Economic Regulation 

This is where the Institute posts material related to economic regulation, particularly of utility sectors such as water, energy, transport and telecoms, along with the wider regulation of the environment. If you have material to add, or would like to help curate this page, please contact us. 

Economic regulation involves the imposition of rules, backed by penalties and sanctions, that are intended to modify the economic behaviour of individuals and firms. Regulation, for example, limits choices in certain economic areas, including prices, supply, rates of return, information disclosure, methods of production, standards for products or services, and conditions of service.

The information here relates particularly to the regulation of utilities and the environment. Economic regulation takes place elsewhere too, particularly as part of business regulation.

Organisations involved in economic regulation in the utility and transport sectors include:

• Ofcom is the UK’s communications regulator of TV, radio, video-on-demand, fixed line telecoms, mobiles, postal services, and the airwaves over which wireless devices operate.

• Ofgem, the Office of Gas and Electricity Markets, protects consumers by regulating for a greener, fairer energy system.

• Office for Nuclear Regulation protects society by regulating for safe nuclear operations.

• Ofwat, the Water Services Regulation Authority, is responsible for economic regulation of the privatised water and sewerage industry in England and Wales.

• The Office of Rail and Road is the safety and economic regulator of Britain’s railways and highways, and the railways competition authority, enforcing consumer protection.

• The Utility Regulator regulates the electricity, gas, water and sewerage industries in Northern Ireland.

• The Water Industry Commissioner for Scotland regulates water and sewerage services in Scotland.

Organisations involved in environmental regulation include: 

• The Environment Agency is responsible in England for regulating major industry and waste, contaminated land, water quality and resources, fisheries, inland river, estuary and harbour navigations, conservation and ecology, and for managing the risk of flooding.

• Natural Resources Wales has regulatory responsibility for protecting people and the environment including marine, forest and waste industries.

• Scottish Environment Protection Agency (SEPA) is Scotland’s principal environmental regulator.

• Northern Ireland Environment Agency protects and enhances Northern Ireland’s environment.

• Maritime Management Organisation protects and enhances the marine environment and regulates sustainable marine activities and development.

• Maritime and Coastguard Agency regulates ships and seafarers, enforcing standards for ship safety, security, pollution prevention and seafarer health, safety and welfare.

• The Competition and Markets Authority also has a role in economic regulation including to promote competition for the benefit of consumers in utility and other sectors.

Further reading and information:

• FCA (2022) How regulation can prepare the ground for economic growth.

• Emmanuelle Auriol, Claude Crampes & Antonio Estache (2021) Regulating Public Services: Bridging the Gap between Theory and Practice (Cambridge University Press).

• Maya Bacache-Beauvallet, Anne Perrot (2017) Economic Regulation: Which Sectors to Regulate and How? in Notes du conseil d’analyse économique 44(8) 1-12.

• • NAO (2016) Accountability to Parliament for taxpayers' money.

• Department for Business Innovation and Skills (2011) Principles of Economic Regulation.

• George J. Stigler (1971) The Theory of Economic Regulation The Journal of Economics and Management Science 2(1) 3-21.