Problems Associated with Regulating Service Providers

Transcription

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2 Introduction Functions of the RIC How the RIC Protects Customers: - Issues with T&TEC and WASA Problems Associated with Regulating Service Providers How do we fix the Problems? End 2

3 Established by Act # 26 of 1998 assented to October 14, 1998 First Executive Director appointed June 01, 2010 First Board appointed, April,

4 All service providers existing at the time the RIC Act came into force were deemed to be licenced. Those were: The Trinidad and Tobago Electricity Commission (T&TEC) The Water and Sewage Authority (WASA) The Power Generation Company of Trinidad and Tobago (POWERGEN) The Telecommunications Services of Trinidad and Tobago (TSTT) Inn Cogen Limited- now called, Trinity Power Limited 4

5 The Independent Power Producers, POWERGEN and Trinity Power limited fall under the ambit of the Ministry of Energy, while the others fall under the Ministry of Public utilities. The IPPs operate under power purchase agreements with the GOVTT, the negotiations of which contracts the RIC has never been a part of, not even the new ones. That creates a problem for the regulator. Since 2005, the Telecommunications Authority of Trinidad and Tobago (TATT) has assumed regulatory responsibility for TSTT. 5

6 1. Making recommendations on the award of licences. 2. Monitoring and enforcing compliance with licence conditions; 3. Establishing the principles upon which tariffs will be based and monitoring rates charged to ensure compliance; 4. Prescribing standards for services and monitoring compliance of those standards; 5. Carrying out studies of efficiency and economy of operation and of performance; 6

7 6. Facilitating competition between service providers where competition is possible and desirable; 7. Investigating complaints by consumers, of their failure to obtain redress from service providers; 8. Imposing and collecting fees for licences; 9. Ensuring that service providers earn sufficient return to finance necessary investment. 7

8 From among the functions outlined above, the RIC has had very little to do in relation to four of them, 1, 2, 6, and 8. The presentation will therefore focus on the areas where activity has been ongoing. 8

9 Prescribing Standards and Monitoring Compliance: Quality of Services Standards for T&TEC were first established in April, They were revised in 2009, and currently there are Eight Guaranteed Standards and Seven Overall Standards. 9

10 Code GES 1 GES 2 GES 3 GES 4 Service Description Response and restoration time after unplanned (forced) outages on the distribution system. Billing Punctuality (new customers) Reconnection after payment of overdue amounts or agreement on payment schedule Making and keeping appointments Performance Measure Time for restoration of supply to affected customers - within 10 hours Time for first bill to be mailed after service connection: (a) Residential within 60 days (b) Non-Residential within 30 days Time to restore supply after payment is made - within 24 hours Where required, appointments will be made on a morning or afternoon basis GES 5 Investigation of Voltage Complaints (i) Response - All voltage complaints to be responded to within 24 hours. (ii) Rectification - All voltage complaints to be rectified within 15 working days. GES 6 Responding to billing and payment queries. Substantive reply within 15 working days. GES 7 New connection of supply Service drop and meter to be installed within 3 working days. GES 8 Payments owed under guaranteed standards Time to credit compensatory payment: (i) Residential within 30 working days (ii) Non-Residential within 60 working days 10

11 Code Description Required Performance Units OES 1 OES 2 Frequency of meter reading (a) 90% of industrial meters should be read every month (b) 90% of residential and commercial meters read according to schedule Billing punctuality 98% of all bills to be mailed within ten (10) working days after meter reading or estimation OES 3 Responding to meter problems Visit or substantive reply within 10 working days 95% of the time. OES 4 Prior Notice of planned outages 3 days advance notice of planned outages 100% of the time OES 5 Street Lights Maintenance Street Lights - within 7 working days Highway Lights within 14 working days OES 6 Response to customer queries/requests (written) Time to respond after receipt of queries. Initial Response within 10 working days Final Position within 30 working days OES 7 Notifying customers of receipt of claim under Guaranteed Standard GES 1 100% of customers to be notified of receipt of claim within 10 working days. 11

12 COMPENSATION BY T&TEC YEAR DUE (TT$) ACTUAL (TT$) 2004* 2005 $775, $ $476, $ $457, $ $741, $ $502, $ $992, $33, $629, $18, * The GSS took effect from 2004 Source: T&TEC Quarterly Reports, various years & RIC Analysis. 12

13 Capital Contribution Policy Policy for the Compensation for damage due to Fluctuations Code of Practices 13

14 Table 4 - Analysis of Complaints Both Utilities - Per Year Number of complaints received Number of complaints resolved Number of complaints unresolved Number of complaints withdrawn Resolution rate for complaints received *Rebate awarded to customers Year % TT$30, % TT$85, ,087 1, % TT$959, % TT$368, % TT$711, % TT$548, % TT$658, % TT$1,743, % TT$1,293, % TT$856,489 Total 28,652 27, % TT$7,256,057 14

15 Table 5 - Analysis of Complaints by Service Provider - WASA Number of complaints received Number of complaints resolved Number of complaints unresolved Number of complaints withdrawn Resolution rate for complaints received *Rebate awarded to customers Year % TT$30, % TT$68, % TT$922, % TT$280, % TT$607, % TT$336, % TT$318, % TT$1,540, % TT$174, % TT$167,467 Total 24,772 23, % TT$4,446,211 15

16 Table 6 - Analysis of Complaints by Service Provider - T&TEC Year Number of complaints received Number of complaints resolved Number of complaints unresolved Number of complaints withdrawn Resolution rate for complaints received *Rebate awarded to customers % TT$ % TT$17, % TT$36, % TT$87, % TT$104, % TT$212, % TT$340, % TT$202, % TT$1,119, % TT$689,022 Total 3,880 3, % TT$2,809,856 16

17 Table 7 - Summary of Complaints by Type WASA Number of Complaints Received Share of Received Complaints Number of Complaints Resolved Share of Resolved Complaints Complaint Catergory Billing Query % % Inadequate Supply % % Leaks % % Request for Service % % Road Restoration % % Other % % Total % % 17

18 Table 8 - Summary of Complaints by Type - T&TEC Number of Complaints Received Share of Received Complaints Number of Complaints Resolved Share of Resolved Complaints Complaint Catergory Billing Query % % Breach of Standards % % Damage Appliances % % High/Low Voltage % % Power Outages % % Request for Service % % Street Lights/ Poles % % Other % % Total % % 18

19 Two sections of the RIC Act treat with this issue: Section 48- The Commission shall review the principles for determining rates and charges for services every five years, or where the licence issued provides otherwise, at such shorter interval as it may determine (we have interpreted this to mean that we shall use incentive regulation as opposed to rate of return regulation). Section 49- Where a fundamental change in circumstances warrants a review the service provider may give notice requesting a review, except that it is confined to only one request in any year. In this instance the period between the notice and a determination by the Commission shall not exceed six months. If such a situation occurs, the service provider s requests will be deemed to be approved. 19

20 Last Rate Review approved by the Public Utilities Commission 1992 Based on Audited Accounts of

21 November 08, 2004 submission of application for Rate Review by T&TEC; Meetings held on Nov. 26 and Dec. 02, 2004 to discuss weaknesses in submission and to request additional information; Feb. 15, 2005 RIC accepts T&TEC submission; April/May 2005 Publication of Technical papers for public comments; May 10, 2005 Launch of Rate Review, first Public consultation, public informed that the RIC was conducting a review of T&TEC rating structure; June 30, 2005 Salient features of T&TEC s submission published in newspapers; 21

22 Ninety- three written comments received from public. All comments considered in finalizing Draft Determination; July Draft determination completed (substantially) but awaiting Shareholder s input; Nov. 21, 2005 Consultation with shareholder; Dec. 01, 2005 Legal Notice gazetted (requirement of RIC Act); Jan., 18, Draft Determination published for public comments; Five public Consultations held across Trinidad and Tobago (including Tobago); Public given one month to provide comments; All comments considered (in some cases the RIC varied its position in response to comments received, in others it provided reasons why it maintained its position); Final Determination issued on June 01, 2006, for the period June 01, 2006 to May 31,

23 Year kwh kwh Over 1000 kwh (TT$) (TT$) (TT$) Implemented 2006/07 $0.27 $0.31 $0.34 May 1, /08 $0.27 $0.31 $0.35 May 1, /09 $0.25 $0.31 $0.36 Aug 1, /10 $0.26 $0.32 $0.37 Sept 1, /11 $0.26 $0.32 $

24 Year kwh Year on Year Change (% ) kwh Year on Year Change (% ) Over 1000 kwh Year on Year Change (% ) (TT$) (TT$) (TT$) 2006/07 $0.27 $0.31 $ May /08 $0.27 0% $0.31 0% $0.35 3% 1-May /09 $0.25-7% $0.31 0% $0.36 3% 1-Aug /10 $0.26 4% $0.32 3% $0.37 3% 1-Sep /11 $0.26 0% $0.32 0% $0.37 0% Implemented 24

25 Year Total Income (TT$) Expenditure (TT$) Surplus/Deficit (TT$) ,302,192,100 1,367,745,702 (65,553,602) ,351,778,713 1,466,028,659 (114,249,946) ,489,241,928 1,583,126,895 (93,884,967) ,600,694,913 1,290,410, ,284, ,600,819,630 1,724,455,327 (123,635,697) ,740,005,386 1,588,232, ,773, ,888,994,278 2,146,870,918 (257,876,640) ,280,273,584 2,077,383, ,889, ,477,844,285 2,191,269, ,574, ,648,393,131 2,362,708, ,684, ,783,050,067 2,753,549,387 29,500,680 Source: T&TEC Management Reports, various years. 25

26 RIC approved rates were not implemented as expected. Increases were applied to Commercial and Industrial customers but not to Residential customers, in Increases applied to residential customers in May and June, 2008 (imagine the confusion for customers). The RIC was very careful in its application of the new rates to avoid rate shock but by delaying implementation that became an issue. Tariff revenues were utilized for projects not approved by the RIC (customers funding projects that should have been funded by the Gov t). Non-payment for NGC supplied gas, which costs were built into the tariffs (the result, a huge NGC debt. 26

27 Year T&TEC's debt to NGC (TT$) T&TEC's Fuel Expense (TT$) 2000 $354,891,878 $318,586, $244,804,970 $339,215, $528,227,816 $391,020, $124,632,052 $442,818, $110,943,081 $483,256, $333,185,861 $512,744, $837,801,847 $546,289, $1,468,556,904 $625,597, $2,082,873,702 $622,444, $2,600,419,463 $658,659, $2,916,874,166 $747,956, Source: T&TEC's Annual Financial Report T&TEC's Business Plan

28 Last price review conducted under PUC- Order 83 of RIC engaged WASA for several months on the requirements of a business plan necessary for the commencement of a rate review (2007). RIC published its document Information requirements, Business Plan which provided a guide on the manner in which WASA should supply information and data, and the approach it expects to see outlined in the Plan. Published a document, Framework and Approach, Price review , October, Business Plan submitted December 17,

29 Jan., 14, 2008 Press Release advising that the RIC has accepted WASA s Business Plan. Feb., 13, The RIC publicly announced that it has commenced its review of WASA s rates and charges. April 09, 2008 Stakeholder Information Day Developing a more efficient Water sector: Key issues and Challenges. Public consultations held across the country (Arima, Chaguanas, Rio Claro, Siparia, San Fernando, Port of Spain and Tobago). 29

30 Several Technical papers published for public comments. Consultant hired to assess WASA s capital programme and to evaluate asset valuation methodology. Consultation held on Consultants findings. Draft Determination substantially complete since December Awaiting consultation with shareholder. 30

31 Quality of Service Standards for the Water and Wastewater Sector (WASA) Consultation on Draft Standards March 2003 Launch of the QSS WASA April 5, 2005 Committee Comprising Teams for the RIC and WASA to identify problems with implementations and make recommendations 2007 Standards Finalised 2008 Awaiting action by Ministry in relation to publication in Gazette

32 From inception, the RIC Act was found to have limitations. Since 2002, initiatives were taken to have the Act amended. Still ongoing (recall a similar situation existed with the PUC Act). In Jamaica for instance, the OUR can issue licences for Service Providers but in T&T, all the RIC can do is advise the Minister. To my mind, there are too many issues to be referred to the Minister for approval - that introduces lengthy delays in the process. 32

33 One distinct power that the RIC has that cannot be varied is the absolute authority to grant rate increases RIC s determined rates are not subject to change by any external party. However, the Government, while it has no power to alter rates, uses its position as shareholder / owner to delay implementation. In the case of the Residential Rates cited earlier, the service provider did not implement those rates until after the outcome of the 2007 General Elections (price implementation might have affected the outcome, and thus, the government delayed action). 33

34 The government uses its power of delay in other ways. By the non-appointment of Board members - when the RIC does not have a fully constituted Board, no decisions can be taken on regulatory matters. Also, whenever the RIC has had to consult with the shareholder, that process is usually not completed in an efficient timeframe. Another way is to delay gazetting of Standards or Regulations, which action is necessary for them to be effective and binding on service providers. Such a situation currently exists with the Quality of Service Standards for the Water and WasteWater Sectors. 34

35 - The most obvious way is to have the amendments passed into law (out of the RIC s hands). - Reform / restructure the RIC, using the example of the OUR as a guide. The office, which comprises three persons, Director General and two Deputies, take all decisions. They are full time staff and not part time like current Board Members. There is still involvement by politicians. The Governor General appoints the Director General and the Prime Minister appoints the Deputies. The main benefit is that the institution has more independence but is still accountable to Parliament. - If the politicians continue to have the power of delay which they now enjoy, the RIC will never be an effective regulator. 35

36 THE END 36