Fuel at Sh100, recent problems in the matatu sector, water rationing in parts of Nairobi, and confidence issues in capital markets after a stock firm goes under with depositors' funds. All these problems in key sectors of the economy point towards emerging challenges in utility regulation in the country.

Why are key utilities in the country under stress from rogue players and inadequate responses for industry watchdogs? World over, utility regulation was seen as part and parcel of the deregulation and privatisation policy that was pursued by many governments in the 1990s, and was supposed to usher in legal and policy frameworks that would continue to safeguard public interest following the withdrawal of the State from economic activity.

Today, utility regulation has evolved to also embrace other issues such as setting standards for environmental and consumer protection and promoting healthy competition, among others. Regulation, therefore, was to be different and distinct from government controls, such as price controls.

In Kenya, firms such as the Capital Markets Authority, the Electricity Regulatory Board (ERB) and various water service boards were set up to act as custodians of public interest, at a time when the practice of regulation was far from being properly understood by many players.

Over a decade later, utility regulation has made some modest progress, but is far from getting to the optimal level that would safeguard the interest and welfare of consumers and investors alike, and foster a free enterprise regime that is able to allocate resources efficiently.

Gains made include the creation of a policy and legal framework that now allows for licensing and operation of key providers. In sectors such as energy, there is a move toward seeing the sector in a holistic sense, hence the formation of the Energy Regulatory Commission (ERC) to replace the ERB.

However, current challenges of effective utility regulation outweigh the gains made. First, there is the issue of developing a general approach on which utility regulation is to be founded, whether we're to build a rules-based system or an incentives-based regime. Each has its own merits and challenges.

Rules require ability to enforce, while incentives require market players that respond quickly to signals. Secondly, is the issue of reforming the existing policy framework to match the regulatory regime with best practices.

This will entail boosting features like independence and autonomy of regulatory agencies in order to allow them sufficient muscle to operate and enforce existing regulation laws.

For instance, many heads of regulatory bodies are either appointed by the president or responsible minister. Hence, they are answerable to the executive. Some also draw part of their funding from Treasury, undermining financial autonomy.

Thirdly, is the issue of technology. How is it that stock brokers were able to irregularly deal in clients funds without the knowledge of the CMA or the stock exchange? The challenge here will be to set boundaries within which technological innovation by industry reaches, in order to safeguard client or user welfare.

Finally, the biggest challenge to regulation today is to set new standards and policies for key sectors that desperately require strong policing, but where none exists or is too weak. Sectors such as public transport, marketing and distribution of oil products require strong regulation.

The so-called self-regulation has just turned out to an euphemism for allowing a few big players, and illegal cartels, to take advantage of monopoly pricing and dominant market power.