Assessing the business boundaries of regulated operators

Should regulated operators perform activities in competitive markets?

In recent years, regulated utility operators have diversified their activities, leading to a grey area when it comes to defining their mandates. Although their core activities are identified and controlled by a specific authority, there’s no clear regulation on their other, ‘non-regulated’ activities. 

In Belgium, for example, it appears that operators in different regulated sectors (transmission system operators (TSOs), distribution system operators (DSOs), water companies, etc.) are increasingly involved in diversified activities. This could lead to potential difficulties such as extra risk for the regulated activities and their stakeholders, higher risk of cross-subsidisation and unfair competition. 

The question raised by this report is should regulated operators perform non-regulated activities and if so, under which circumstances?

This study was based on both research and interviews with the following organisations:

  1. VREG (Independent authority of the Flemish energy market)
  2. CREG (Commision of Electricity and Gas Regulation)
  3. CEER (Council of European Energy Regulators) 
  4. Authorité Belge de la Concurrence (Belgian Competition Authority)

The assessment of the above question in this report is built around four topics:

  1. The objectives of regulating specific activities
  2. The scope and boundaries of regulated activities
  3. The advantages and disadvantages of having regulated operators active in competitive markets
  4. The practices to put in place to ensure that regulated operators don’t interfere with competitive markets and don’t dilute the main purposes of regulation

While there’s no one-size-fits-all answer, the key findings of this report emphasise the important roles of both policy makers and regulators to ensure that social welfare is always optimised and that there’s no interference within competitive markets.

Competitive activities: to regulate, or not to regulate?

Competitive activities: to regulate, or not to regulate?

Regulations and related topics have recently made headlines on several occasions. While some questioned whether or not a regulated operator should perform a specific activity, others questioned the necessity to regulate competitive activity to avoid the pitfalls of a monopoly. Based on PwC’s extensive experience with regulators and regulated operators, we analysed the scope of activities performed by regulated operators to highlight key principles determining if, and under which conditions, these activities could be performed.

This report is intended not only for regulators, operators and policy makers, but to any individual or organisation active within the numerous sectors facing rapidly evolving regulation.

Contact us

Serge Loumaye

Partner, PwC Belgium

Tel: +32 47 888 3532

Luc Vercruyssen

Director, PwC Belgium

Tel: +32 47 991 3180

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