Utility chiefs cautious on new regulations

Utility chiefs have reacted cautiously to Monday’s publication of a draft law creating a unified commission to oversee water, electricity, telephone and fuel providers, while dissolving separate regulatory bodies previously responsible for each industry.

Establishing the Utility Regulation and Competition Office, or URCO, the bill will go to the Legislative Assembly at its next sitting, scheduled for October. The bill will be accompanied by related legislation dissolving the Information and Communications Technology Authority, the Electricity Regulatory Authority and the Petroleum Inspectorate, while the Water Authority-Cayman, under still-pending legislation, will lose its economic regulatory function.

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Other amendments will affect the Wastewater Collection and Treatment Law and the Dangerous Substances Handling and Storage Law.

The move – by the Ministry of Planning, Lands, Agriculture, Housing and Infrastructure – comes in the wake of 2014’s Ernst & Young consultant report, recommending measures to streamline government administration and achieve cost savings of $250,000 per year.

Under URCO, separate oversight bodies will be merged into a single office with a nine-member board of directors, meeting at least six times each year and including executive directors of information and energy, and the chief petroleum inspector.

ERA Managing Director Charles Farrington said, “I do not see the change resulting in any immediate change to electricity regulation. Over the longer term, it should result in an authority/office with wider and deeper expertise, which should improve the effectiveness of regulation of all the affected utilities … There should be synergies that are realized over time which I see as a positive development. The legislation has been developed with an objective of having little, if any, immediate impact on the electricity sector.”

He did not anticipate being part of URCO, as he hopes to retire after passage of the legislation. Timing, he indicated, was “contingent on the legislation being adopted by the LA …”

Duke Monroe, chief inspector at the Petroleum Inspectorate and scheduled to be a member of the URCO board, said the new law would streamline oversight.

“The Petroleum Inspectorate in its current form will be largely preserved under the amalgamated entity, notwithstanding there will be process improvements, optimization, harmonization, etc.

“The organizational structure will be somewhat different to what currently exists, but this administrative arrangement is not intended to alter our remit vis-a-vis the Dangerous Substances Law as a policy.”

Rick McTaggart, president and CEO of Consolidated Water Company, said his organization was still reviewing the legislation, and hoping to hear from its Ministry of Planning, Lands, Agriculture, Housing and Infrastructure sponsors.

“No one has met with us yet or showed us the law, although we heard about it earlier in the year,” he said.

The legislation will resolve tensions between Consolidated Water Company and the Water Authority-Cayman regarding the latter’s dual role as regulator and service provider. The two have been locked in talks for two years regarding changes to Consolidated Water’s license.

Water Authority-Cayman Director Gelia Frederick-van Genderen said she had seen the draft legislation only recently.

“We have not had time to review further … We are well aware of and certainly support government’s stated intentions to establish an office to regulate utilities inclusive [of] the water sector. We are working with the ministry on the relevant legislation,” she said.

Managing Director of the Information Communications and Technology Authority Alee Fa’amoe directed questions to the ministry.

In a statement, the ministry addressed concerns about water utilities, saying they would be “subject to a transparent and structured regulatory environment as are the service providers in the other utility sectors” and that “amendments to the Water Authority Law will … repeal the economic regulatory functions of the authority.”

Overall, the statement said, URCO would “promote fair and effective competition; protect the interests of consumers: supervise, monitor and regulate any sectoral utility … ensure utility services are satisfactory and efficient and that charges imposed in respect of utility services are reasonable and reflect the efficient costs of providing the services; … and promote innovation [and] facilitate economic and national development in the markets and sectors for which it has responsibility.”

Government “is keen to complete this regulatory reform, and the remaining legislation related to the water and fuels sectors are expected to be tabled at the first sitting of the Legislative Assembly in 2017,” the statement said.