What the proposed utility regulation office will do

Under the new law, the Utility Regulation and Competition Office will create a four-member Risk and Audit Subcommittee, a Regulatory Committee, a Policy and Technical Committee for each regulated sector, and a Remuneration and Human Resource Committee, all drawn from URCO members.

The office will regulate consumer prices and ensure reasonable costs for network interconnections and sharing of infrastructure. It will also regulate mergers and acquisitions.

A “consumer protection” section authorizes codes of practice for provision of services, and creation of protective “Consumer Councils.” URCO itself will review consumer complaints rather than the provider itself.

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Critics have accused the monopoly utilities – water and electricity particularly – of slow adoption of new technologies in an effort to defend their economic position. The draft legislation obligates URCO “to promote innovation” and “national economic competitiveness,” using technological improvements to “enhance workplace productivity and quality of life.”

In a similar vein, the law creates a “Universal Service” fund to ensure Cayman residents have access to utility services.

An 11-page section on “anti-competitive practices” allows URCO to intervene in the case of a utility’s “abuse of a dominant position,” including price fixing, limiting production or investment, or colluding to share markets or sources of supply.

At the same time, however, the law allows URCO to exempt or declare the provisions “inapplicable” should they improve trade, production or distribution, or promote technical or economic progress.

Section 70 addresses Caribbean Utilities Company, drawing a fine line between protection of CUC’s “legitimate business interests” and monopoly abuse of purchase and selling prices, “limiting production, markets or technical development to the prejudice of subscribers,” “applying dissimilar conditions to equivalent transactions,” thereby placing other parties at a competitive disadvantage, and cross-subsidizing any CUC services with revenues from other company services.

URCO may seek a court injunction against any utility, even sending its own officers to search a company’s premises. Anti-competitive penalties are 10 percent of the licensees annual turnover. CUC’s 2015 operating revenues, for example, were nearly $190 million. Net earnings were nearly $21 million.

If a utility fails to comply with an URCO order, an individual can be fined $500,000 and a company $3 million.