New Developments in Economic Regulation. Lessons for the Polish District-Heating Sector

The growing awareness of the inherent weaknesses in the sectoral regulation model used around the world is stimulating thoughts about how it should be reformed. The essence of the new approach is to activate companies and their customers to find, through direct negotiation, regulatory solutions that best fit interests of both sides. Such an approach, known in the USA as `negotiated settlements', is now beginning to be implemented in some other countries. The aim of this paper is fourfold: first, to explain the essence of the form of regulation based on negotiated process, and the implications of this change for the role of the regulator in the regulatory process; second, to indicate the key benefits and risks associated with this form of regulation; third, to provide an overview of initial experiences in its implementation in other countries and to identify the most important lessons learned; and fourth, to create a number of arguments related to applying this approach in the Polish district-heating sector.