A Made-to-Measure Regulator for the Government

To not regularize what is badly regularized you need a deregulator to regulate by deregulating what is well regulated.

Monday, July 4, 2016

EDITORIAL

The new head of the Regulatory Authority of Public Services of Costa Rica (ARESEP) took office while subject to a serious challenge over an obvious conflict of interest that arose from his status as an active employee of the Instituto Costarricense de Electricidad (ICE), the monopolistic state entity whose rates must be fixed by the very same ARESEP. The insistence of the Solis administration eventually led to his appointment as Controller General, and after an announced pause for reflection, the new chief resigned from the ICE, promising that his actions would be solely taken with the welfare of consumer services in mind, services which are regulated by the ARESEP.

All of this is happening in a context where the supply of public institutions with goods and services is being strongly challenged because privileges, in terms of wages and benefits received by its employees, are causing rates for those goods and services to be higher than normal production costs. The clashes between the previous Regulator General with the public companies that sell basic goods monopolistically, such as fuels and electricity, were notorious, whether or not those privileges formed part of the cost of those assets. Hence the widespread suspicion that led to the appointment of an official of one of those companies as General Regulator.

Now, in his first notable performance, the new General Regulator has frozen the entry into force of a new pricing model for public transport buses, a model which updates a system that is now 20 years old and whose antiquity is estimated to have caused increases of up to 40% above what the actual cost of tickets should be. According to an article on Nacion.com, the new model is the result of 6 years of "... negotiations and consultations which included the participation of Chambers of Bus Companies, the Ombudsman, the Public Transport Council (CTP) and consumer groups. That debate reached its climax in 2015, when consultation workshops were organized by the ARESEP, to address issues, objections and concerns from the sectors over the possible effects of the instrument that replaced one that had already been in use for 20 years. The Constitutional Court even ruled against three actions of unconstitutionality against a public hearing to discuss the proposal. This finally took place on 14 December. The board of the ARESEP endorsed the method on 29 February. "

The order to freeze the new model for a "sensitivity analysis" comes 15 days after a deputy of the Frente Amplio (FA), came, along with three bus entrepreneurs, to meet with the new regulator. Among them was the president of the National Chamber of Transport (Canatrans).

At the same time President Luis Guillermo Solis also received visits from bus companies, and days later he dismissed a deputy minister who had endeavored to bring about a change in the structure of public transport bus services, a change involving improvements in the service and in particular in fare collections, which would bring transparency regarding the actual number of passengers transported (which is part of the tariff model) and consequently a reduction in rates, which of course is resented by the bus companies.

Dennis Melendez, former Controller General, writes on the subject, in an article which is a must read : "What a great injustice is being committed against bus users!" (In Spanish)

Another editorial, on Nación.com states: "... the delays by ARESEP and the government are shifting a lot of wealth from disadvantaged people in our society over to a group of entrepreneurs who exploited concessions granted by the State, whose duty to safeguard the public interest is being not met. "

It is hard to forget the tongue twister about the deconstantinopolizing bishop of Constantinople: To not regularize what is badly regularized you need a deregulator to  regulate by deregulating what is well regulated. (so that corporate abuse is well protected).

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More on this topic

Costa Rica: Political Rates for Utilities

April 2016

The stubbornness of the Solis administration to award a highly technical job to a candidate rejected by employers confirms the importance that this specific person would have in the formulation of public tariffs.

Editor's note:
This review was written hours before the now newly appointed General Regulator of Costa Rica gave notice of his resignation from his position at the Instituto Costarricense de Electricidad (ICE).

Gross Conflict of Interest Persists in Costa Rica

March 2016

Transparency in governance and better use of productive resources in an economy are not achieved by appealing to good personal intentions, but by observing basic principles of management.

EDITORIAL

The government's candidate for the office of Controller General of Public Services sees "no inconsistency" in serving in this position, while at the same time being on sabbatical leave from a company which is a provider of those services.

Panama: New Urban Transport Concessions

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A bill is being prepared which would allow the granting of new concessions to domestic private companies for the provision of public transport in the districts of Panama and San Miguelito.

The initiative to amend Law 14 of 1993 on public transport presented in the Assembly states that only firms which are 100% Panamanian may apply for the concession.

Costa Rica: Rates for Renewable Energy

April 2014

The tariffs for electricity generated with solar power or biomass will be determined using the same methodology used for setting prices for the sale of hydropower.

The measure approved by the Regulatory Authority of Public Services (ARESEP) and applied to production of less than 20 megawatts, aims to foster the participation of a greater number of companies dedicated to the production of energy from renewable sources such as water, solid waste and other things.

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