal cooperation between the
      Commission and domestic policy-makers are greatly enhanced. Nevertheless, the
      external accountability of such networks (especially political accountability) is
      significantly hampered when decision making takes place on the fringes of the
      public domain. This, in turn, requires a different policy response than one simply
      based on attempts to retain or regain national sovereignty. As explained below, in
      section 7.5, the role of the national state should strive to foster new checks and
      balances in the form of appropriate accountability mechanisms. The essay by
      Lavrijssen and Hancher (2008) describes various ways of enhancing accountabil-
      ity through the creation of multi-level and hybrid legal and political mechanisms,
      including hybrid accountability networks, increased transparency and strength-
      ened procedural rights for the various stakeholders involved.
7.4.2 distrust and uncertaint y, risk s and rewards
      The emergence of multiple and heterogeneous actors – multiple agents and prin-
      cipals – as well as hybrid public-private actors can itself generate distrust and
      uncertainty, especially in terms of who will reap the rewards or bear the future
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<pre>    infr ast ruc t ures
                        risks of investment requirements. Under conditions of competition there is of
                        course no guarantee that every investment will prove profitable – an element of
                        risk is inevitable. Uncertainty is also inevitable if sectors or parts thereof are left
                        to market, but a certain degree of mitigation could be required and could be
                        achieved (Larouche 2008). As the Council has underlined in this report, in the
                        face of indecision and uncertainty as to the future direction of regime change, as
                        well as uncertainty as to how investment risks and rewards are to be allocated,
                        the default political and regulatory approach is often one of non-decision or a
                        preference for ad hoc, pragmatic solutions (ad hoc and temporary exemptions
                        from regulatory regimes or regulatory holidays, for example) to ensure certain
                        major investments are realised (see also chapter 6). But ad hoc solutions, which
                        favour certain actors and the avoidance of commitment to a long-term strategy
                        for a particular sector, create unnecessary uncertainty for other actors and for
                        their own investment plans (Larouche 2008) and can lead to sub-optimal levels of
                        investment (Shuttleworth 2008).
                 7.4.3  investment and its functions
                        The term ‘investment’ is used in this report in a generic sense and, as such, extends
182                     to the different investment phases in the lifecycle of an infrastructural asset: from
                        maintenance schemes, to the extension or upgrading of existing infrastructures as
                        well as large scale innovative investments. Investment in infrastructures is charac-
                        terised by its long lead times and high sunk costs and this is what sets the sector
                        apart from many other sectors. This has a particularly important consequence in
                        that many future decisions about the use of infrastructural assets will be affected
                        by current choices and approaches. The absence of a viable longer-term policy per-
                        spective and the prevalence of short-sighted ambitions will undoubtedly affect the
                        freedom to effectively rearrange matters at a later stage.
                        In many aspects, timing and coordination are crucial to achieve balanced progress
                        in the right direction. Lack of coordination, either by effective market mecha-
                        nisms or by an adequate system of regulatory intervention will impose extra
                        costs on society, either due to the lack of a technical, economic and institutional
                        fit between the constituent parts of the overall infrastructure, or due to the fact
                        that issues of equity will cause serious societal resistance to eventual adjustments
                        at a later stage. Postponing action may considerably narrow the choices of effec-
                        tive instruments available to policy-makers to realise longer-term values and
                        objectives.
                        Timing and coordination are, in turn, dependent on the execution of a variety of
                        key functions. Chapter 2 distinguished the following functions: Information
                        (analysis, signalling trends, providing prognoses); role of expertise broker (gener-
                        ation of solutions, development of alternatives); developing a vision (decision
                        making: evaluation of alternatives, risk assessment); agenda setting; goal setting;
                        political decision making; development of principles, laws and norms; invest-
                        ment and finance; project planning; monitoring; refereeing. An important
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<pre>                                                                             conclusions and recommendations
          distinction between maintenance and extension investments, on the one hand,
          and system innovation, on the other, is that the role of the expertise broker and
          the development of a vision is likely to be more crucial in the latter category than
          in the ‘business as usual’ categories.
7.4.4     different effects in different infr astructures
          The impact of the multiplication and diversification of actors as well the multipli-
          cation of functional and governance levels will obviously vary depending on the
          infrastructure in question. Figure 7.1 aims to capture this divergence, and distin-
          guishes the sectors on the basis of two axes: x: homogenous and heterogeneous
          actor constellation and y: single/multiple levels. This report has identified these
          dimensions as decisive in understanding the consequences of regime change for
          future investment in infrastructures. Regime change has led to a new, heteroge-
          neous constellation of actors and a re-alignment of roles in delivering infrastruc-
          tures – including a re-positioning of the role of the state (chapter 3). Regime
          change may also imply, depending on the sector that crucial stages of decision
          making on the planning and realisation of an investment are spread across
          multiple levels (chapter 4).
                                                                                                             183
          Figure 7.2 aims to provide an indicative ‘snapshot’ of the historical/critical and
          current position of the various infrastructures. The dotted lines (which depict
          the position of the sector some twenty years ago) illustrate the diverging dynam-
  Figure 7.1    Infrastructures in the quadrant of homogeneous and heterogeneous actor constella-
                tion: single and multiple levels
      i                                      multi-level                                     ii
   homogeneous                                                                heterogeneous
        actor                                                                       actor
   constellation                                                               constellation
     iv                                      single-level                                    iii
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<pre>      infr ast ruc t ures
                                 ics in the position of the different infrastructures, a divergence which is part to be
                                 attributed to the outcome of deliberate policy choice, but may also be due to
                                 changing technological characteristics of infrastructures. The choice of
                                 unbundling or vertical integration, for example, has a direct impact on the
                                 number and types of actors in infrastructures. But technological factors also
                                 influence the available options: in electronic communications, for example,
                                 competition between infrastructures is possible but this is not the case with
                                 dikes and roads, where the potential for competition between infrastructures is
                                 obviously limited. (For an elaboration of the relation between governance and
                                 technical characteristics, see also Knops 2008.)
                                 Given the substantial differences between the infrastructures, recommendations
                                 with regard to the scope for, and form of a strategic policy framework reorien-
                                 tation (section 7.5) to secure long-term investments in infrastructures – can be
                                 matched to each of the four quadrants. It is in this context that this report has
                                 examined the parameters necessary to secure long-term investment, both in
                                 terms of the legacy of regime change in the sector concerned and regarding the
                                 future challenges which the relevant infrastructures will be required to meet.
184
                     Figure 7.2       Infrastructures in quadrant of homogeneous and heterogeneous actor constellation;
                                      single/multiple levels.77
                                                               multi-level
                            i                                                                                         ii
                                                                                                        electronic
                                                                                             energy
                                                                                                      communication
                                                                  roads      airports
                                                      dikes
                                                                          railways
                      homogeneous                                                                        heterogeneous
                                                                   ■                 waste
                         actor                                                                               actor
                      constellation                                                                      constellation
                                                    drinking       ■
                                                     water         ■
                                                                   ■
                                                      ■
                                                        ■
                                                  sewage       ■■
                            iv                                                                                        iii
                                                              single-level
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<pre>                                                                          conclusions and recommendations
7.5 towards a str ategic polic y fr amework: redefine,
    realign and recalibr ate
    As the subsequent sections of this chapter make clear, the requisite strategic policy
    framework to secure long-term investment in physical infrastructures must take
    account of the legacy of regime change and the challenges and opportunities that
    the process itself has created. In order for policy to be effective, the resulting insti-
    tutional architecture must obtain commitment from all the relevant stakeholders
    on the one hand and also generate a high level of trust among them on the other.
    It must therefore be conceived and executed as a joint exercise – as opposed to a
    hierarchical one – which is capable of channelling discussions and insights into
    a vision on future infrastructural requirements between the various stakeholders
    but without prioritising specific interests, technologies or even methods of evalu-
    ating performance. The foundations for such an approach are based on three pillars:
    – Defining (and redefining) functions, roles and responsibilities;
    – Realigning goals and resources through joining-up and connecting actors and
       levels; and
    – Recalibrating risks and rewards through the elaboration of appropriate checks
       and balances.
                                                                                                          185
    An approach based on a clear allocation of roles avoids blurring of interests and
    reduces uncertainty and distrust. The broader, joined-up dimension provides a
    better guarantee of wider input and of a richer but more flexible repertoire of
    instruments to realise longer-term objectives. If relevant checks and balances are
    properly recalibrated this should ensure incentives, and, where necessary, that
    checks or controls can remain in place over the longer term.
    The Council recommends that in the design of a robust strategic policy frame-
    work, reliance should be placed on these three pillars. But the emphasis on any
    one of these three pillars for crafting an individual sectoral policy framework may
    vary depending on the quadrant (Figure 7.1) in which a particular infrastructure is
    situated, as illustrated in the following schematic diagram.
7.6 pill ar i: defining and redefining roles and
    responsibilities
    A robust strategic policy framework requires the clear recognition and proper
    allocation of roles and responsibilities to the various actors involved to avoid
    default reliance on hierarchical, top-down interventionism. It is equally neces-
    sary to ensure a clear allocation of roles and responsibilities for implementation
    and for the constant evaluation of this process in order to engender commitment
    and trust. Finally, the allocation of new roles may be necessary to address the
    specific consequences of regime change in certain sectors. In this regard, the
    Council puts forward a series of recommendations for allocating responsibilities
    between government, regulators and industry at the different stages of policy
    formation, implementation and evaluation.
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<pre>    infr ast ruc t ures
                    Figure 7.3     The three pillars of the strategic policy framework depicted in the quadrant
                         i                                    multi-level                                            ii
                                                                                                           electronic
                                                                                            energy       communication
                                  redefine
                                recalibrate
                                                                                                      redefine
                                                               roads           airports
                                                                                                      realign
                                                      dikes
                                                                          railways
                    homogeneous                                                                        heterogeneous
                           actor                                                                            actor
                                                                           waste
                    constellation                 drinking water
                                                                                                        constellation
                                  redefine
186                             recalibrate                                               redefine
                                                 sewerage
                        iv                                                                                          iii
                                                             single-level
                 7.6.1      the role of government
                            Given the consequences of regime change, as analysed in this report, a return to
                            direct state intervention in investment decisions is no longer a realistic or fruitful
                            option in the liberalised sectors. An inherent feature of the process of regime
                            change has been the separation of institutional and operational functions albeit to
                            varying degrees across the different infrastructures; in general, industry actors
                            are no longer in a position to dictate regulatory choices while national policy-
                            makers and supervisory authorities (or regulators) are unable to dictate opera-
                            tional choices – including major investment decisions. According to the princi-
                            ples on which regime change are generally based, these latter decisions should be
                            left to the sector, irrespective of whether it is publicly or privately owned.
                            Nevertheless, a frequently heard political plea is for a return to the old paradigm of
                            top-down planning and state-controlled monopolies or even ‘national champions’
                            that can produce and deliver long-term sectoral objectives. However, to conclude
                            that this approach would be either desirable or possible is to ignore the fact that in-
                            frastructures have in many sectors become not only a global good as opposed to a
                            national or local tool for industrial policy, but also an important, stable and pre-
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<pre>                                                                         conclusions and recommendations
      dictable source of revenue for private investors as well as public shareholders, who
      may, in turn, be responsible for at least partly financing new investment.
      Chapters 4 and 6 have illustrated that, in many sectors, these investment deci-
      sions have to be made in an economic context which transcends national borders
      and national interests. State-owned infrastructure companies are also global
      actors. As the role of infrastructures has changed and, with it, the role of the
      network operators, their interests have not necessarily been synonymous with
      national interests (see Shuttleworth 2008). It would therefore be overly simplistic
      to expect these companies to act as mere instruments of government policy and
      passively deliver the social and economic objectives dictated by it.
      Finally, the complexity of the heterogeneous actor multiple level constellations
      exacerbates the problem of asymmetrical information – given their operational
      responsibilities – the infrastuctures themselves are the primary locus of detailed
      economic as well as technical knowledge and expertise. Full stakeholder involve-
      ment is now necessary to ensure both the quality and eventual success of any
      longer-term institutional arrangements for infrastructural provision.
                                                                                                         187
7.6.2 the role of minister s in the evolution of sector al road maps
      Given these factors, the Council contends that the evolution of sectoral road
      maps should be conceived primarily as a form of strategic dialogue and partner-
      ship between the relevant stakeholders. In order to minimise the uncertainty
      caused by political opportunism and ad hoc government intervention, the Coun-
      cil recommends that the primary role of ministers should be to ensure that
      national policy strategies for major infrastructure development are drawn up and
      revised at regular intervals. These strategies could be prepared in the first instance
      by a panel of independent advisers who would, in turn, draw on the expertise of a
      wide range of stakeholders, and who would provide informed and non-partisan
      advice on the objectives to be met and the options for meeting them. The organi-
      sational structure developed by two quite diverse European platforms that seek
      to stimulate innovation and investment that are vital for major economic transi-
      tions (the European Zero Emission Platform and the Commission’s Innovative
      Medicines Initiative) can serve as a useful illustration. Both platforms have been
      set up to produce a robust strategy, based on a deliberative method, and with the
      aim of facilitating a major system innovation. The working method embraces
      parties from multiple levels (both eu and Member States), and combines input
      from market parties, universities as well as regulatory and administrative expert-
      ise. In this way, policy-makers have access to diverse sources of expertise and a
      broad range of views is guaranteed.7
7.6.3 the role of independent regul ator s
      The process of regime change has generated new institutions with specific roles
      and functions. In a number of sectors, the phenomenon of the specialised
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<pre>    infr ast ruc t ures
                        economic regulator has emerged. The establishment of regulatory agencies is
                        advocated as a useful solution in meeting the challenges of the future. The Raad
                        voor Verkeer en Waterstaat, for example, has recently recommended the creation
                        of a national road authority (nma) with explicit powers to draw up capacity plans
                        and stipulate priority investment goals (Raad voor Verkeer en Waterstaat 2007).
                        The Council would also stress that the achievements of regime change to date
                        should not be overlooked. Independent regulators such as opta and the various
                        specialised regulatory chambers of the nma (dte and the Vervoerskamer) are able
                        to mobilise information more effectively than government agencies, provide
                        centres of specialised expertise and have also become centres of epistemic author-
                        ity in their field and among their peer groups. They provide a source of informa-
                        tion to the public that is less mistrusted than information provided by govern-
                        ment and by commercial actors themselves. They provide a more stable
                        institutional and legal setting for those they regulate. As part of the process of
                        establishing their own legitimacy, they also have an incentive to inform the
                        public and the regulated firms about the reasons for their actions and to follow
                        procedural disciplines that may not be followed by government agencies. After a
                        decade of developing their work they have achieved credibility with the public
188                     and with their peers.
                        Ad hoc, government-imposed solutions to address wider public concerns regard-
                        ing, for example, security of energy supply, risks a return to political oppor-
                        tunism and the spectre of non-transparent departmental interference. This
                        would undermine the independence of the relevant sectoral regulator as well as
                        creating uncertainty at the industry level, which could, in turn, deter investment.
                        At the same time, the Council recalls that in the Dutch approach to sectoral regu-
                        lation, the powers of the regulator have traditionally been limited
                        to implementing policy, and to supervising the economic performance of the
                        various actors in a particular sector. In other words, these regulators have a
                        narrow remit; they are economic and not technical regulators. In so far as they are
                        entrusted with the task of safeguarding public values, this is largely concerned
                        with protecting primarily individualised public values, including affordability
                        and accessibility for the consumer or user by keeping tariffs down. These sectoral
                        regulators have neither an express mandate to give priority to wider or more
                        collective public values such as sustainability or innovation in infrastructures,
                        nor indeed do they have the power to mandate investment (see chapters 5 and 6).
                 7.6.4  new roles for regul ator s?
                        In the Council’s view, in the sectors where they are already well established such
                        as electricity, gas and electronic communications, and more recently, transport,
                        the institution of the independent regulator has led to a clearer demarcation
                        between political and regulatory authority that enhances regulatory stability,
                        creating a better climate for investment, and, with it, the realisation of longer-
                        term public values. At the same time, there is a growing risk that the roles and
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<pre>                                                                         conclusions and recommendations
      responsibilities of established regulators are becoming blurred. It is tempting for
      existing regulators to become involved more deeply in the size and composition
      of the investment programme of regulated firms than was originally envisaged in
      the constitutive legislation, for example, in the energy and electronic communi-
      cations sector.
      The Council has recommended that the relationship between regulators and re-
      sponsible ministers should be re-considered as a target for re-alignment if the for-
      mer are entrusted with the implementation of broader public value tasks, including
      explicit responsibility for ‘Type II’ public values. In the Council’s view, regulators
      must continue to play a valuable role in the development of a strategic, long-term
      perspective. However, so-called ‘regulatory tinkering’ must be avoided. Merely
      adding on a broader range of duties and powers to the existing regulatory structure
      is not a solution. A radical expansion of the powers and duties of economic regula-
      tors does not fit easily into the Dutch constitutional model – in which these regula-
      tors would have strictly circumscribed legal powers, and their duties are primarily
      confined to the implementation of policy. In the absence of a clearly designed set of
      duties, or government guidelines, sector-specific regulators would be left to make
      trade-offs between various public values which involve strategic, policy choices.
      This would transform the role of the regulator into a policy-making institution. It                189
      could lead to a blurring of roles, which would enhance regulatory uncertainty and
      possibly discourage rather than promote major new investment. If regulators are to
      assume a broader set of responsibilities for achieving social and economic objec-
      tives this must be under clear political guidance, regularly amended based on con-
      sistent monitoring processes, and stipulating how, as a matter of principle, trade-
      offs should be made.
7.6.5 new roles in s ystem coordination
      As several contributors to the wrr study that accompanies this report argue, and
      as the energy case study in chapter 6 has confirmed, an unforeseen or unintended
      ‘victim’ of regime change has been system coordination. The processes of
      unbundling, together with technical and economic market integration have led to
      splintered transactions. There is frequently no single actor or level in a position to
      predict the impact of any one transaction on overall infrastructure provision. The
      analysis of regime change in the energy sector in chapter 6 suggests that certain
      roles and functions that are necessary to secure investment in infrastructures
      may be particularly difficult to secure given the current constellation of heteroge-
      neous actors with divergent if not conflicting interests. The role of an informa-
      tion broker or network monitor could well prove pivotal for the development of a
      robust sectoral strategy.
      Monitoring investments
      None of the infrastructures examined in this report, have had investments moni-
      tored and assessed in a systematic or structured way, although the national power
      and gas transmission network operators are now required to publish medium-
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<pre>    infr ast ruc t ures
                        term investment outlooks. In those infrastructures where investment is moni-
                        tored, this is primarily done through indirect measurement of the quality of serv-
                        ice and interruptions in service delivery (e.g., drinking water, gas and electricity).
                        Measurement of quality is necessary, but not sufficient. The quality of service
                        delivery can only reflect the current state of infrastructures. Investment in infra-
                        structures is a long-term issue. If current maintenance proves insufficient, this
                        will only be measurable in a decline in service quality after two or three decades.
                        In some infrastructures, the absence of external monitoring may not cause prob-
                        lems if the market parties compete to construct new infrastructures to meet
                        demand for new services or infrastructures, for example, in electronic communi-
                        cations where depreciation periods are also relatively short. Even for infrastruc-
                        tures with long depreciation periods and where a natural monopoly exists, there
                        is an incentive for the infrastructure holders to invest in order to maintain the
                        profitability of their operations over time. However, that incentive is potentially
                        insufficient to guarantee ‘Type II’ public values. For these non-competitive
                        national monopolies, the Council recommends obligatory external monitoring of
                        the quality and the level of investment.
190                     External monitoring of investment may take various institutional forms. The
                        Australian approach, discussed in chapter 6, may provide a useful precedent in
                        the Dutch context. A national network monitor has been recently introduced in
                        the Australian electricity sector. This organisation is equipped with the necessary
                        technical expertise and resources for identifying major maintenance and invest-
                        ment requirements and for drawing up technical plans and mapping out potential
                        investment requirements. The Australian national monitor is independent of
                        both politics and industry. The former is important with regard to reducing the
                        chance of political opportunism, and the latter is important since broader inter-
                        ests are reflected in network planning and monitoring. The Council recommends
                        that the introduction of a public network monitor in the Dutch context, espe-
                        cially for those infrastructures where competition between networks is not
                        possible due to natural monopoly characteristics, should be investigated.
                        Depending on whether the physical network is local or transnational (drinking
                        water is largely local, while electricity is transnational) a regional or European
                        monitor for physical networks could also be considered. Irrespective of the even-
                        tual institutional form which might be given to this type of monitoring function,
                        it should be stressed that the network monitor is intended to fulfil a signalling
                        function – identifying where and when major investments or large-scale mainte-
                        nance are required. However, it will be for the other actors in the sector – the
                        industry, the regulators and eventually government – to decide how investment
                        is to be made and how it should be financed.
                 7.6.6  avoiding blurring of roles and interests
                        Even in sectors which have only undergone a limited degree of regime change,
                        such as corporatisation, and the introduction of commercial incentives into what
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<pre>                                                                       conclusions and recommendations
      remains an essentially publicly owned and managed but hybrid organisation, a
      re-allocation of roles may be necessary to ensure the realisation of longer-term
      investments by, for example, entrusting monitoring and refereeing to external
      bodies. In the drinking water sector, for example, there is no obligation on the
      part of public owners to re-invest the substantial profits which have resulted
      from re-organisation and the introduction of efficiency-based norms over the
      past five years. The introduction of an external monitoring or refereeing role may
      be a useful mechanism to counter the disadvantages of hybridity and to directly
      address the merits of ploughing back profits into new investment in infrastruc-
      tures, as compared to diverting these financial resources to other public interest
      objectives (Karré 2006).
      Explicit attention to allocating clear responsibilities for monitoring and referee-
      ing may ensure that the heterogeneous, and often hybrid actors and organisations
      engaged in infrastructure provision are guided by multiple longer-term incen-
      tives in the public interest, and not only short-term commercial goals.
7.7   pill ar ii – realigning goals and resources: exploring
      ways to join - up and connect actors and levels                                                  191
      An emphasis on joint action and horizontal coordination is required to devise as
      well as implement and monitor sectoral strategies to ensure their full success.
      The Council places a premium on realising the full potential for joint action at the
      various stages of the process of designing and operationalising a strategic
      perspective. This, in turn, will provide greater certainty and clarity for the vari-
      ous actors involved with the infrastructures and engenders trust and commit-
      ment.
      The process of joining-up or re-connecting encourages and improves coordina-
      tion across and between the different splintered arenas. It brings in different
      stakeholders with different views from different positions on the transaction
      chain, creating openings for an alignment of competing interests. It facilitates a
      horizontal but structured debate between the different actors in such a way that
      a coherent perspective evolves, counteracting splintered transactions. With
      this in mind, recommendations have been put forward for aligning the goals and
      resources at different stages of evolution, implementation and monitoring of
      sectoral strategies.
7.7.1 joined - up action at the political level
      In sectors in which competition between networks is not economically feasible,
      the Council recommends a joint mapping approach in which the parties involved
      (ministries, regulator and service providers, system users and organisations
      representing final customers) together map out the uncertainties and risks by, for
      example, outlining scenarios that all parties regard as possible and realistic. The
      process in which parties map out the uncertainties and risks could be moulded in
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<pre>    infr ast ruc t ures
                        the form of a joint and widely supported real-options analysis, accompanied by a
                        robust longer-term cost-benefit analysis. This type of approach ensures continu-
                        ity as opposed to ‘one shot’ future perspectives that are liable to require change
                        at every new occasion. The parties should negotiate the various parameters and
                        links in this analysis. In relation to this, analyses of the positive and negative
                        external effects of the different available options should also be conducted, both
                        qualitatively and quantitatively. The corresponding uncertainties, risks and
                        opportunities should further be identified and, where possible, quantified in a
                        process in which these stakeholders are actively involved.
                 7.7.2  joined - up action at the regul atory level
                        Joined-up action can take various institutional shapes and guises. At the regula-
                        tory level, the Council considers that maximising various ways of ‘re-connecting’
                        actors and levels can be an important guiding principle for regulators and regula-
                        tions to be able to realise their long-term perspectives, and for securing a coher-
                        ent and consistent approach to monitoring and evaluation of the objectives they
                        seek to promote.
192                     At present, national regulators do not regularly share their experiences in the de-
                        veloping or monitoring principles of best practices. An effective platform for such a
                        process of exchange could take a variety of forms. The House of Lords in the uk has
                        recommended the creation of a formal Joint Regulator Group with a permanent
                        Secretariat in order to promote a platform for ‘joined-up thinking’ on cross-sec-
                        toral regulatory issues – be it on the merits of structural separation in different in-
                        frastructures or the evolution of best practices. Regulatory learning in general
                        could be enhanced. The Council considers that a ‘joined-up’ process could offer a
                        platform for assessing and monitoring different options for new approaches to in-
                        frastructural regulation and for the further development of infrastructure-specific
                        regimes. For example, in certain of the more liberalised infrastructures such as elec-
                        tronic communications, a clear commitment not to engage in particular responses
                        may prove a useful way forward as opposed to relying on the standard discussion of
                        the pros and cons of ex ante regulatory measures versus ex post competition control
                        (Larouche 2008). The Council, therefore, recommends the investigation of the fea-
                        sibility of such a Joint Regulatory Group for the Dutch context.
                        Similarly, a joined-up regulatory process could be deployed to assess the advan-
                        tages and disadvantages of formal as opposed to informal regulatory instru-
                        ments. The latter may be preferred because they offer the necessary flexibility to
                        react to continuous evolution, for example, through corporate governance norms
                        (see, for example, the Walker Working Group 2007 and Stout 2007). At the same
                        time, these types of mechanisms lack transparency and offer little accountability
                        to a wider body of stakeholders. In the Council’s view, if these informal mecha-
                        nisms are combined with periodic external reporting requirements to a body
                        such as a Joint Regulatory Group, as recommended above, this could counter
                        their perceived shortcomings.
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<pre>                                                                        conclusions and recommendations
7.7.3 conferr al of concurrent power s
      The conferral of joint powers or the possibility of jointly investigating certain
      issues across sectors may also enhance the potential for joined-up action. This
      may allow sectoral regulators to take a more proactive role in dealing with certain
      novel issues or new challenges. A concurrency initiative could be developed to
      examine whether and to what extent a critical transaction involving private
      equity investors could lead to risks of over-gearing, which might threaten long-
      term investment and/or the capacity for innovation. Sectoral regulators such as
      the nma’s energy supervisory chamber or transport supervisory chamber
      (dte/Vervoerskamer) do not have the necessary expertise or available resources
      to make detailed financial assessments of financial strategies. The afm, on the
      other hand, has the requisite resources, experience and expertise in the financial
      markets. By pooling their expertise in specific cases, these agencies could operate
      more effectively and offer a more robust assessment of the issues in question. The
      example provided by the joint consultation launched by the two British sector-
      specific regulators ofwat (for water) and ofgem (for energy) on options for
      financing long-term investment, is a useful illustration of the productive use of
      concurrent powers. The collaboration between the two regulators has now led to
      a new, more dynamic and robust approach to incorporating investment costs and                     193
      quality regulation into energy and water tariffs, on the one hand, and to a more
      refined approach based on a menu of regulatory contracts to suit particular
      investment challenges, on the other (ofwat and ofgem 2006; Tutton 2008 and
      Holt 2007). Examples of conferral of concurrent powers in the Dutch context are
      the collaboration between the dte and the Toezicht op de Staatsmijnen,8 as well
      as the collaborations since 2001 in the financial sector (Mooij and Prast 2002: 23).
7.7.4 multilevel joining - up
      For the Council, it is vital that any approach to evolving a strategic policy frame-
      work recognises the value of the output that new, transnational networks offer
      to national policy-makers to formulate a more structured, and at the same time, a
      sufficiently flexible approach, to learn from experience in other sectors and from
      other countries, and to establish a clear, stable framework for assessing and evalu-
      ating best practices. Comparative assessment is too often only carried out on an
      ad hoc basis (for example, the ‘ad hoc groep marktwerking’, Ministry of Economic
      Affairs). This task of aligning the output of transnational networks to review
      national goals could be entrusted to the Joint Regulator Group as proposed here.
7.7.5 learning from brussels?
      Institutional developments within the European context may inspire other meth-
      ods for multi-level joining-up exercises. As explored in chapters 4 and 6, several
      types of transnational ‘networks’ have emerged, including regulatory or adminis-
      trative networks, networks of experts as well as stakeholder forums or networks
      (see also Lavrijssen and Hancher 2008). However, national policy-makers and
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<pre>    infr ast ruc t ures
                        parliament currently still tend to rely on limited opportunities for contact with
                        the infrastructures through their national regulators, while, in turn, national
                        regulators tend to focus on national organisations of stakeholders.
                        Clearly, the potential for national bodies to capitalise on the experience, expertise
                        and insights emanating from the evolving transnational networks of regulators,
                        experts and stakeholders, and deploy it at a national level remains unexplored
                        territory and deserves serious attention. Aligning the competing output of these
                        various networks and identifying optimal national solutions requires an approach
                        which goes beyond one-directional delegation. It is not enough that the Dutch
                        ministry sends a representative to the European Energy Regulators Group
                        (ergeg), for example, and that the national transmission system operators,
                        TenneT and GasUnie, participate in the relevant stakeholder networks (see chap-
                        ters 5 and 6). This also means that the governance approach should not be simply
                        one of ‘double delegation; – see chapter 4 (drawing on Thatcher and Coen 2008) –
                        delegating the realisation of certain national goals for coordination at the Euro-
                        pean level through these networks. The Council would instead stress the oppor-
                        tunities for government, as a manager of physical ‘network of networks’ to
                        harness the deliberative processes developing within these transnational
194                     networks, as described in chapter 4, to interactively enrich both policy formation
                        and regulatory policy at the national level.
                        A strategy based on realignment contributes in various ways to the realisation of
                        ‘Type II’ public values. A structured link between regulators and ministries helps
                        to increase policy stability and coherence. Moreover, realigning contributes to the
                        elaboration of a joint vision, not just by state actors, but all actors that are relevant
                        regarding investments in infrastructures. The joint risk mapping exercise
                        contributes to the mobilisation of support and commitment, and the resulting
                        shared vision should extend over a longer period than just one cabinet term. In
                        this way, private actors can, where necessary, be encouraged to finance long-term
                        investments. Confronted with similar challenges, the British House of Lords, in
                        its recent report (House of Lords 2007), recommended that ministers and regula-
                        tors should confer on the main policy goals for a period of 15 years.
                 7.8    pill ar iii – recalibr ating checks and bal ances
                        The third and final dimension of the Council’s approach to devising and opera-
                        tionalising a robust strategic policy framework revolves around the necessary
                        substantive and procedural checks and balances, to ensure that longer-term
                        objectives are realised in practice, but without sacrificing flexibility. It follows
                        that the process of redefining roles and aligning goals and resources may need to
                        be supported by an adequate system of checks and balances, which can ensure a
                        fair and transparent allocation of investment risks and rewards. In particular,
                        careful attention should be paid to the requisite incentives for the various parties
                        involved to commit to new investment. To mitigate the inevitable regulatory
                        uncertainty and risk that attends major system innovation, the Council advocates
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<pre>                                                                         conclusions and recommendations
      that urgent attention should be given to recalibrating incentive mechanisms and
      instruments.
      Moreover, although joined-up action and the institutionalisation of horizontal
      linkages and regulatory learning has considerable potential, any process with no
      hierarchy and no agreed solutions can degenerate into a conference. Sabel and
      Zeitlin thus add that this type of governance approach will be more effective
      when there is an unattractive ‘penalty default’, i.e., something worse that
      happens if the more experimental forms of governance discussed above fail. This
      can include a ‘destabilisation regime’ in which the direction of policy creates a
      search for alternatives ‘by, in effect, terrorising stakeholders into undertaking a
      search for novel solutions’ (Sabel and Zeitlin 2007: 39).
      The Council has recommended the introduction of a network monitor in
      non-competitive sectors. This institution is not, however, expected to determine
      political or regulatory policy or choices nor will it be entitled to impose costly
      requirements on investors. Its primary role is to signal where gaps or threats to
      the system are likely to materialise. But, in order to arrive at a coherent response
      to dealing with identified lacunae and attendant risks, the right incentives struc-
      tures and even penalty defaults, must be in place to stimulate the necessary                       195
      level of investment. An appropriate regulatory framework may therefore also
      be required, again depending on the infrastructures concerned, in which ex ante
      incentives for additional investment are balanced with ex post optimisation of
      access rights for third parties to the new capacity which has benefited from these
      incentives. The dilemmas surrounding the development of large-scale gas storage
      facilities, vital to meet the challenges of external energy dependence and security
      of supply could be addressed in this way (see chapter 6).
7.8.1 a national super fund for infr astructures?
      As this report has highlighted, certain exogenous developments are likely to put
      enormous financial pressures on infrastructures in order to meet the challenge of
      the transition to a low carbon economy. New incentives may be necessary to
      mobilise the requisite capital investments. A state-sponsored investment fund –
      a super fund for investment in infrastructures – could be created to ensure that
      critical investments are realised on time, as foreign examples have shown
      (Norway being the most cited European example). Priming financial funding
      from this super fund could be made available, for example, to finance the
      economically unfeasible aspects of a large project, or to provide start-up or bridg-
      ing financing for a particular project. This approach to public financing is
      common practice in the Japanese transport sector, for example (Teisman 2008).
      The proposed super fund could be financed from fes sources, but this fund
      should not be dedicated solely to public infrastructure projects as is presently the
      case, or linked to a particular ministry. The current basis on which the fes is
      operated and the manner in which available funds – budgeted at over € 16 billion
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<pre>    infr ast ruc t ures
                        for the period 2007-2010 – has been heavily criticised – and is ripe for reform
                        (Raad voor Economische Adviseurs: Tweede Kamer 2005-2006, 30560, no. 3 and
                        Centraal Planbureau 2006).
                        Instead, the current fes could be transformed into an independent investment
                        fund, and operated more efficiently as a revolving investment fund. The Council
                        considers that there is also considerable potential to put this type of mechanism
                        to greater use as a way of providing investors with re-assurance that, if as a result
                        of unavoidable policy changes to address new or urgent issues, they will still
                        receive adequate compensation for any sunk or ‘stranded’ investments (see also
                        Shuttleworth 2008). In other words, individual investors should not be expected
                        to shoulder the financial risks of any legitimate alteration or amendment to a
                        long-term sectoral strategy, which is beyond their control. The presence of a
                        safety net of this type can enhance trust and commitment.
                 7.8.2  str ategic public shareholdings
                        Although the present policy of the Dutch government is to exercise its share-
                        holding rights in companies in which it still maintains a financial interest with
196                     restraint (Wilkeshuis 2008; De Pree 2008 and Kenniscentrum voor orden-
                        ingsvraagstukken 2006), this policy is now being actively re-considered (Tweede
                        Kamer 2007-2008, 24036, no. 345).
                        The Council believes that the eventual (re-)deployment of strategic public share-
                        holdings must also be evaluated in the context of regime change as analysed in
                        this report. Now that neither the government nor the entity which it owns or
                        controls through a strategic shareholding are necessarily major players in any one
                        sector, the added value of a strategic shareholding as a means to achieving public
                        objectives is doubtful, especially considering the limitations imposed on the
                        exercise of ‘golden shares’ by the European Court of Justice. In this respect, the
                        Council fully subscribes to the conclusions put forward in the recent report
                        published by the Kenniscentrum voor ordeningsvraagstukken (2006). Even if
                        there are certain, legitimate policy objectives, which justify the continued option
                        for the government to control or veto certain company decisions that might put
                        those policy objectives at risk, a strategic shareholding is only one of a number of
                        mechanisms that can be employed as a form of check (see chapter 5). Regulation
                        may be seen as a potentially less restrictive and more transparent means of
                        achieving public policy objectives, especially if carried out by an independent
                        regulatory authority. If strategic shareholdings are used as a means to influence or
                        direct investment policy, this may come at the expense of company performance
                        and overall value (see for an extensive analysis, Oxera 2005).
                        At the same time, it may also be acknowledged that the retention of public shares
                        may also provide the government with a right to be well informed as a share-
                        holder, and to have access to valuable sources of information in sectors where
                        new actors are emerging – for example, those sectors that are now actively
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<pre>                                                                          conclusions and recommendations
      targeted by foreign sovereign wealth funds (Maasvlakte II being a topical exam-
      ple). There exists, as yet, no specific regulations in this area, and indeed, appro-
      priate regulations in the globalised financial environment may prove difficult to
      implement. In this type of context, government participation on a horizontal
      basis, but on an equal footing with other shareholders, could provide an impor-
      tant potential check, for example against the risk of over-gearing or asset strip-
      ping (see Melody 2008).
      Finally, participation by a state-owned company in new ventures can also be used
      to serve commercial objectives, and can prove to be a useful mechanism for
      encouraging major new investments. For example, existing public companies
      could be encouraged to participate in new investments or new infrastructures.
      The involvement of ebn in investing in gas storage facilities or co2 infrastruc-
      tures could offer both secure financing and longer-term commitment to the
      development of large scale facilities. This, in turn, reduces the threat of regula-
      tory risk for other interested investors (see chapter 6).
      In any event, as the Council has stressed, if strategic shareholdings are to be
      actively used in any sector, then the blurring of roles and responsibilities should
      be avoided. A strict separation between policy and business objectives should be                    197
      maintained. In this respect, it supports recommendations for suitable, transpar-
      ent protocols to be drawn up between the Ministry of Finance (as shareholder)
      and the functional Ministers responsible for policy issues. Nevertheless, the
      Council is of the opinion that supervision by an independent regulator with an
      extended mandate to address ‘Type II’ public values is a preferable alternative to
      strategic shareholdings, given that transparency and accountability can be more
      effectively guaranteed.
7.8.3 procedur al check s and bal ances
      As the previous section 7.6.3 has indicated, the evolution of a joint strategic road
      map would mean redefining the roles of supervisory authorities, regulators and
      the polity – i.e., government and parliament. This process will also result in
      better checks and balances. The Council has suggested that the duties of regula-
      tors/supervisory bodies may need to be more clearly spelled out. If an expansion
      of the economic regulators’ duties to include the realisation of more open-ended
      public interest objectives is deemed necessary, then the scope of the regulator’s
      powers should be circumscribed by legislation, and accompanied by clear guide-
      lines issued by ministers in accordance with legislation. In the Council’s view, the
      interests of citizens and general public should be defined and promoted by the
      government and parliament and not regulators. However, the Council is not
      implying that the government should have a monopoly here. An enhanced, inde-
      pendent role for end-users and consumers should also be considered. Stand-
      alone consumer representation bodies are more effective than those linked to a
      regulator.9
      Finally, the Council recommends that a more robust approach to procedural
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<pre>    infr ast ruc t ures
                        checks and balances should also require ‘joined-up’ thinking at ministerial and
                        parliamentary level. A regular joint ministerial evaluation of the functions of
                        sectoral regulators for example, would be far more effective than the present
                        monitoring system, which is confined to periodic and limited statutory reviews
                        of the sectoral regulators by outside consultancy firms. A clear mandate on
                        regulators to render a more strategic account of their activities to a joint
                        ministerial body and a joint parliamentary committee, to which stakeholders
                        could also make their views known, would be a preferable approach. Moreover,
                        the Council would stress that more attention should be given to regulatory
                        impact analyses and to the development of suitable indicators and benchmarks.
                        In this respect, the emergence of trans-European regulatory networks can
                        offer a wealth of comparative information which can be used in the national
                        context.
                 7.8.4  multi - level check s and bal ances
                        The Council recognises that devising adequate checks and balances on multi-
                        level arenas are especially problematic. Very little attention is currently paid to
                        this aspect by policy-makers. But if responsibility for approving long-term
198                     investment plans as well as individual investment decisions shifts to a European
                        body – as has been proposed with respect to the new electronic communica-
                        tions and energy agencies (see chapter 6) – serious and urgent consideration
                        must be given to this dimension as well.10 There is also a pressing need to devise
                        better and more open processes of accountability. This could be a task for the
                        Joint Regulatory Group, recommended in section 7.7.2 above. This body could
                        be charged with ensuring that the national sectoral regulators obtain a clear
                        mandate for any decisions to be adopted at the European level and that they
                        would, in turn, be required to report back on how final decisions have been
                        implemented.
                        Adequate checks and balances are required to ensure that investment in infra-
                        structures can be optimised, in terms of timing as well as costs, taking account
                        of the multi-level and heterogeneous actor constellation that is (or will be) the
                        new reality in numerous infrastructures. It is in this setting that the broader
                        social and environmental or ‘Type II’ public values increasingly associated with
                        infrastructure provision must be realised, and in which new conflicts of inter-
                        ests between competing actors must be addressed.
                 7.9    time to invest
                        This report has identified major challenges for the future with regard to secur-
                        ing long-term investment in infrastructures. A strategic reorientation of current
                        institutional arrangements is required in order to address long-term public
                        values. In designing a new strategic policy framework the three pillars (redefine,
                        realign, recalibrate) developed in this final chapter are of vital importance.
                        But given the considerable variations across the different infrastructures, the
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<pre>                                                                 conclusions and recommendations
deployment, scope and relative weight given to each of the pillars will differ
depending on the sector.
With the recommendations put forward in this report, the Council aims to
contribute to the development of a strategic policy framework capable of realising
both the interests of today’s national consumer and long-term societal values.
The recommendations elaborated in each of these three pillars, do not provide a
ready-made institutional blueprint for all infrastructures. This report contends,
however, that major challenges for future long-term public values such as inno-
vation, sustainability and long-term availability and accessibility of infrastruc-
tures cannot adequately be addressed by market-based solutions alone. A robust
policy framework, and secured through targeted regulatory intervention, will
still be required to shape the market environment and to ensure that the best
possible signals and risk-sharing tools are available. The necessary process of
reform must reflect a clear recognition that it is now time to invest in national
infrastructure policies as well as in the nation’s infrastructures.
                                                                                                 199
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<pre>    infr ast ruc t ures
                 notes
                 1      Institute of European Affairs, Address by Commissioner Andris Piebalgs,
                        21 March 2006, available at: http://iea.com/images/managed/events_
                        attachments/IEAPiebalgs.pdf.
                 2      ‘Nuclear Energy within the climate change and energy security debate’, Speech at
                         the First European Nuclear Energy Forum, Bratislava, 26 November 2007, avail-
                         able at:
                         http://europa.eu/rapid/pressReleasesAction.do?reference=SPEECH/07/749&
                         format=HTML&aged=1&language=EN&guiLanguage=en.
                 3      nrc Handelsblad, ‘Tjeenk Willink: Sterke markt vereist sterke staat’, 21 May
                        2008.
                 4      This point is elaborated in Van Dijk in his contribution to the wrr study New
                        Perspectives on investment in Infrastructures (2008).
                 5      It is true that the multiplier effect is present in many sectors of the economy,
                        think of agriculture or financial services – but because of the scale effects and
                        network effects, there is a risk of market failure which justifies treating infra-
                        structure extra carefully.
200              6      In Figure 7.2, the infrastructures studied in this report are positioned in four
                        quadrants. Their position on the x-axis is derived from chapter 3, where homoge-
                        nous, hybrid and heterogeneous actors in investment decisions were described.
                        The characterisation of infrastructure goes beyond the issue of the formal owner-
                        ship of the physical infrastructures. It relates to the degree in which heteroge-
                        neous actors influence investment decisions in practice. The position of the
                        infrastructures on the y-axis is derived from chapter 4 that described degree of
                        levels involved in infrastructure investment decisions. Here, both formal and
                        informal, technical and political issues formed the basis.
                 7      See http://www.zero-emissionplatform.eu and http://www.imi-europe.org.
                 8      ‘Samenwerkingsprotocol nma/ dte en sodm’, Staatscourant, 25 May 2007, 99:
                        23.
                 9      House of Lords report on uk Economic Regulation, 2007.
                  10    It is clear that the role of national courts in reviewing regulatory decisions is
                        likely to be eclipsed, but, at the same time, a transfer of more far-reaching review-
                        ing powers to the European courts is by no means obvious (Lavrijssen and
                        Hancher 2007).
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<pre>                                                                                                                                          annex
annex                             char acteristics of the physical infr astructures:
                                  an indicative inventory
Sector                          Depreciation       Natural              Mode of regime change                  Characteristics
                                  period          monopoly?                                                infrastructure manager
Sewe-          rage             40-60 years 1          ++                           none                          municipality
                                  60 years              +              corporatisation, benchmark          drinking water company
Drinking       water
Waste (waste   incineration)
                                 10-15 years            -            in some instances, privatisation       for most incinerations:
                                                                        through private equity and        municipality, but also public
                                                                             corporatisation               corporations and private
                                                                                                                 companies
Dikes
                                  100 years            ++            corporatisation and liberalisation              RWS
                                                                          through outsourcing
                                30-100 years           +/-           corporatisation and liberalisation VW and provinces and water                201
                                                                          through outsourcing           boards (and, in some instances,
Roads
                                                                                                         public private partnerships)
Railways
                                  33 years             +/-            unbundling and some degree of                 ProRail
                                                                     liberalisation through concession
                                  variable 2           +/-              liberalisation (competition                Schiphol
Airport(s)     (Schiphol)
                                                                           between airports) and
                                                                            corporatisation and
                                                                            internationalisation
Electricity
                                30-50 years 3    national grid: +       unbundling, liberalisation,        TenneT, local distribution
                                                regional grid: +/-          corporatisation                      companies
                                  40 years 4       national and         unbundling, liberalisation,       GasUnie Transport Services
                                                  regional pipe-             corporatisation,              (GTS), local distribution
                                                lines: + practical         internationalisation                  companies
Gas
                                                   monopoly in
                                                   gas storage
                                                 and conversion
               communications
                                  variable 5           ---              privatisation, liberalisation,         network operator
Electronic
                                                                              corporatisation,
                                                                            internationalisation
                                                                              (no unbundling)
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<pre>      infr ast ruc t ures
                   annex                               char acteristics of the physical infr astructures:
                                                       an indicative inventory
                     Sector                            Ownership of infra        Supervision (investment)          Dominant regulating level of
                                                                                                                         investment
                     Sewe-          rage                   municipality                  municipality             no direct regulation of investment
                                                      drinking water company     not directly (VROM inspects          EU (water directives) and
                     Drinking       water                                        quality of service and quality     VROM (water quality) but no
                                                                                       of drinking water)          direct regulation of investment
                     Waste (waste   incineration)
                                                      various (municipalities,      VROM and provinces               national and increasingly EU
                                                      public corporations and                                     (for requirements of incineration)
                                                        private companies)
                     Dikes
                                                         state-owned VW/             (VW)/water boards                 national and European
                                                            water boards                                             (water framework directive)
202                                                   state owned (VW) and         VW and provinces and                national and European,
                                                           provinces and           municipalities and water            but latter very limited
                     Roads
                                                        municipalities and                 boards
                                                       water boards (and in
                                                      some instances public
                                                       private partnerships)
                     Railways
                                                        state-owned (VW)          Inspectie voor Verkeer en                   national
                                                                                      Waterstaat/NMa
                                                         State owned and               Schiphol Group                      EU and national
                     Airport(s)     (Schiphol)
                                                     Amsterdam and Rotterdam
                     Electricity
                                                      TenneT = state owned;         NMa/DTe (investment                    EU and national
                                                      LDCs = provinces and          supervision indirectly)
                                                          municipalities
                                                        GTS = state owned;         NMA/DTe (investment                     EU and national
                                                       LDC’s = provinces and       supervisions indirectly)
                                                          municipalities           and Ministry of Finance
                     Gas
                                    communications
                                                         telecom company                    OPTA                           EU and national
                     Electronic
                                                       all private* (one cable
                                                        company Essent still
                                                             part of LDC)
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<pre>                                                                                       notes
notes
1   Economically 40-60 years, but technically 60-80 years (sometimes 30 years, and
    sometimes even over 100 years).
2   According to Anne Graham, The British Airport Authority works with a depreci-
    ation period for runways of 100 years, the Aeroports de Paris with a period of 10
    to 20 years (Graham 2001). The Schiphol Group makes use of a depreciation
    period of 15 to 60 years (runways), 30 to 60 years (platforms), 20 to 40 years for
    other infrastructures such as tunnels, roads, parking, etcetera. (Schiphol Group
    2006).
3   Sometimes only 20 years.
4   40 years for tubes (below surface), 20 years htl net, 55 years rtl net.
5   kpn works with 5-30 years for plants and equipment (kpn 2008). See also Ernst
    & Young (2003).
                                                                                             203
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<pre>    infr ast ruc t ures
204
</pre>

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<pre>                                                                              abbreviations
abbreviations
accc    Australian Competition and Consumer Council
acer    Agency for the Cooperation of Energy Regulators
aemc    Australian Energy Market Commission
aer     Australian Energy Regulator
afm     Netherlands Authority for Financial Markets (Autoriteit Financiële
        Markten)
apx     Amsterdam Power Exchange
avr     Rotterdam Waste Services (Afvalverwerking Rotterdam – Van
        Gansewinkel)
bbl     Balgzand Baction Line
beb     Mining Companies Elwerath and Brigitta (Bergbaugewerkschaffte
        Elwerath und Brigitta)
ccs     co2 Capturing and Sequestration
ceer    Council of European Energy Regulators
cefic   European Chemical Industry Council (Conseil Européen des fédérations
        de l’industrie chimique)
cept    European Conference of Postal and Telecommunications Administration                 205
        (Conférence Européenne des Postes et Télécommunications)
ciwin   Critical Infrastructure Warning Information Network
co2     Carbon Dioxide
coag    Council of Australian Governments
cpb     Netherlands Bureau for Economic Policy Analysis (Centraal Plan Bureau)
ddp     Directly-Deliberative Polyarchy
dso     (regional) Distribution System Operators
dte     Office of Energy Regulation (Dienst uitvoering en toezicht Energie)
easee   The European Association for the Streamlining of Energy Exchange-gas
ebn     Netherlands Energy Management Company (Energiebeheer Nederland
        B.V.)
ec      European Commission
ecb     European Central Bank
ecn     Energy Research Centre of the Netherlands (Energieonderzoek Centrum
        Nederland)
ecj     European Court of Justice
efet    European Federation of Energy Traders
ena     Energy Networks Association
enbin   Association of Energy Network Operators in the Netherlands (Vereniging
        van Energie Netbeheerders in Nederland)
endex   European Energy Derivates Exchange
epcip   European Programme for Critical Infrastructure Protection
era     European Regulatory Agencies
erg     European Regulators Group for Electronic Communications Networks
        and Services
ergeg   European Regulators’ Group for electricity and gas
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<pre>    infr ast ruc t ures
                 erig   Energy Reform Implementation Group
                 ern    European Regulatory Networks
                 etma   European Telecom Market Authority
                 etso   European Transmission System Operators
                 eu     European Union
                 fera   Federal European Regulatory Agencies
                 fes    Economic Structure Fund (Fonds Economische Structuurversterking)
                 fnv    Dutch Trade Union (Federatie Nederlandse Vakbeweging)
                 gb     Great Britain
                 gie    Gas Infrastructure Europe
                 gts    Gas Transport Services
                 h      Hydrogen gas
                 htl    Main Transport System (Hoofdtransportleiding)
                 iea    International Energy Agency
                 ifiec  International Federation of Energy Traders
                 igu    International Gas Union
                 ira    Independent Regulatory Agency
                 kpn    Dutch Royal Telecom (Koninklijke ptt Nederland)
                 ldc    Local Distribution Company
206              lng    Liquefied Natural Gas
                 mce    Ministerial Council for Energy
                 nam    Nederlandse Aardolie Maatschappij bv
                 nec    National Electricity Code
                 neca   National Electricity Code Administrator
                 nem    National Electricity Market
                 nemmco National Electricity Market Management Company
                 ngmc   National Grid Management Council
                 ngo    Non-Governmental Organisation
                 nira   National Independent Regulatory Agencies
                 nl     The Netherlands
                 nma    Netherlands Competition Authority
                 nogepa Dutch Oil and Gas Exploitation and Production Association (Nederlandse
                        Olie en Gas Explotatie en Productie Associatie)
                 nra    National Regulatory Authorities
                 ns     Netherlands Railways (Nederlandse Spoorwegen)
                 ntndp  National Transmission Network Development Plan
                 oecd   Organisation for Economic Cooperation and Development
                 oei    Optimal Energy Infrastructure programme
                 ofgem  Office of Gas and Electricity Markets
                 ofwat  Office of Water Services
                 ogp    International Association of Oil and Gas Producers
                 opta   Independent Telecommunications Supervision and Compliance
                        Authority (Onafhankelijke Post en Telecommunicatie Autoriteit)
                 pvda   Dutch Social Democratic Party (Partij van de Arbeid)
                 ppp    Public Private Partnership
                 rab    Regulatory Asset Base
</pre>

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<pre>                                                                                abbreviations
rea     Council of Economic Advisers (Raad van Economisch Adviseurs)
rioned  Stichting Riolering Nederland
rivm    Netherlands Institute for Health and Environmental Issues
        (Rijksinstituut voor Volksgezondheid en Milieu)
rpi     Retail Price Index
rtl     Local Gas Transport System (Regionale transportleiding)
rwe     Rhine and Westphalia Electricity Network (Rheinisch-Westfälisches
        Elektrizitätswerk)
rws     Directorate-General for Public Works and Water Management
        (Rijkswaterstaat)
sep     Samenwerkende Elektriciteits Productenten
ser     The Social and Economic Council of the Netherlands (Sociaal-Econo-
        mische Raad)
sodm    State Mines Supervision (Staatstoezicht Op De Mijnen)
sp      Socialist Party (Socialistische Partij)
swot    Strengths, Weaknesses, Opportunities and Threats
taqa    Abu Dhabi National Energy Company pjsc (Public Joint Stock Company)
ten     Trans-European Energy Networks
ten-e   Trans European Networks in the field of electricity and natural gas
TenneT  Dutch Energy Transmission Systems Operator                                            207
ten-t   Trans European Networks in the field of transport infrastructures
ten-tea Trans European Transport Network Executive Agency
tsi     Technical Specifications for Interoperability
tso     Transmission System Operators
ttf     Title Transfer Facility
ucte    Union for the Coordination of Transmission of Electricity
uctpe   Union for the Coordination of Production and Transmission of Electricity
ugs     Underground Gas Storage
uk      United Kingdom
us/usa  United States of America
ussr    Union of Soviet Socialist Republics
vemw    Association for Energy, Environment and Water (Vereniging voor zake-
        lijke Energie- en Watergebruikers)
vinex   Fourth Spatial Planning Report (Vierde Nota Ruimtelijke Ordening
        Extra)
voeg    Dutch Traders Association (Vrijhandels Organisatie voor Elektriciteit en
        Gas)
vrom    Ministry of Housing, Spatial Planning and Environment (Ministerie van
        Volkshuisvesting, Ruimtelijke Ordening en Milieubeheer)
vw      Ministry of Transport, Public Works and Water Management (Ministerie
        van Verkeer en Waterstaat)
wrr     Scientific Council for Government Policy (Wetenschappelijke Raad voor
        het Regeringsbeleid)
</pre>

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<pre>    infr ast ruc t ures
208
</pre>

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</pre>

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                 Stout, H. (2007) Weerbare Waarden. Borging van publieke belangen in nutssectoren, The
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</pre>

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<pre>                                                                                                      rapporten aan de regering
rapporten aan de regering
         Eerste raadsperiode (1972-1977)
       1 Europese Unie
       2 Structuur van de Nederlandse economie
       3 Energiebeleid
         Gebundeld in één publicatie (1974)
       4 Milieubeleid (1974)
       5 Bevolkingsgroei (1974)
       6 De organisatie van het openbaar bestuur (1975)
       7 Buitenlandse invloeden op Nederland: Internationale migratie (1976)
       8 Buitenlandse invloeden op Nederland: Beschikbaarheid van wetenschappelijke en technische kennis (1976)
       9 Commentaar op de Discussienota Sectorraden (1976)
      10 Commentaar op de nota Contouren van een toekomstig onderwijsbestel (1976)
      11 Overzicht externe adviesorganen van de centrale overheid (1976)
      12 Externe adviesorganen van de centrale overheid (1976)
      13 Maken wij er werk van? Verkenningen omtrent de verhouding tussen actieven en niet-actieven (1977)
      14 Interne adviesorganen van de centrale overheid (1977)
      15 De komende vijfentwintig jaar – Een toekomstverkenning voor Nederland (1977)
      16 Over sociale ongelijkheid – Een beleidsgerichte probleemverkenning (1977)                                              219
         Tweede raadsperiode (1978-1982)
      17 Etnische minderheden (1979)
         A. Rapport aan de Regering
         B. Naar een algemeen etnisch minderhedenbeleid?
      18 Plaats en toekomst van de Nederlandse industrie (1980)
      19 Beleidsgerichte toekomstverkenning
         Deel 1: Een poging tot uitlokking (1980)
      20 Democratie en geweld. Probleemanalyse naar aanleiding van de gebeurtenissen in Amsterdam op 30 april 1980
      21 Vernieuwingen in het arbeidsbestel (1981)
      22 Herwaardering van welzijnsbeleid (1982)
      23 Onder invloed van Duitsland. Een onderzoek naar gevoeligheid en kwetsbaarheid in de betrekkingen tussen
         Nederland en de Bondsrepubliek (1982)
      24 Samenhangend mediabeleid (1982)
         Derde raadsperiode (1983-1987)
      25 Beleidsgerichte toekomstverkenning
         Deel 2: Een verruiming van perspectief (1983)
      26 Waarborgen voor zekerheid. Een nieuw stelsel van sociale zekerheid in hoofdlijnen (1985)
      27 Basisvorming in het onderwijs (1986)
      28 De onvoltooide Europese integratie (1986)
      29 Ruimte voor groei. Kansen en bedreigingen voor de Nederlandse economie in de komende tien jaar (1987)
      30 Op maat van het midden- en kleinbedrijf (1987)
         Deel 1: Rapport aan de Regering
         Deel 2: Pre-adviezen
      31 Cultuur zonder grenzen (1987)
</pre>

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<pre>    infr ast ruc t ures
                        32 De ﬁnanciering van de Europese Gemeenschap. Een interimrapport (1987)
                        33 Activerend arbeidsmarktbeleid (1987)
                        34 Overheid en toekomstonderzoek. Een inventarisatie (1988)
                           Vierde raadsperiode (1988-1992)
                        35 Rechtshandhaving (1988)
                        36 Allochtonenbeleid (1989)
                        37 Van de stad en de rand (1990)
                        38 Een werkend perspectief. Arbeidsparticipatie in de jaren ’90 (1990)
                        39 Technologie en overheid (1990)
                        40 De onderwijsverzorging in de toekomst (1991)
                        41 Milieubeleid. Strategie, instrumenten en handhaafbaarheid (1992)
                        42 Grond voor keuzen. Vier perspectieven voor de landelijke gebieden in de Europese Gemeenschap (1992)
                        43 Ouderen voor ouderen. Demograﬁsche ontwikkelingen en beleid (1993)
                           Vijfde raadsperiode (1993-1997)
                        44 Duurzame risico’s. Een blijvend gegeven (1994)
                        45 Belang en beleid. Naar een verantwoorde uitvoering van de werknemersverzekeringen (1994)
                        46 Besluiten over grote projecten (1994)
220                     47 Hoger onderwijs in fasen (1995)
                        48 Stabiliteit en veiligheid in Europa. Het veranderende krachtenveld voor het buitenlands beleid (1995)
                        49 Orde in het binnenlands bestuur (1995)
                        50 Tweedeling in perspectief (1996)
                        51 Van verdelen naar verdienen. Afwegingen voor de sociale zekerheid in de 21e eeuw (1997)
                        52 Volksgezondheidszorg (1997)
                        53 Ruimtelijke-ontwikkelingspolitiek (1998)
                        54 Staat zonder land. Een verkenning van bestuurlijke gevolgen van informatie- en communicatietechnologie (1998)
                           Zesde raadsperiode (1998-2002)
                        55 Generatiebewust beleid (1999)
                        56 Het borgen van publiek belang (2000)
                        57 Doorgroei van arbeidsparticipatie (2000)
                        58 Ontwikkelingsbeleid en goed bestuur (2001)
                        59 Naar een Europabrede Unie (2001)
                        60 Nederland als immigratiesamenleving (2001)
                        61 Van oude en nieuwe kennis. De gevolgen van ict voor het kennisbeleid (2002)
                        62 Duurzame ontwikkeling. Bestuurlijke voorwaarden voor een mobiliserend beleid (2002)
                        63 De toekomst van de nationale rechtsstaat (2002)
                        64 Beslissen over biotechnologie (2003)
                        65 Slagvaardigheid in de Europabrede Unie (2003)
                        66 Nederland handelsland. Het perspectief van de transactiekosten (2003)
                        67 Naar nieuwe wegen in het milieubeleid (2003)
</pre>

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<pre>                                                                                                         rapporten aan de regering
   Zevende raadsperiode (2003-2007)
68 Waarden, normen en de last van het gedrag (2003)
69 De Europese Unie, Turkije en de islam (2004)
70 Bewijzen van goede dienstverlening (2004)
71 Focus op functies. Uitdagingen voor een toekomstbestendig mediabeleid (2005)
72 Vertrouwen in de buurt (2005)
73 Dynamiek in islamitisch activisme. Aanknopingspunten voor democratisering en mensenrechten (2006)
74 Klimaatstrategie – tussen ambitie en realisme (2006)
75 Lerende overheid. Een pleidooi voor probleemgerichte politiek (2006)
76 De verzorgingsstaat herwogen. Over verzorgen, verzekeren, verheffen en verbinden (2006)
77 Investeren in werkzekerheid (2007)
78 Europa in Nederland (2007)
79 Identiﬁcatie met Nederland (2007)
80 Innovatie vernieuwd (2008)
   Rapporten aan de Regering nrs 1 t/m 67 en publicaties in de reeks Voorstudies en achtergronden zijn niet meer leverbaar.        221
   Alle studies van de wrr zijn beschikbaar via de website www.wrr.nl.
   Rapporten aan de Regering nrs 68 t/m 80 zijn verkrijgbaar in de boekhandel of via Amsterdam University Press,
   Herengracht 221, 1016 BG Amsterdam (www.aup.nl).
</pre>

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<pre>    infr ast ruc t ures
                           verkenningen
                           Zevende raadsperiode (2003-2007)
                         1 Jacques Pelkmans, Monika Sie Dhian Ho en Bas Limonard (red.) (2003) Nederland en de Europese grondwet
                         2 P.T. de Beer en C.J.M. Schuyt (red.) (2004) Bijdragen aan waarden en normen
                         3 G. van den Brink (2004) Schets van een beschavingsoffensief. Over normen, normaliteit en normalisatie in
                           Nederland
                         4 E.R. Engelen en M. Sie Dhian Ho (red.) (2004) De staat van de democratie. Democratie voorbij de staat
                         5 P.A. van der Duin, C.A. Hazeu, P. Rademaker en I.J. Schoonenboom (red.) (2004) Vijfentwintig jaar later.
                           De Toekomstverkenning van de wrr uit 1977 als leerproces
                         6 H. Dijstelbloem, P.L. Meurs en E.K. Schrijvers (red.) (2004) Maatschappelijke dienstverlening. Een onderzoek
                           naar vijf sectoren
                         7 W.B.H.J. van de Donk, D.W.J. Broeders en F.J.P. Hoefnagel (red.) (2005) Trends in het medialandschap.
                           Vier verkenningen
                         8 G. Engbersen, E. Snel en A. Weltevrede (2005) Sociale herovering in Amsterdam en Rotterdam.
                           Eén verhaal over twee wijken
                         9 D.J. Wolfson (2005) Transactie als bestuurlijke vernieuwing. Op zoek naar samenhang in beleid en uitvoering
                        10 Nasr Abu Zayd (2006) Reformation of Islamic Thought. A Critical Historical Analysis
                        11 J.M. Otto (2006) Sharia en nationaal recht. Rechtssystemen in moslimlanden tusssen traditie, politiek en rechtsstaat
222                     12 P.L. Meurs, E.K. Schrijvers en G.H. de Vries (2006) Leren van de praktijk. Gebruik van lokale kennis en ervaring voor
                           beleid
                        13 W.B.H.J. van de Donk, A.P. Jonkers en G.J. Kronjee (red.) (2006) Geloven in het publieke domein. Verkenningen van
                           een dubbele transformatie
                        14 D. Scheele, J.J.M. Theeuwes, G.J.M. de Vries (red.) (2007) Arbeidsﬂexibiliteit en ontslagrecht
                        15 P.A.H. van Lieshout, M.S.S. van der Meij en J.C.I. de Pree (red.) (2007) Bouwstenen voor betrokken jeugdbeleid
                        16 J.J.C. Voorhoeve (2007) From War to the Rule of Law. Peace Building after Violent Conﬂicts
                        17 M. Grever en K. Ribbens (2007) Nationale identiteit en meervoudig verleden
                        18 B. Nooteboom and F.C. Stam (eds.) (2008) Micro-foundations for Innovation Policy
                        19 G. Arts, W. Dicke and L. Hancher (eds.) (2008) New Perspectives on Investment in Infrastructures
                           Alle Verkenningen zijn verkrijgbaar in de boekhandel of via Amsterdam University Press, Herengracht 221,
                           1016 BG Amsterdam (www.aup.nl).
</pre>

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<pre>                                                                                                                       webpublicaties
      webpublicaties
      Zevende raadsperiode (2003-2007)
WP 01 Opvoeding, onderwijs en jeugdbeleid in het algemeen belang
WP 02 Ruimte voor goed bestuur: tussen prestatie, proces en principe
WP 03 Lessen uit corporate governance en maatschappelijk verantwoord ondernemen
WP 04 Regulering van het bestuur van maatschappelijke dienstverlening: eenheid in verscheidenheid
WP 05 Een schets van het Europese mediabeleid
WP 06 De regulering van media in internationaal perspectief
WP 07 Beleid inzake media, cultuur en kwaliteit: enkele overwegingen
WP 08 Geschiedenis van het Nederlands inhoudelijk mediabeleid
WP 09 Buurtinitiatieven en buurtbeleid in Nederland anno 2004: analyse van een veldonderzoek van 28 casussen
WP 10 Geestelijke gezondheid van adolescenten: een voorstudie
WP 11 De transitie naar volwassenheid en de rol van het overheidsbeleid: een vergelijking van institutionele arrangemen-
      ten in Nederland, Zweden, Groot-Brittanië en Spanje
WP 12 Klassieke sharia en vernieuwing
WP 13 Sharia en nationaal recht in twaalf moslimlanden
WP 14 Climate strategy: Between ambition and realism
WP 15 The political economy of European integration in the polder: Asymmetrical supranational governance and the limits
      of legitimacy of Dutch eu policy-making                                                                                         223
WP 16 Europe in law, law in Europe
WP 17 Faces of Europe: Searching for leadership in a new political style
WP 18 The psychology and economics of attitudes in the Netherlands
WP 19 Citizens and the legitimacy of the European Union
WP 20 No news is bad news! The role of the media and news framing in embedding Europe
WP 21 Actor paper subnational governments: Their role in bridging the gap between the eu and its citizens
WP 22 The Dutch third sector and the European Union: Connecting citizens to Brussels
WP 23 Europe in parliament: Towards targeted politicisation
WP 24 Europe in the Netherlands: Political parties
WP 25 The eu Constitutional Treaty in the Netherlands: Could a better embedding have made a difference?
WP 26 How to solve the riddle of belated Euro contestation in the Netherlands?
WP 27 Connection, consumer, citizen: Liberalising the European Union gas market
WP 28 Dutch eu-policies with regard to legal migration – The directive on family reuniﬁcation
WP 29 The accession of Turkey to the European Union: The political decision-making process on Turkey in The
      Netherlands
WP 30 The Habitats Directive: A case of contested Europeanisation
WP 31 Encapsulating services in the ‘polder’: Processing the Bolkestein Directive in Dutch Politics
WP 32 Zorgen over de grens
WP 33 De casus Inburgering en Nationaliteitswetgeving: iconen van nationale identiteit
WP 34 In debat over Nederland
WP 35 Veel voorkomende criminaliteit
WP 36 Gevaarlijke stoffen
WP 37 ict en internet
WP 38 Voedsel en geneesmiddelen
WP 39 Waterbeheer en waterveiligheid
</pre>

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<pre>W R R R A P P O R T E N A A N D E R E G E R I N G 81
Infrastructures
All sectors of the Dutch infrastructures have undergone a degree of commerciali-
sation, liberalisation or privatisation over the last ten to twenty years. Where in
the past the infrastructure landscape was dominated by public monopolies, the
ownership and management of infrastructures is today shared by several public and
private sector players. The original goals of this ‘regime change’ have in many cases
been achieved: greater efﬁciency, a greater focus on the customer and more choice for
consumers.
The question is whether this emphasis on current consumer interests allows
enough scope to achieve long-term objectives which affect the whole of our society:
innovation, long-term availability and sustainability of infrastructures. This is of
crucial importance for economic and social development, which is coming under
increasing pressure due to the combined impact of the exhaustion of natural resources
and climate change.
The transition to a sustainable future demands substantial investment in infrastruc-
tures, which cannot be taken for granted in the present situation. The wrr has
investigated how these investments could be safeguarded in the long term, whilst
retaining the efﬁciency of the infrastructures.
                               ISBN 978-90-5356-605-3
               A m s t e r d a m U n i v e r s i t y P r e s s • w w w. a u p. n l
</pre>

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<br><br>