Tue | Oct 17, 2017

We are doing some things right - Matalon

Published:Wednesday | November 2, 2016 | 12:00 AM
Joseph M. Matalon

The following are excerpts from a speech delivered by Joseph M. Matalon, chairman of the Office of Utilities Regulation, last week at the 14th annual conference of the Organisation of Caribbean Utility Regulators in Montego Bay, St James.

As I am sure you will hear from the relevant sector ministers' presentations, the water and telecommunications sectors are also having their moments in the sun.

It is also fitting that the conference is being held at a time when the International Monetary Fund, just three weeks ago (October 8), recognised Jamaica as possessing the best infrastructure strategy in the Caribbean. With all of this, it would not be immodest to say we are doing some things right.

That said, however, we accept that like the little one in Robert Louis Stevenson's poem, "we still have many more miles to go" - and I end it there, because sleeping is not at all in our contemplation.

We see in the road ahead abounding opportunities. Notably, the advent of new technologies such as smart metres opens up a plethora of options for enhanced choices and controlled costs. At one point it was true to say that compared with the telecommunications infrastructure, the electricity grid had remained relatively unchanged for more than a century. That, however, is no longer the case. The grid now shares and indeed converges the action with its ICT counterpart. All of this has spawned new challenges, evident in rapidly evolving consumer expectation and independence, new business models and an increasing requirement for defter regulatory interventions.

CHANGING INDUSTRY

Research has shown that falling costs and increasing interest in technologies for improved efficiency, triggered by solar power and net metering, are factors that are leading to changes in the electric utility industry, comparable to those experienced by the telecommunications industry starting in the late-1970s. At the same time, innovative energy service suppliers have appeared, disrupting relationships between traditional utilities, regulators and customers.

As customers depart from the grid and provide their own power needs, the departing customers' share of utility costs fall on fewer customers, raising their rates, so more of them depart. Such are some of the challenges that regulators face around the region and which we as regulators must strive to address in the public interest.

MANAGING OBLIGATIONS

But there are also many opportunities. Globally, many utilities perceive that they are carrying a relentlessly increasing regulatory burden. In established markets, these regulations are driven by market reforms and a move towards competition in all aspects of utility operations. In regions experiencing rapid infrastructure growth, regulation typically increases as wholesale and retail markets become more complex. In such circumstances, the experts recommend that utilities better manage their regulatory obligations.

Keeping abreast of frequent changes in regulation is key, as is the ability to effectively communicate with all stakeholders about exactly how these changes will affect prices.

Despite efforts by many utility operators to enhance customer processes such as metering, billing and complaint handling, people remain suspicious of their utility providers. Such a public perception can have negative consequences for utilities, including at times increased regulatory intervention. At the same time, however, utilities also have an opportunity to foster stronger and more trusting relationships with their regulators.

I have only been a part of the Office of Utilities Regulation since January of this year, but even over that short period, I have recognised one of the great strengths of the organisation, and that is its methodical, integrated and consultative approach to regulatory interventions and decision making. That approach has served us well in the development of competition, particularly in the telecommunication sector, and has as one of its defining characteristics the practice of bringing the utilities' stakeholders together to find solutions to complex regulatory and technical problems.

KEY FACTOR TO SUCCESS

A key factor in our success has been the powers vested in the regulator and the willingness to allow for strong exercise of regulatory independence. This has permitted us to pursue our objectives of first preparing the market, for the introduction of competition, and then putting in place the general framework to open the market and the regulatory safeguards necessary to support such competition.

Consumers have already benefited substantially from competition in terms of lower prices for telecommunication services, an improved basket of prices, wider choice, rapid offer of a number of new technologies, especially broadband services, and higher quality of services. With the introduction of natural gas, and the development of replacement generating capacity with newer and more efficient technologies, consumers are also expected to benefit from lower prices, which will have a positive ripple effect on the economy.