By Ansord Hewitt
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About the Author... |
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Ansord Hewitt is employed as a Senior Economist at the Office of Utilities Regulation in Jamaica. Prior to this, he worked with the Fair Trading Commission also as an Economist from 1994-2000. His duties as a Senior Economist at OUR include: conducting and assisting with rate reviews, analysing financial data submitted by regulated entities, writing documents for public consultation and providing economic advice to the Office on a range of regulatory issues. He holds a BSc in Economics and Management from the University of the West Indies and an MSc in Regulations from the London School of Economics. Ansord was a participant at IP3's "Energy and Power Sector Financial and Tariff Rate-Setting" weminar (November 26-December 14, 2001). |
As one who has recently benefited from the training that IP3 provides I would like to use this medium to offer congratulations to the organisation on the pivotal role that it is playing in providing global training on matters of Public Private Partnership(IP3). It is also commendable that IP3 has provided this excellent window to highlight the activities of its global alumni.
This article is written from a regulator's perspective and in it I have attempted to provide information on the role, function and achievements of Jamaica's Office of Utilities Regulation. Additionally, I have outlined some of the challenges with which we are currently grappling as well as underscored some of the ways we have and no doubt will continue to benefit from the resources of agencies such as IP3.
The Office of Utilities Regulation (OUR) is a multi-sector regulator in Jamaica responsible for the regulation of: telecommunications, electricity, water, sewerage and transportation by road, rail and ferry. The authority of the OUR to regulate the utilities in question is set out in the Office of Utilities Act 1995 and the Act to Amend the Office of Utilities Act, 2000 and specifically, in the enabling statues and instruments governing each sector or utility as the case may be. The OUR first opened its doors to the Jamaican public in 1997.
The OUR falls into the category of what has become known all over the world as independent regulatory institutions. Although the notion of independence is sometimes hard to define, in the context of the OUR it is perhaps best illustrated by delineating some of the operational features of the Office and important provisions of its governing statute.
The OUR does not receive a subvention from the consolidated fund (treasury) to meet its budgetary requirement. Instead, its budget is funded by an annual levy on the various entities it regulates. This is allocated among the regulated sectors and entities according to the OUR's estimates of their demand on its resources. It must be noted, however, that the annual budget of the OUR is still subject to ministerial scrutiny. This requirement is aimed at preventing any abuse on behalf of the OUR, to levy charges on the regulated entities, and form part of the accountability requirement to ensure that the Agency does not act as a law unto itself.
The OUR is subject to the authority of the Executive to issue policy directives of a general nature but it is not part of the executive arm of the government, subject to the day to day direction from Ministers. At the same time, decisions taken by the OUR in fulfilling its regulatory duties are not subject to reversal by the political directorate. In keeping with the principles of natural justice however, there are provisions for appeal to both the courts and or a tribunal.
The matter of how principal officers are appointed is also one of the areas that is examined in determining the independence of a regulatory body. In the case of the OUR, the governing statute clearly sets out the means and terms on which the principal officers (Director General and Deputy Directors General), are to be appointed. The Director General is appointed by the Governor General on the recommendation of the Prime Minister, while the Deputy Directors General are appointed by the Prime Minister on the recommendation of the relevant minister. An important safe guard in the act is that these Officers may be appointed for no less than three years and up to a maximum of seven years with eligibility for reappointments at the end of each term. The period of employment, therefore, of the Officers in question would normally span the country's five-year electoral cycle and since the act also specifies the conditions under which their employment may be terminated, which provides some protection against dismissal on a whim by the executive.
Perhaps the most important articulation of the independence of the OUR is the requirement for it to conduct affairs transparently and to provide written explanation for each decision. The OUR fulfils this requirement by inter alia: the act of issuing public consultation documents setting out its preliminary position on issues and soliciting the inputs of interested parties; making its decisions and its reasoning public and providing annual reports to parliament (which it is obliged to do under the OUR Act). This approach is vital because it ensures that the OUR fulfils its transparency obligation while maintaining the institution's legitimacy in the eyes of the Jamaican public. This process of public consultation also provides the OUR with the opportunity to elicit valuable advice from different interest groups. A number of the documents used for public consultation are published on the OUR's website at www.our.org.jm.
Under its current structure, the OUR is headed by The Office consisting of a Director General and two Deputy Directors General. A staff of technical and administrative personnel staffs The Office. The technical personnel undertake the investigative and analytical work relating to the various utilities and provide the Office with the advice that it needs to fulfil its statutory duties. There is some degree of specialisation among the technical staff among various utilities, but as a general principle, The Office is committed to inter-departmental training. My own attendance at the recent IP3 seminar on "Energy and Power Sector Financial and Tariff Rate-Setting" (November 26-December 14, 2001) reflects this commitment. Prior to the workshop, my focus was primarily on matters relating to telecommunications. My enrolment in the training programme was intended to expose me to some of the critical issues and concern facing the power sector. Subsequently, it is anticipated that in the coming months I will become more involved with work relating to the local power sector.
The work carried out by the OUR can be classified along two broad lines, economic regulation of utilities and providing consumer protection. Economic regulation runs the gamut from providing advice on licensing and drafting regulation, to reviewing and approving tariffs. Consumer protection is provided indirectly via good economic regulation but The Office is also required to provide explicit consumer protection particular with regard to safety and quality of service. This is accomplished through its Consumer Affairs Division (CAD) which inter alia: receives and investigates complaints against utilities, recommends and prescribes quality of service rules, prescribes procedures for addressing complaints and monitors the performance of utilities with regard to consumer complaints. Performance monitoring records are made available to the public as a matter of routine.
Since its establishment, The Office has done seminal work in the regulation of telecommunications, electricity and water. The OUR provided critical analyses in telecommunication from 1997-2000 on rate reviews submitted by Cable and Wireless Jamaica (up to then a monopoly) under a rate of return regime. Subsequent to the beginning of phased liberalisation of the local telecommunications sector in 2001 The Office has successfully presided over the establishment of interconnection regimes to foster market entry for mobile telecommunication. It has also facilitated the licensing of new entrants in the telecommunications sector to provide, internet service, Free Trade Zone services, data transmission services, and to resell domestic and international minutes. In keeping with statutory requirements the Office has (since 2001) initiated a price cap regime for setting tariffs for Cable and Wireless' basic telephony services.
In the electricity sector, the OUR has reviewed and approved various tariff submissions by the Jamaica Public Service Company (JPSCO). It has also assisted in the drafting of a new licence for the JPSCO after the sale of 80% of its shares to Mirant (a US corporation). The Office is also frequently called upon to investigate claims of electric billing inaccuracies. In this regard, The Office has entered into an agreement with the JPSCO for the promulgation of a customer charter, which came into effect in 2001, providing specific service commitments to customers and redresses for breaches. The OUR is also currently engaged in the conduct of a cost of service study to determine rates for The Company going forward. A critical part of this exercise will be the approval of and enforcement of a price cap model to govern that Company's tariffs.
The OUR has also been very active in the regulation of water and sewerage. An important part of the work of the Office in the last few years has been the supervision of a metering programme to reduce the incidence of high 'unaccounted for water' (the difference between total water produced by the water utility and the actual amount billed for). The Office has also approved licences for a small private water supply scheme.
Notwithstanding its achievements to date, The Office is still grappling with a number of thorny issues with respect to the utilities within its purview. In telecommunications for example, the question of how to design a plan for universal service and facilitating the liberalisation of the market for directory enquiries are matters of currency. Equally relevant is the matter of instituting the kind of accounting separation that will minimise competitive abuse.
The need to eliminate cross-subsidy in electricity and to design an incentive structure to encourage loss reduction are important challenges for The Office. Similar concerns with regard to high unaccounted for water, 'social water' (water to customers who do not pay) and cross subsidies remain. It is anticipated that in the near future the Office will be required to set tariffs for public transportation and for a reactivated railway.
It has been the OUR's experience that in carrying out its duties, it often has to revert to seeking external professional assistance. This stems from the limited manpower lacking the necessary skills and experience in the agency. Such external assistance comes both in the form of specific training and the acquisition of the services of consultants. To this end, the Office has benefited tremendously from the attendance of its staff at various training programmes and collaborative fora. The OUR has also benefited from the employment of consultants with relevant expertise and breadth in best practices in regulation from around the world.
Agencies such as IP3 have been critical to the capacity building of OUR staff. A number of our technical staff have attended its programmes and have expressed satisfaction about the level of training, the issues addressed and the opportunities afforded to effect international networking. As an IP3 alum, I will certainly be making use of some of the experience gained from the course on Energy and Power Sector Financing and Tariff Rate-Setting in the months to come. I also anticipate that I will be calling upon some of the important network links forged in Washington during my three-week stint to get advice on how to deal with knotty problems in the local power sector as well as to just exchange ideas.