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Caribbean Electricity Industry Regulation

Electric Industry Regulation and

Best Practice

ABSTRACT and uses a single buyer model. The typical regulation
regime that exists in these territories is cost of service
The Caribbean political directorates have been setting regulation with governments approving rate changes and
aggressive Renewable Energy targets which can only be monitoring compliance with license arrangement and/or
achieved through the deployment of the right technology, concessions. Over 200 countries have adopted some
the availability of adequate financing and the creation of form of independent regulation to create a long-term
an enabling environment that reflects best practice and stable predictable policy environment under which many
principles of regulation. The Caribbean Electric Utility utilities and private sector enterprises have invested in the
Services Corporation (CARILEC) has engaged key infrastructure sector in developing countries. Independent
stakeholders in formulating a robust regulatory environment regulation supported a clear and sustainable long-term
for the Caribbean. Regulation involves balancing the legal commitment with backing from the government
interests of the customer who require low tariffs and best and from participating private sector enterprises. The
service quality, and the interests of the utility company who financial institutions consider that fairness, transparency,
require a reasonable rate of return and sustained financial predictability, consistency and independence were all
health. The regulator’s independence is critical to the attractive qualities in the regulatory environment for an
integrity and stability of the electricity sector. Additionally, investor and as such, must be preserved. In addition,
transparency and publicity of the regulatory process the regional governments want to achieve the promotion
are important factors to gain consumer confidence in of renewables and energy efficiency through a robust
the regulatory process. Transparency is an important regulatory environment. The introduction of Renewable
element for commercial banks as well as multilaterals Energy Technologies (RETs) would also have implications
and export credit agencies. The establishment of the for the regulation of the sector in terms of pricing, tariff
Eastern Caribbean Energy Regulatory Authority (ECERA) mechanisms, equipment standards and quality of service
as a sub-regional regulatory body should provide added standards, and addressing the realities of the region. In
value to the regional statutes and for the countries in the this regard, the adoption of best practice regulation is
region to respect the decisions of the regulator on both critical, and an integrative and structured consultative
economic regulation and service quality regulation. The approach that will develop avenues for the discourse and
Caribbean Electric Utility Services Corporation (CARILEC) harness the views of all key stakeholders is indispensable.
has a significant catalytic role to play in the changes of the
Caribbean regulatory landscape, to include technology BACKGROUND
advancements, high RETs penetration and the dimensions
of the energy policy. In March 2010, CARILEC published a position paper
on regulation and Renewable Energy . The objective of
INTRODUCTION this paper was to set out the views of CARILEC’s Full
Member utilities on the issue of regulatory reform in the
In most of the Caribbean countries, the Electric Utility Caribbean and minimizing barriers to the implementation
operates under an Electricity act with the exception of Renewable Energy technologies and alternative fuels.
of the French and Dutch islands. Additionally, these
countries operate under legal concessions or licenses. Governments have been promoting competition in
In almost all islands the Utility is vertically integrated Generation, increased use of Renewable Energy
INDUSTRY JOURNAL 2