E x c e l l e n c e i n p u b l i c s e r v i c e : D e l i v e r y a n d r e f o rm There is one caveat, however. As mentioned above, the concessions for provision of utility services are awarded to private entities under long-term concession agreements that were entered into in the 1980s and 90s, long before a utility regulator was conceptualised. Concessions are basically bilateral contracts where a utility operates more or less as an investor-owned utility, while the government, as the grantor, has had very little discretion or interference in the utility’s affairs. No money passes from the utility to the government as a royalty or profit sharing for use of public assets. In the past utilities were more or less allowed to operate as absolute monopolies with almost unrestricted power to set their own price. Provisions in the contracts were carefully drawn to protect private assets and interests. Contracts were unduly complicated for the size of the systems and customer base, perhaps on purpose. It is reasonable to assume that concession contracts were written in an environment where the government had little experience in concessions as Vanuatu had only recently gained independence in 1980. On the other side were highly experienced private utilities, backed by a much larger parent company. It is likely, therefore, that a level playing field was absent. The government of Vanuatu recognised this, which may have been a motivating factor in establishing an independent regulator with broad powers. At the same time as recognising that contractual rights in Vanuatu must be respected, the URA Act allowed that the URA may exercise its powers and functions by taking any action, provided that such action is not inconsistent with concession contracts entered in prior to the act. Further to this, in 2010, the government amended the Electricity Supply Act to encourage private investment by allowing third-party generators within the existing concession area, thus diluting the ‘exclusive manufacture and supply’ provisions in the concessions. Needless to say, the entrenched utility companies are uncomfortable with the new regulatory compact. From the outset they have attempted to water down the powers and role of the utility regulator, asserting the superiority of the concessions over provisions in the applicable acts. Challenges in reducing electricity costs In order to tackle the root causes of high electricity prices, regulatory activity is focused in three areas: • Stimulating consumer demand for electricity • Introducing lower cost generation sources • Strengthening regulation of monopoly utilities Stimulating consumer demand for electricity Since 2010 the growth in electricity consumption in Vanuatu has slowed dramatically. This slow growth is causing delays to improvements in efficiency and cost reductions from higher system use. Commonwealth Governance Handbook 2014/15 70 The Utilities Regulatory Authorities Act of 2007 established the Utilities Regulatory Authority as an independent statutory body to regulate water and power utilities in Vanuatu. Pictured: Two brothers share a bath tub in Lamen Bay, Epi livcool / Shutterstock.com
CEP template 2012
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