The Utility Regulation and Competition Office issued a statement Sunday refuting suggestions made in a Refuel gas station planning application that the regulatory body did not support projects that supply lower-emission fuel to local consumers.
In its statement, OfReg said it was “deeply concerned about unsubstantiated comments recently made by a licensee in some local newspapers concerning OfReg’s stated position on the National Energy Policy goals and innovation in the fuel sector”.
Dow Travers, owner of Refuel, in a letter to the Central Planning Authority, had said comments by OfReg’s Chief Fuels Inspector and Director Duke Munroe had appeared to conflate the supply of emission-reducing lower-priced Refuel gas with the fuel provided by Sol and Rubis and failed to make “the basic economic distinction”. He also claimed OfReg seemed to support the Sol/Rubis “duopoly” to the detriment of those trying to break into the fuel market.
However, OfReg said, to the contrary, by not mandating that ethanol blends and biodiesel blends be supplied by all fuel importers, this had led to Refuel being the “current sole supplier to benefit in a ‘niche’ market”.
Travers, in his letter, was referring to the following statement by OfReg in his application:
“Under OfReg’s broader remit, the office’s preliminary economic and regulatory
assessment indicates that the increase in the number of gas stations continues to place
(upward) pressure on fuel prices. Subject to finalization of the comprehensive fuel market
assessment, Grand Cayman may be overserved by gas stations. The assessment takes
into account a number of additional gas stations which has been approved and are pending
construction unless there were change of approval status for those previous applications.”
OfReg said it had begun including this statement whenever it approved gas station applications, after market analysis had shown the overall fuel market was already approaching saturation in 2015 based on the number of gas stations in operation. The issue was more pronounced in certain districts, while some areas remain underserved, OfReg said.
In its statement Sunday, OfReg said, “In the event the fuel market economic assessment indicates that to achieve efficient pricing, there may need to be options such as rationing of gas station licenses, these options are taken into consideration by potential investors.”
The Central Planning Authority last week approved Travers’ application to open his second Refuel station on Grand Cayman.
In relation to his application, OfReg indicated to the CPA that “the new/proposed site is contributing to achieving Cayman Islands National Energy policy, and such initiative and investment should be encouraged/facilitated. Accordingly, OfReg had no objection to the project moving forward, subject to the technical conditions and considerations.”
OfReg said its mandate “includes ensuring a vibrant and competitive fuel sector and mix of fuel options, reflecting a sustainable transition to 70% renewable energy supply and consumption by 2037”.
It added that OfReg had ensured ethanol-blended fuels form an integral part of the National Energy Plan, and had facilitated the approval and introduction of ethanol blends and biodiesel into the market in 2017.
The regulator said it had granted approval for three applications relating to the storage and supply of ethanol blends and biodiesel, including Refuel’s new station.
OfReg also stated that it “ensures consistent and appropriate safety and economic conditions are set out for new entrants and existing market players”, and that it continues “to engage potential market entrants on entering and participating in the market while ensuring efficient and effective market operation to benefit both consumers and suppliers”.
Travers had accused OfReg of supporting Cayman’s two major fuel importers, Sol and Rubis, and keeping new entrants out of the market.
“OfReg and its consultants appear to have confused genuine open market economic competition with anti-competitive strategic entry/preemption games,” Travers said. “The intention of these entry/preemption games in this scenario is to enable the established incumbent duopoly, Sol and Rubis, to saturate the market deliberately to prevent new entrants, here Refuel, from competing or gaining market share.”
OfReg denied this, arguing that fuel prices in the Cayman Islands were impacted by several factors, including cash flow and cost flow. “Newer entrants with significantly lower overheads have the unique advantage of offering considerably lower prices for consumers’ benefit, which is encouraged,” it said.