The role of competition authorities in utilities regulation. Co-operation with sector regulators. The role of Competition Council of Latvia Valdis Latkovskis 2nd analytical department Competition Council of Latvia

1. The aim of the Competition policy Promotion of competitive economy; Promotion of the business environment conducive to lower price, higher quality, new products and greater choice; Promotion of the market for the benefit of consumers.

2. Main activities of the Competition Council Protection of the free, fair and equal competition;. Promotion of the competition in the interests of the public in all economic sectors.

3. Main tasks of the Competition Council and rights to act (1) supervise, how prohibition of abuse of dominant position and prohibited agreements, provided by the Competition Law, other regulatory enactments and international agreements, has been followed. Entitled to: - carry out market supervisions and conduct investigations of violations of Competition Law; - provide opinions regarding conformity of the activities of market participants with regulatory enactments governing competition.

3. Main tasks of the Competition Council and rights to act (2) within the scope of its competence, formulate draft legislation; prepare and submit opinions regarding draft regulatory enactments which directly or indirectly affect issues on competition; in event of privatisation, reorganisation and demonopolization of state or local government companies, submit if necessary proposals or opinions regarding observance of the principles for the protection, maintenance or development of competition. Entitled to: - formulate draft legislation; - evaluate draft legislation and other documents prepared by other institutions and to provide opinions in respect of them, if they include provisions influencing issues on competition.

4. Decisions taken by Competition Council (1) 1) Liepājas siltums (2003) – production of heating energy, distribution in central network and selling. Abuse of dominant position, i.e., refusal to conclude an agreement with market participant in vertical downstream market (heat meter installation services). The consequences - reduced competition in downstream market, added barriers to entry into the market.

4. Decisions taken by Competition Council (2) 2) Latvijas propāna gāze (2007) – distribution in networks (from underground and above-ground tanks), delivery and selling liquefied petroleum gas. Abuse of dominant position, i.e., restricted other (potential) competitors opportunity to enter into the vertical downstream market (internal gas supply system maintenance services) by influencing consumer choice - stopped gas supplies to homes where gas internal systems maintenance services were provided by another company (competitor) and put unreasonable requirements to them to renew gas delivery if maintenance also hereafter would be provided by competitors.

4. Decisions taken by Competition Council (3) 3) Latvijas propāna gāze (2008) – distribution in networks (from underground and above-ground tanks), delivery and selling liquefied petroleum gas. Abuse of dominant position, i.e., in gas cylinder lease (sales) contracts were included a provision requiring that filling of the gas cylinders can be done only by itself (seller) – bundling of two related (but independent) markets. The consequences - reduced competition in gas cylinder filling service market.

4. Decisions taken by Competition Council (4) 4) Latvijas propāna gāze (2008) – distribution in networks (from underground and above-ground tanks), delivery and selling liquefied petroleum gas. Abuse of dominant position, i.e., unreasonably high sales tariffs for delivering gas from underground and above-ground group tanks and their application to separate consumers. Comment: liquefied petroleum gas market was regulated till 2007, since 2007 only distribution to apartment buildings was regulated, but since 2012 market is fully liberalized.

4. Decisions taken by Competition Council (5) 5) Latvenergo (2009) - production of heating energy, electricity, selling. Abuse of dominant position, i.e., used retroactive discount system was confusing and distorted competition in the wholesale heating energy market. Latvenego forecasted a competitor's participation in procurements, and offered to purchaser a discount exactly on these purchases. Only part of all demanded heating energy was purchased in procurements (free market), other part could be delivered only by Latvenergo (only Latvenergo has sufficient producing capacity) (exclusive market). Thereby Latvenergo used dominance in exclusive heating delivery part to reduce price in free market heating energy part.

4. Decisions taken by Competition Council (6) 6) Jūrmalas siltums (2011) - production of heating energy, distribution in central network and selling. Abuse of dominant position, i.e., refused to conclude an agreement with independent heating energy producer to purchase heating energy in 2011 (without considering the potential benefits of it). Also it unreasonably restricted independent producer ability to work with full capacity (2 days of idleness) in The consequences - eliminated competition in heating energy producing market.

5. Initiated investigations (ongoing)(1) 1) Ūdeka – providing water management service, distribution in central network and selling. Potential abuse of dominant position, i.e., restrict other (potential) competitors opportunity to enter into the vertical downstream market (water meter installation services). The consequences - reduced competition in downstream market.

5. Initiated investigations (ongoing)(2) 2) Latvijas gāze – natural gas transmission, storage, distribution, and sales. Potential abuse of dominant position, i.e., refusal to conclude a contract for gas deliveries with the new object owner or user (in event of changing owner / user), while the previous object owner / user are not fully paid for previously provided gas amount, or the new owner / user does not agree to take over previous debt obligations.

Conclusions (1) Ability to affect situation in utilities market directly: - within the scope of its competence formulate draft legislation; - evaluate draft legislation and other documents prepared by other institutions and to provide opinions in respect of them; - conduct investigations of violations of Competition Law in utilities market.

Conclusions (2) Ability to affect situation in utilities market indirectly: - publication of conclusions about situation in utilities markets in general that arise from investigated cases and market supervisions (problems, recommendations, opinions); - informing Public Utilities Commission, ministry and other related institutions about problems in regulated sector; - Competition Council's opinion / position of the regulated sector issues.

Thank you for attention!