As “market referees”, regulators contribute to the delivery of essential public utilities. Their organisational culture, behaviour and governance are important factors in how regulators, and the sectors they oversee, perform. The OECD Performance Assessment Framework for Economic Regulators (PAFER) looks at the institutions, processes and practices that can create an organisational culture of performance and results. The report uses PAFER to assess elements linked to both the internal and external governance of Ireland's Commission for Regulation of Utilities (CRU). The review acknowledges the achievements and good practices put in place by the regulator since its creation. It also analyses the key drivers of CRU’s performance and proposes an integrated reform package to help the regulator prepare for the future.
Driving Performance at Ireland's Commission for Regulation of Utilities
Abstract
Executive Summary
The Commission for Regulation of Utilities (CRU) is an independent multi-sector regulator with a range of economic, customer and safety functions and duties in Ireland’s energy and water sectors. The CRU is a high-performing and well-regarded regulator that has, since its creation in 1999, successfully absorbed new functions and developed and implemented major policy reforms for the benefit of Irish consumers and the country’s economy.
As the regulator continues to implement complex projects in a rapidly changing and uncertain policy context, its institutional and organisational capacity to operate effectively needs to be bolstered through integrated reforms to upgrade some of its external and internal governance functions, including strategic planning and human resource management mechanisms.
Role and objectives
The CRU is an independent regulator under the aegis of two Ministries (Department of Communications, Climate Action and Environment, DCCAE and Department of Housing, Planning and Local Government, DHPLG) and is governed by a series of sector-specific laws that have been amended over the years. Currently, the CRU is responsible for regulating energy markets, energy safety, and public water and wastewater services in Ireland. The CRU also shares cross-jurisdictional responsibilities for regulating the all-island Single Electricity Market (SEM), covering Ireland and Northern Ireland.
The CRU has built cordial and predictable (“no surprises”) working relationships with the executive and other government entities. However, the gradual increase in the CRU’s functions and the complex legal framework in which it operates make it difficult for both stakeholders and the regulator itself to fully understand the CRU’s priorities. Moreover, while the regulator’s activities are guided by five year Strategic Plans that focus on policy outcomes, it is not clear how these Plans are monitored or how they guide decision-making.
Key recommendations
Assert the leadership of the CRU in setting its priorities as a multi-sector economic and safety regulator, using the next Strategic Plan (2019-2021) as an opportunity to do so; explore the possibility of setting up an advisory group that can act as sounding board for the definition of the Plan and annual work programmes.
Strongly advocate for and contribute to the launch of a rationalisation of the CRU’s legislative framework in the energy sector.
Develop a comprehensive and well-resourced communications strategy that increases the transparency and predictability of informal information-sharing and co-ordination channels with the executive and the legislature.
Input
The CRU is independent in defining its budget and collecting its income. Generally, the regulator feels it is adequately resourced financially to fulfil its mandate and carry out its activities, and is able to manage financial resources autonomously.
In contrast, the CRU is constrained in the management of human resources by central government frameworks, leading to serious difficulties in attracting and retaining staff. In response to these challenges, the CRU has introduced ways to attract and retain staff, but reports that these are not sufficient.
Key recommendations
Use the Strategic Plan of the CRU as the guiding framework for all planning and monitoring activities, including developing a multi-year human and financial resource framework.
Take full advantage of the opportunity to present a business case for the review of overall CRU staff levels with the DCCAE and the DHPLG, as appropriate, following regular workforce planning exercises.
Join with other Irish economic regulators to advocate and make the case for taking into account the “special needs” of economic regulators in Irish public administration practices.
Process
Decision-making and information-sharing processes at the CRU are fluid and effective and have been further improved with recently introduced internal planning and management tools.
As an independent regulator, the CRU is accountable to the Oireachtas and prepares annual reports for this purpose, but the regulator’s activities and results are not addressed in formal dialogue channels.
In addition, the CRU engages with stakeholders systematically and transparently in its regulatory activities. This engagement could be complemented by other tools of good regulatory practice.
Key recommendations
Instate structured mechanisms for the presentation of CRU annual reports to Oireachtas standing committees, including for activities of the SEM Committee.
Take the lead on the uptake of good regulatory practices (impact assessment, ex post evaluation, stakeholder engagement) in a proportional and targeted manner, and use these practices to foment internal learning as well as promote the better regulation agenda within the Irish government.
Continue to actively engage with consumers through dedicated forums, in addition to available channels for online stakeholder consultation.
Output and outcome
CRU activities are guided by multi-year Strategic Plans that focus on policy outcomes, but it is not clear how these Plans are monitored or guide decision-making. The Strategic Plan is operationalised through annual work programmes with comprehensive indicators, but the strategic and operational plans are not fully aligned. Moreover, the CRU has the power to request and collect a large amount of information from regulated energy entities.
Key recommendations
Use the Strategic Plan as a tool for reporting on CRU performance and results, and seize the opportunity to use the 2019-21 Strategic Plan to develop this comprehensive and streamlined performance assessment and reporting framework.
In the new framework, align goals and indicators between the Strategic Plan and annual work programmes, for easier monitoring and reporting, using simplified performance indicators that focus on measurable deliverables.
Ensure the collection of appropriate data from regulated entities to inform CRU reporting and analytical activities.
