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In the Name of God The Beneficent, The Merciful OOCUR 2013 Market Reform Does Regulated State-owned Enterprises Compromise Regulator's Values? (Electricity.

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Presentation on theme: "In the Name of God The Beneficent, The Merciful OOCUR 2013 Market Reform Does Regulated State-owned Enterprises Compromise Regulator's Values? (Electricity."— Presentation transcript:

1 In the Name of God The Beneficent, The Merciful OOCUR 2013 Market Reform Does Regulated State-owned Enterprises Compromise Regulator's Values? (Electricity Sector Public Utilities Commission Belize) 1

2 Objectives: 1) hopefully something of value will be said to one or more persons; 2) a definition of values; 3) what are the Regulator’s Values? 4) look carefully at the question; 5) make a recommendation: 2

3 Regulatory Compromise deserves our attention: a) exists at multiple levels in our systems; b) attacks the Regulator at multiple levels; c) the Regulator is a major line of defence, and possibly the last line of defence in the interest of the customers; 3

4 Regulatory Compromise deserves our attention: a) can distort prices customers pay for Utility services; b) can distort prices customers pay for building electrical installations; c) can distort the level playing field customers expect at the Regulator’s front office; d) and it can reduce the quality of service that customers deserve and expect from Regulator and Utility; 4

5 Market Reform – The Question Does Regulated State-owned Enterprises Compromise Regulator's Values? 5

6 The Question makes some Direct Statements 1) this question is complex; 2) does not simply require a straightforward response; 3) makes some “direct statements”, 6

7 This Question states clearly that: 1) the Regulator must have Values. 2) some situations may compromise Regulator’s Values. 3) Compromised Values affect performance, and at minimum, could undermine the Regulator’s ability to secure appropriate service for the customer. 4) major elements of Regulatory compromise are likely from Regulated State-owned Enterprises. 7

8 This Question states clearly that: 5) major elements of Regulatory compromise are not likely from Regulated Privately-owned Enterprises. 6) Regulated Privately-owned Enterprises are likely to facilitate the smooth functioning of the Regulator; 7) Caribbean Communities should move toward Regulated Privately-owned Enterprises; 8) Caribbean Communities should move away from Regulated State-owned Enterprises; 8

9 Values One Possible Definition Values may be defined as “important and enduring beliefs or principles” shared by the members of a group or organization, about what is good or bad and, what is desirable or undesirable. Values have major influence on a person's or on an organization’s approach to life and to the person’s or the organization’s performance; and Values can serve as broad and necessary guidelines in all situations. beliefsmembersinfluenceperson'sguidelines 9

10 We must ask: a) what are the Regulator’s Values? b) where should the search begin? c) the Regulator is a creature of law: the Electricity Act? the Public Utilities Commission Act? 10

11 Electricity Act: Section 6.-(2) The Commission shall exercise the powers assigned or transferred to it under this Act in a manner which it considers is best calculated to - a) secure that all reasonable demands for electricity are satisfied; b) secure that licence holders are able to finance the carrying on of the activities which they are authorized by their licences to carry on; c) promote competition in the generation and supply of electricity; 11

12 d) protect the interest of consumers with respect to: prices, continuity of supply, quality of service; e) promote efficiency and economy; f) promote research into and the development and use of new techniques; g) protect the public from dangers arising from the generation, transmission or supply of electricity; 12

13 The search has identified some, of many, obligations placed on the Regulator for product and service delivery. We must ask with these responsibilities placed on the Regulator, by the law; is the Regulator in need of Values? Values that will ensure that all members of the body are informed and ready to implement product and service delivery, in a balanced manner and in the best interest of customers and other stakeholders? 13

14 Can the Regulator, our regulator (Commissioners, employees and Contractors) be allowed daily, to proceed with our business of regulation, and not have her/him fitted with the best possible (bullet proof) set of Values? Can the Regulator (Commissioners, employees and Contractors) be asked to proceed to the front line and to act/react/respond in the trenches with Wiremen, Contractors, Investors, the Poor, Developers and others, and not have her/him fitted with the latest skill-set of Values? 14

15 A Few Observations 1) We have seen our Regulator’s Vision Statement. The Public Utilities Commission will be a legitimate economic regulator that balances the interests of stakeholders through the implementation of a best practice approach to regulation. 2) We have seen our Regulator’s Mission Statement. The purpose of the Public Utilities Commission is to regulate the electricity, water, and telecommunications sectors in Belize to efficiently provide the highest quality services at affordable rates, ensuring the viability and sustainability of each sector. 15

16 3) While some entities include their Values Statement within their Vision Statement or within their Mission Statement, our Regulator has not done that. We are/I am certain, I have no doubt, that our Regulator has strong, robust and enduring values that we are happy and thankful to have an opportunity to share in; but do we need these Values written? 16

17 4) We have seen BEL’s Vision Statement. Vision A model of excellence 5) We have seen BEL’s Mission Statement. Mission To provide reliable electricity at the lowest sustainable cost, stimulate national development and improve the quality of life in Belize. 17

18 6) We have seen BEL’s Values Statement. Values Reliability Integrity Team Work Respect Passion for Excellence 18

19 7) At Scotia-Bank on Phillip Goldson Highway, we have seen their Values Statement. In my assessment; Scotia-Bank uses a three (3) stage process to deliver what appears to me to be a Vision/Mission/Values Statement. At Stage # 1, Scotia-Bank provides an un-labelled Vision/Mission Statement. At Stage # 2, Scotia-Bank employs one word to identify and state each Value. Then at Stage # 3, Scotia-Bank proceeds to provide a short, clear, invigorating, and definitive action oriented meaning for the Value. 19

20 ScotiaBank Phillip Goldson Highway Our Shared Values Our core purpose is to be the best at helping customers become financially better off. This guides all our decisions. We are committed to providing excellence in customer service by living our shared values – as a team and as individuals. 20

21 Integrity … Interact ethically and honestly with others. Respect … empathize and fully consider the diverse needs of others. Commitment … achieve success for our customers, our teams, and ourselves. Insight … Use our high level of knowledge to proactively respond with the right solutions. Spirit … Enrich our work environment with teamwork, enthusiasm, and a can-do attitude. 21

22 Values (Our Shared Values): a) tell us how we want to behave; what to expect from ourselves; how we will respond in present and future situations; and our Values tell others (our partners, stakeholders, and customers) what to expect from us as we interact and walk together in building our communities. b) in particular, the Regulator on the front line and in the trenches, very much need to be armed with shared values, to allow members of the body to act/react/respond to customers, stakeholders, and among ourselves, in the most appropriate manner and on a continuous and consistent basis. 22

23 The Regulator’s Values or Principles Of course, it has become clear by now, and with full agreement by all. It is important for the Regulator to formulate and develop a Statement of Values (Our Shared Values). What should the public be looking for in the Values Statement? What should the public be expecting to see? for example, should the public be expecting that the Statement of Values will include things like: 23

24 1) Consultation? important to hear from stakeholders. 2) A statement on “Good Governance? 3) we appreciate countries with fully integrated Utility, but I prefer the Utility downstream, near the point of sale. 4) no “retroactive rate setting” 5) No undue preference and no undue dis­crimination. 6) RAV must show prudence; must be used and useful. 7) the Regulator must have the right to information/data. 24

25 8) a clear and understandable RSM. 9) consumers pay lowest possible rates for services. 10) decisions, that are clear and transparent. 11) clear and transparent penalties that fit the crime. 12) no return for the Utility on Contributed Capital? 13) That Rates should be fair and just; 25

26 There is no intention here to jump the gun. there is a process to establish an organization’s Values. such a process could include multiple stakeholders at varying levels (Commissioners, employees, invite some external partners … invite Adeli, invite Jules, invite Mose, invite the Chamber). The process should be inclusive, the process should be open, the Regulator may want to look for new ideas. 26

27 Back to the Question What Really is The Question Saying? this question is not simply asking something; neither is it simply making one or two open and clear statements. it is important to interrogate this question, and if necessary, this question may need to be treated as a hostile question! 27

28 Is the question saying/stating? that if the Utility is Government/State-owned: 1) the Ministry and GOB has direct control in implementing policy, nothing has to be written? 2) fees are set by the Ministry, the Regulator has to step in line? 3) Regulator and Utility has same ministry, Utility has direct access to Minister and P.M. and can dictate to the Regulator? 4) Regulator is compromised, must obtain ministry’s approval before it can act. The Regulator follows unwritten directives, not the law? 5) the Regulator is captured and any appearance at making Byelaws, Rate Setting, Orders and Directives, is purely a pretence? 28

29 Or, is the question saying/stating? that if the Utility is Privately- owned: 1) Regulator has a working chance to be independent? 2) there will be no attempt by the Utility, to capture the Regulator? 3) no likelihood of a compromised relationship between Utility and Regulator, or GOB and Utility, or GOB and regulator? 4) information needed by the Regulator will flow smoothly and evenly, the Regulator is always an informed position? That information asymmetry will always be at a minimum? 5) efficiency, effectiveness, fairness and a level playing field will automatically be the order of the day? 29

30 Or, is the question saying/stating? only the Regulator’s Values can be compromised? Utility’s Values are so strong, so reinforced, and so instilled into the Utility at all levels, that these Values are above being compromised? GOB’s Values are so strong, so reinforced, and so instilled into the GOB persons at all levels, that these Values are above being compromised? 30

31 Or, is this question saying/stating: that the Regulator is the last and most important line of defence for customers and other stakeholders, and therefore Regulator’s Values must be formidable, impregnable? 31

32 The Meaning of Moot a matter is moot if further discussion, interrogation and probing, can have no effect, or events have placed the matter beyond the reach of ordinary discussion. The matter has been deprived of practical significance or rendered purely academic. Based on my history, I conclude that the Question is Moot. I will withdraw the conclusion, if there is no support, no rational basis for such conclusion. 32

33 Incidents : A) As a young engineer I sat in a Board Meeting as the Board reviewed the analysis I provided on submissions for a RFP; After general comments, the Chairman asked “who shall we give this contract to, this proposal Victor recommended or our friend. The Board responded unhesitatingly and clearly, our friend. I came out of that meeting with vertigo, my medical doctor concluded I was working too hard, and gave me a few days off. I went back to work same day and advised Victor. You do the analysis & recommendation/s. You run one leg of the relay, then pass the baton; no bearer of burdens can bear the burden of another … I note that the Utility was State-owned. 33

34 B) In 1992 a permit was given to a generator informing the generator to proceed as he saw fit, no law now or future would affect any of generator’s decisions. The Project had a component to be built by GOB, expected price two (2) cents Belize per kWh, it was not built. The component later built by the generator, with a price of ten (10) cents Belize per kWh. This permit has led to the generator claiming that it cannot be regulated, and sometimes ignoring request for providing information to the Regulator. … I note that the Utility/generator was Private-owned. 34

35 C) In 2005 the Regulator issued its first RSM. The Utility and the Regulator had issues. Up to 2007 the law read “the Commission may, with the approval of the Minister make Byelaws ….. ….. ….. The Regulator had previously approved some PPAs and also had previously approved the value of the RAV. In 2007 the law was changed to “the Minister may, after consulting the Commission, make Byelaws” ….. ….. …..; In late 2007 the ministry issued a Byelaw that contained a new RSM, re-stated what PPAs were approved, and also re-stated the RAV; … I note that the Utility was Private-owned. 35

36 D) In 2008, 2009, 2010 the Utility sharply reduced the willingness to provide information to the Regulator; In 2011 GOB took over the Utility; yes there has been some changes, not sufficient for me to write home about; … I note that the Utility is Government- owned. 36

37 E) In 2011 (one of many incidents) a License Wireman came to the front office (the front line) looking for one of the female clerks, to express a thank-you for customer care he had received. The clerk was not available, so he gave a small amount of money for the clerk. The information quickly reached one of our engineers who called the Wireman, returned the money with signature, and reminded that the PUC does not accept tips. F) There are more Incidents that can be stated, both from history and at the present, but there is no additional clarity to be obtained. 37

38 Identifying the Issue While doing diligence to identify the issue, keep in mind that in Belize, the regulator currently has oversight responsibility for the Public Utilities Providers, and also for the Building Electrical Installation Industry. The issue is made up of several components, the search should inform our ability to propose options for resolving Regulatory Compromise: 38

39 1) The Politician … We all are aware of the Project Process. It goes from Concept to Operation (and maybe salvage), and includes several well defined phases. The Politician has a limited political time-window to achieve delivery on a Project, and with the best of intention, sometimes the Politician may see the Project Process as an obstacle to achieving operation in the limited political time-window. The Politician needs/wants to deliver, the Politician must deliver, hence a political-corner cut here and there to achieve Project delivery (with the best of intentions), could have some compromising impact. 39

40 2) The Profit Motive … In general our financial investments are driven by the profit motive. As a rule we have one bottom line, profit. This could be harmful; this could lead to the desire for excess profits, and the desire for excess profits could result in compromise. 3) The Developer … The Developer is under pressure to get his product into the market, and is driven to maximize the return of her shareholders, which in fact, is her objective. The Developer may use lobbying and other techniques; but again, the profit pressure, and the market pressure could cause distortion that may encourage compromise. 40

41 4) The Utility … In the business of regulation there is information asymmetry. The Regulator needs information for him to be able to come to correct decisions, and to act in line with these decisions. The Utility has all the information it needs and also has all the information that the Regulator needs. 5) The Wireman … As ordinary as the Licensed Wireman, in his day to day affairs, may appear to be, he too is under the pressure of a time-window, under the pressure of maximizing profit, under the pressure of competing in the market place, under the pressure of helping some consumers to reduce electricity bills, for a price. 41

42 6) The Business-Man … Some consumers find it useful to employ the services of Wiremen to pilfer electricity. They develop new ways for diverting electricity consumed away from the meter; this of course has the impact of increasing losses, and could compromise the Regulator’s ability to deliver the best price for the service. 7) The Regulator … The Regulator has some capacity to design and construct appropriate penalties; but any penalty must be of sufficient financial magnitude to fit the crime. There may be a need for the Regulator to invest some resource in the development of penalties that are sufficient in financial magnitude to cause the Utility and others to pay attention to the stated needs of the Regulator. 42

43 I hasten to state, that history has shown that this situation has nothing to do with whether or not the Utility is State-owned or is Privately-owned. What can we do: Regulatory compromise exists, it is a reality of life, a reality of the way humans live and do business. 43

44 Fixing BAU … Regulatory compromise benefits the few; it distorts the field of activity, and generally reduces the quality of service received and may increase the cost of service received by majority of consumers. For want of a better definition/terminology; Regulatory Compromise may uncomfortably be called, the business- as-usual (BAU) scenario. We need to fix the BAU-scenario, and one way could be to add an Anti-Regulatory-Compromise-Body (ARCB), made up of some of our partners designed and intended to offer comments “in-house” and “openly” as the ARCB sees fit. This is not necessarily something new, because the Regulator by design/character is intended to consult and to seriously consider the comments coming out of the consultation. Also the Minister has the power to assemble advisory (consulting) bodies, and just maybe the ARCB may be one such body. 44

45 Attracting the ARCB … The ARCB will be made up of individuals from organizations such as: APEB; Kremandala; Channel 7; and so on. example the Regulator will work with Kremandala to assign a proven employee to the ARCB, and the Regulator will, by order, ensure that the Monopoly Utilities pay a meaningful monthly allowance to Kremandala for the service of this proven employee, while she/he is still fully employed by Kremandala. This will allow the Kremandala employee the flexibility to have time to review and comment on Utility issues in the interest of the public. 45

46 Purpose of the ARCB … The ARCB will be intended/designed to deprive attempts at Regulatory Compromise of value or effectiveness; to make futile or of no consequence the efforts of Regulatory Compromise. The ARCB is not intended to replace or interfere with the functioning of the Commission; rather it is intended to know what is current with the Commission, read Commission decisions and other documents, and make comments to the Commission and the Minister on how things can be done better. This may suggest no political appointments to the ARCB. 46

47 there is no intention to indicate the ARCB is the solution. The intention is to seek agreement that Regulatory Compromise is not acceptable, and to suggest it is important to seek a solution. Finding a solution belongs to the Minister and/or Commission; but it would help if the Minister or Commission do not go it alone; it would help if the services of partners are employed in the search to find one or more mechanisms to nullify Regulatory Compromise. 47

48 You have been patient and kind Thank you very much 48

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