10 gadu

Experience of multisectoral regulation:
succeeded and achievable yet
electronic
communications
waste
management
Prof. Edvins Karnitis
Public Utilities
Commission
railway
post
water
natural
gas
district
heating
electricity
Policy of the EU related to SGEI:
too soft aiming at unified approach
White Paper on services of general interest; COM(2004)374;
Services of general interest, including social services of general
interest: a new European commitment; COM(2007)725;
sectoral Directives – the first steps only:
 electricity and gas;
 electronic communications and post;
Treaty of Lisbon amending the Treaty on
European Union and the Treaty establishing the
European Community; Protocol on services of
general interest; 2007;
Multisectoral problems:
too little coordination and consistency in European Commission;
the result – inconsistency on national scale
Treaty of Lisbon amending the Treaty on EU
and the Treaty establishing the European Community
Protocol on services of general interest
The shared values of the Union in respect of
services of general economic interest …
include in particular:
the essential role and the wide discretion of national, regional
and local authorities in providing, commissioning and
organising services of general economic interest as closely as
possible to the needs of the users;
a high level of quality, safety and affordability, equal treatment
and the promotion of universal access and of user rights.
Advantages of the multi-sectoral model:
harmonized regulation
component of the national strategic issues: consistence with economy,
state intervention level, social policy, etc.;
unified essence: provision of services of general economic interest;
partial transition to competition;
service providers – multi-utility companies;
technological convergence of services;
consumers – users of various services;
small country factor: analogous environment on whole territory,
effective resource utilization – strong independent regulatory body;
knowledge management: unified strategy, methodology, principles
and instruments, adoption of methods and experience considering
sectoral peculiarities.
EU countries: looking for efficient regulatory model
historical experience – state regulators in USA;
Luxembourg – mechanical composition of
sectoral regulation;
UK – merging various subsectoral regulators;
Latvia – real multisectoral regulator;
Germany – joining energy and railways
regulation to electronic services regulator;
Estonia – joining all sectoral regulators with competition authority;
Lithuania, Hungary – merge planning;
Spain – united decision making board;
Stochastic changes or advanced trend?
Similar trend vs different level of sectors liberalization
sectoral Hirschmann-Hirfendal Indexes
2405
Electronic communications
– unified
1783
2006
3861
Electronic communications
– fixed
2010p
3283
4815
Electronic communications
– mobile
3802
4962
Post
4443
9828
Electricity
7727
10000
Natural gas
10000
0
Competitive market
2000
4000
6000
Concentrated market
Moderately concentrated market
8000
10000
Monopoly
Source: PUC
Quality of regulation:
unified microlevel regulatory procedures coupled with
observation of sectoral individualities
Regulations on issuing licenses for provision of services and general
authorisation;
Regulations on information submission by service providers;
Provisions on cooperation and consultation with service providers
and consumers;
Unified methodological principles for determination of tariffs for
services;
Procedure for acquaintance with tariff projects;
Future tasks:
 Regulations on dispute solving;
 Regulations on documents to submit for tariff approval;
 Regulations on administrative costs that are included in tariffs;
Harmonisation problems or intersectoral benefits
unbundling in energetics (generation,
transmission, distribution) – structural separation
(electronic services);
critical infrastructure, transmission and
distribution networks (wires and pipelines) –
frequencies, secondary trading;
market analysis – energy supply, postal services;
universal service – unification of models and
algorithms (electronic communications, postal
services, energy supply);
Coordination problems of multisectoral regulation
are much lower than those with lot of sectoral regulations
Usage of SGEI and payments for them (2009)
100%
100%
100%
100%
100%
6,2%
6,1%
7,0%
6,0%
90%
5,3%
5,3%
82%
5,0%
80%
71%
3,6%
71%
70%
65%
2,7%
60%
4,0%
3,0%
1,9%
2,0%
1,8%
50%
Comparative
average
usage of
services by
household
1,0%
Payment for
used
services, %
from
household
budget
All hou- 1st
All hou- 1st
All hou- 1st
All hou- 1st
seholds quintile seholds quintile seholds quintile seholds quintile Average – 15,1%
Electronic
communications
Electricity
supply
Natural gas
supply
District heating 1st quintile – 17,8%
Source: CSB Latvia
Unified innovative universal service model
US fund
Obligations have to be
put on all providers:
equality and solidarity
P
Natural gas
Post
Service
provider 1
P
Service
provider 2
P
Service
provider 3
US provider
Standard
customers
Electronic services
District heating
Electricity
P
US
customer
Advanced approach to set of services
Combined
financing:
providers > 90%
budget < 10%
Government
(budget)
Unified:
principles, methodology,
procedures,
management
Sector specific:
services, indicators,
financing
US financing: prognoses 2014
Sector
Max rate
Total
of duty
(1000’Ls)
(% of
turnover)
Support
principle
Monthly
(Ls)
Yearly
(Ls)
El. com. (low income)
1st quint. p.c.
7,30
87,60
7 538
1,56%
El. com. (invalid)
Average p.c.
10,30
123,60
1 182
0,24%
Electricity (low income)
Average p.c.
7,50
90,00
8 000
1,59%
Nat. gas (low income)
Average p.c.
4,35
52,20
2 000
0,61%
Distr. heat. (low income)
Average p.c.
10,90
130,80
8 140
2,61%
0,007
700
1,52%
Post (all population)
Per item
strongly directed support;
any sectoral service provider (standard of quality!)
have a chance to become the US provider;
individual tendering;
Source: PUC
Combined structure of the PUC vs fragmented skills
Board
5+5
52
Energetics
Department
Electronic
Communications
and Post
Department
Economic Analysis Department
25
Legal Department
Dr. Sc. – 7
Mg. Sc. – 53
Higher ed. – 37
Others – 10
 harmonized decision
making;
 sectoral support;
Municipal
Services and
Railway
Department
Regional
branches
Capacity of the PUC vs
capacity of shareholders
90
bilj. EUR
78,2
80
Turnover of shareholders,
2010 or the latest available
70
60
51,0
50
40
30
20,9
20
10
8,1
GDP Latvia 18,1
10,4
11,9
6,3
4,5
0
Dalkia E.ON Gaz- Fortum TNT
Ruhrgas prom
DHL
Tele2
TeliaSonera
Sources: company reports
Quality of decisions:
court verdicts on PUC’s decisions (2002–2010)
10
District Court
23
6
Regional Court
11
3
10
12
9
Withdraw
Supreme Court 1
10
Won
11
Lost
Under process
0
5
10
15
20
25
30
35
40
Complaints
45
50
55
Only one lost process in Latvia’s court
and another one in Stockholm arbitration
Source: PUC
Independence level of the PUC:
relatively high but has to be improved
independence of decision-makers – good;
institutional independence – worse;
supervision problems:
 PUC decisions for third parties;
 involvement in current activities nonrelated to regulation;
 normative initiative: long process, approach of the ME;
financial independence (0,17% of utilities’ turnover + chapter in the
national budget) – insufficient; autonomy problems:
 budgetary autonomy is not implemented in the budgetary law;
 lack of autonomy in spending of the allocated budget;
 lack of adequate financial / human resources;
unachievable for sectoral regulator level of real independence;
necessity of higher level – changes in the Satversme (Constitution);
Strong balanced regulation:
to keep equal distance from all involved parties
Problems erected by breach of the balance:
 municipal regulators – the major
weakness of the Latvia’s
regulatory system in the past;
recently eliminated;
 composition principles for
electricity basket –high tariffs,
court processes;
 dilatory revaluation of
Latvenergo infrastructure – low
quality of services;
 overdue implementation of
universal service principles –
debt payments for electricity, gas
and district heating;
Government
PUC
Utility
Consumer
Could politically approved
decision makers be experts
in regulated sectors?
Yes, could be.
Multi-sectoral model: functional imperfections
inharmonized political and normative environment;
follow-up problems:
 tendency in sectoral ministries: to perform
regulatory functions and to be shareholder of
state-owned service providers;
 lack of technological regulatory instruments in
framework of the PUC;
 regular infringement proceedings against Latvia
concerning regulatory procedures;
tendency to decrease functionality of the PUC:
 planning of spectrum and numbering;
 setting of cogeneration tariffs;
 reform of railway infrastructure;
SGEI in EU and Latvia: consumers’ evaluation (2010)
90
85
80
Evaluation
86,8
77,3
79
85,3
81,1
75,1
75
85,6
83,4
80,2
80,7
88,6
82,9
81,7
77,9
77,1
73,6
72,6 72,9 71,4
72,6
74,4
70,8
69,9
70
65,4
65
60
Postal
services
& couriers
Water
supply
Network
Fixed
Electricity Mobile Railways
gas
telephony
telephony
EU 27
Ranking of Latvia’s services:
Fixed telephony – 2
Railways – 4
Network gas – 6
Mobile telephony – 6
Latvia
Internet
service
provision
The highest in EU
Internet services – 7
Post – 10
Electricity – 13
Water – 25
Source: EC
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el
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ho
ko
ny
ho
lic
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te
s
rn
et
se
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ic
es
E
Fo lec
od tric
- m ity
Re W C ea t
al a t lo t
e ser hin
ta su g
te p
sep ly
rv
.
65,4
65,2
66,9
70
71,5
72,9
77,8
78,5
76,2
77,1
74,4
80,2
79
80
80,6
83,4
82,9
81,3
87
Services in Latvia: consumers’ evaluation (2010)
90
60
Source: EC