The hybrid model for economic regulation of water utilities: Mission impossible?

The two main approaches to economic regulation-regulation by contract and regulation by agency-may both encounter significant challenges in regulating public-private partnerships when institutions are weak. As a result, the hybrid model, a mixture of elements from both systems, is widespread. This paper considers hybrid regulation as a distinct regulatory model. A case study of water services regulation in Manila from 1997 to 2015 suggests that hybrid regulation is both possible and compelling. Yet, while it might help to expedite private-sector involvement initially, fundamental tensions between the two underlying approaches may undermine PPP sustainability if not addressed appropriately at the outset.