Case Studies

Where critical public infrastructure—such as an electricity distribution network or a water or sewerage system—is owned by a dominant firm (e.g., a monopoly), it is in the public interest that service charges and quality be subject to regulation. It is, however, expensive for a small economy to support multiple regulators. Instead, it will typically be more cost-effective for several industries to be regulated by a single agency, i.e., a multisector regulator (MSR). In 2018, the Government of the Cook Islands decided to establish an MSR over several stages. The Pacific Private Sector Development Initiative (PSDI) has been supporting this process since its inception.

In its information paper to the Cabinet, the Ministry of Finance and Economic Management (MFEM) proposed the establishment of an MSR through a three-stage process:

• Stage 1: Establishment of the telecommunications regulator under the Telecommunications Bill 2018. This will meet the need to implement the new telecommunications regulatory framework before the Manatua submarine cable project is completed.
• Stage 2: Transformation of the telecommunications regulator into a multisectoral utility regulator. The Office of the Prime Minister is seeking technical support to set up the office of the telecommunications regulator. As part of the assistance package, this will create an opportunity to provide more detailed advice on establishing an MSR, including advice on the required legislative framework (including new legislation and amendment of existing legislation) and a detailed budget.
• Stage 3: Expansion of the economic regulatory remit of the utility regulator beyond the three utility sectors, potentially undertaking a commerce commission-type role. The government has commissioned a public expenditure review (i.e., a functional review of the economic, social, and environmental sectors), originally planned for 2018. The review will provide recommendations on expanding the remit of the utility regulator beyond the three utility sectors.

In stage 1, PSDI supported the MFEM in developing and consulting on a Telecommunications Market Competition Policy, which led to a Telecommunications Bill, enacted in Parliament in 2019. Responsibility for administering and enforcing the Telecommunications Act was vested in an independent agency, established by the Competition and Regulatory Authority Act 2019, which was prepared with PSDI support.

Since fiscal year (FY) 2020, PSDI has been supporting the MFEM in establishing the Competition and Regulatory Authority (CRA). The CRA is now operational, with an experienced chair appointed after an international search.

Initially, the CRA was responsible solely for the telecommunications sector. Stage 2 of the government’s MSR plan requires extension of the CRA’s responsibilities to additional sectors.

In FY2022, the MFEM held public consultations on a draft Utilities Regulation Policy 2022: Electricity, Water, and Sewerage Services (Utilities Policy), which was developed with support from PSDI. Following public consultations and discussions with key stakeholders, including the regulated utilities, the MFEM amended the policy to respond to points raised by stakeholders. PSDI also in FY2022 supported the MFEM in developing a Utilities Regulation Bill, which is intended to vest regulatory responsibilities over electricity, water, and sewerage pricing and access matters (but not health standards) in the CRA. Following a pause during the parliamentary general election period, PSDI’s work with the MFEM on the Utilities Regulation Bill has resumed, with the aim of introducing the bill to Parliament in FY2023.

Stage 3 of the government’s plan for phased MSR establishment will involve assessment of, and consultations on, options to extend the CRA’s role with respect to consumer protection, price oversight, and competition enforcement functions.

This case study is taken from the PSDI FY2022 Annual Progress Report. Read the full report here.