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EDITORIAL: NPC needs transparent regulation


EDITORIAL: NPC needs transparent regulation

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NATURAL GAS USERS in Barbados are fortunate to have had a relatively good service.

The sole provider, the National Petroleum Corporation (NPC), can point with some satisfaction to the absence of persistent complaints about its operations, even though it offers a limited service to the country.

Natural gas has certainly been very affordable and domestic consumers have benefited from price stability, even during those times when the costs of other energy products have been subjected to the volatility of the markets.

Little surprise therefore that an argument would have been advanced for a hike in the local price of the commodity. But, there is a problem with Government’s move to the legislature last Friday to present and defend the NPC’s case, and it has nothing to do with being insensitive about the perilous financial situation in which the parastatal could find itself.

The fundamental error is Government’s failure to place the NPC under the regulation of the Fair Trading Commission (FTC). There has been more than sufficient leg time to ready state utilities such as the Barbados Water Authority (BWA), the Transport Board and the NPC for transition to the FTC, seen now by Barbadians as the appropriate regulatory agency, even if some legislative adjustments are required.

The idea of a minister of Government setting out a schedule for new rates is fraught with problems. This practice of going to the legislature and seeking this increase continues an old and outdated model in which both the consumer and, more importantly, the taxpayer, are in many ways left in the dark.

It is understandable that the NPC, like other utilities, needs to be guaranteed a rate of return based on its investments, but the approach adopted by the Freundel Stuart administration precludes one fundamental fact. It does not open up the operations of the NPC to public examination. The corporation should be made to disclose the true cost of its products and services.

The importance of having the NPC under the regulator would allow critical details about all aspects of its operations to be made public, and where the knowledge and expertise about this service provider can be questioned by public interests. This avoids “regulatory capture” where any internal interest can be shaded, resulting in both the consumers and taxpayers being disadvantaged.

Government has not openly stated as much, but it is evident that it sees the NPC and the BWA as “natural monopolies”. However, there is real danger that, because of market dominance, they will be reluctant to change and adopt new technology.

If the Government is going to press a case for the NPC to get a rate hike, then it must ensure that the natural gas provider also adheres to the rules of transparency and accountability. The state has never given adequate oversight to its own utilities.