DRIVING PERFORMANCE AT LATVIA’S

PUBLIC UTILITIES COMMISSION

Nick Malyshev, Head, & Filippo Cavassini, Policy Analyst, Regulatory Policy Division

Public Governance and Territorial Development Directorate, OECD

Launch of the OECD Performance Assessment Review of Latvia’s PUC

Riga, 20-21 September 2016

1. Background and review methodology

2. Key findings and recommendations of the review

Agenda

• Unique forum to promote cross-sectoral dialogue across regulators – More than 70 energy, telecommunication, transport,

water regulators

– OECD members and non-members

– Meeting twice a year in connection with the meetings of the Regulatory Policy Committee

• Strong attention for governance and performance – Best Practice Principles for the Governance of

Regulators

– Independence, accountability and application of behavioural insights

– Developing a framework for supporting regulators’ efforts to assess performance

1. OECD Network of Economic Regulators

1. Body of work of the NER

http://www.oecd.org/gov/regulatory-policy/ner.htm

1. What makes a world-class regulator?

http://www.oecd.org/gov/regulatory-policy/governance-of-regulators.htm

Assessing the impact of regulatory actions and decisions to drive improvements

Supporting transparency and accountability to public institutions

Building trust and confidence of investors and citizens by tracking tangible results

1. Measuring outcomes is a key feature

of a world-class regulator

1. Performance assessment

Output & Outcome Input & process

Regulatory, governance & cultural context

Role & Strategy

1. Input-process-output-outcome

framework for performance indicators

2. Regulation & governance

Market concentration index, 2013

Government involvement

in network sectors, 2015

Low involvement

High involvement

Recognised & affirmed independence

Multi-sector model providing some protection from undue influence

Goals: competition & dvlpt of public utilities

Wide scope of action

Proactive co-ordination

Strategy framework in place

2. Role and strategy – state of play

Which strategic priorities?

How to balance consumers’ and investors’ interests?

What is the “right” advisory role?

Regulatory functions fit-for-purpose?

2. Role and strategy – next steps

Revamp the strategic planning framework to clarify goals, priorities and outcomes, aligning functions with these outcomes.

Ensure that regulatory functions are fit-for-purpose, including through the use of incentive regulation and the power to amend tariff proposals.

Continue to provide expert advice for the development of regulation, while remaining within the role of an independent regulator, including by releasing opinions publicly and relying on the media and other accountability avenues to draw attention to them.

Transparent & accountable budget

Attractiveness/commitment to staff development

Transparent Board decision-making

Effective use of multi-sector model

Informed & systematic consultation

Accountability to parliament

2. Input and process – state of play

How to avoid conflict of interests in setting regulatory fee?

Salary system weakening long-term attractiveness?

Which system for board renewal ?

How to engage with parliament?

2. Input and process – next steps

Consider an alternative process for setting the regulatory fee, either by relying exclusively on the legislated ceiling or through some independent council or body

Develop a “total rewards” approach to attract and retain staff, while further investigating the possible long-term effects of the salary cap.

Consider staggered terms for Board members.

Facilitate mobility across sector departments and unleash opportunities for innovation and experimentation.

Introduce more regular and formal exchanges between Parliament and the PUC.

Systematic data collection & guidance

Some measurements of regulatory processes

Analysis of costs and services provided

Some data presented in annual report

Regular meetings Board-staff to alert/discuss issues

2. Output & outcome – state of play

What linkages between data and strategy?

Which data aggregation and linkages to regulatory processes?

How to make greater use of data in the decision-making process?

Greater use of data for consumers (e.g. choice engines)?

2. Output & outcome – next steps

Develop a performance assessment matrix that links goals and priorities to outputs and outcomes.

Use performance information to communicate with key stakeholders, especially Parliament.

Explore the use of data to develop choice tools for consumers, either directly or indirectly

http://www.oecd.org/publications/driving-performance-at-latvia-s-public-utilities-commission-9789264257962-en.htm

Thank you!