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 report uses the OECD Performance Assessment Framework for Economic Regulators to assess both the internal and external governance of Peru's Energy and Mining Regulator (Osinergmin). The review discusses Osinergmin's achievements and good practices, analyses the key drivers of its performance, and proposes an integrated reform package to help the regulator prepare for the future.
Driving Performance at Peru's Energy and Mining Regulator
The Governance of Regulators
Abstract
Executive Summary
Osinergmin (Organismo Supervisor de la Inversión en Energía y Minería) was created in 1997 as Peru’s safety and economic regulator for energy and mining infrastructure. The regulator has gained a strong reputation as an autonomous and technically competent regulator over the last 20 years, overseeing sectors of strategic importance to Peru in terms of economic development, investment attraction and export performance. A key challenge for Osinergmin is to build on its technical competency and autonomy and strive for greater institutional maturity in a complex governance system.
Role and objectives
Osinergmin is a specialised and decentralised regulatory body with technical, administrative, economic and financial autonomy. Like all Peruvian regulators, it relies on the Presidency of the Council of Ministers (PCM) for approval for several procedures and is subject to public finance rules.
Osinergmin’s role, mandate and structure have changed over the past 20 years, absorbing new powers (e.g. mining sector supervision, administration of the Energy Social Inclusion Fund) and losing others (e.g. supervising compliance with environmental and labour standards). In the absence of formal co-ordination structures, a complex governance system for the sector has emerged.
Osinergmin sets out a Strategic Institutional Plan (PEI) underpinned by the values of commitment, excellence, service, integrity and autonomy. Osinergmin is active in communication and outreach activities to provide information about its work, especially important in light of changing roles and functions.
Key recommendations
Develop specific instruments to ensure more structured and regular co-ordination among all public agencies involved in the supervision of the energy and mining sectors, as well as the electricity system operator.
Carry out a mid-term evaluation of the PEI in order to prioritise objectives more systematically, develop a vision for the regulated sectors and more closely link budgeting and planning to forecast needs and minimise risks.
Input
Osinergmin is entirely funded by resources received from the regulated sectors. New public finance and austerity measures have placed limitations on budget execution and raised uncertainty around the regulator’s ability to plan its resources and fulfil some of its activities.
All stakeholders recognise the competence of Osinergmin’s staff, and staff report high levels of satisfaction and low turnover rates. Nevertheless, the presence of a dual employment framework and salary caps set by central government may reduce the regulator’s attractiveness compared to the private sector in the long run.
Key recommendations
Map the impacts of funding uncertainty on budget execution, seeking clarity from government and advocating for the principles of cost recovery and transparency to be key drivers of Osinergmin’s funding model.
Continue to attract and retain competent staff, regularly updating existing plans for maintaining technical expertise, monitoring salaries compared to the private sector and investing in recruitment strategies for new graduates.
Process
The Board of Directors, led by the President, is the decision-making body in Osinergmin. The Board meetings tend to focus on complex operational matters and only a limited amount of time is dedicated to strategic planning and longer-term thinking.
Osinergmin demonstrated institutional agility in adapting its mandate and functions. To complete this transition, further changes in internal organisation would be beneficial, although these require the government’s approval.
Osinergmin has been a pioneer amongst Peruvian government agencies in implementing regulatory impact assessments (RIA) and ex post evaluations. The regulator also places a high priority on transparent and accountable decision making, though there is no effective forum for dialogue with regulated entities and users.
Enforcement and inspections of the safety of energy and mining infrastructure are core functions of Osinergmin, but the regulator carries those out with little co-ordination with other supervisory agencies (e.g. on reporting requirements for companies) and the large number of norms hamper the regulator’s ability to manage effectively the volume and frequency of inspections.
Key recommendations
Assess whether the activity and duties of the Board reflect its mandate and structure, encouraging Board members to focus more of their limited time on strategic matters.
Starting from the existing Manual of Functions, clarify some internal functions (e.g. communications, regional activities), spread executive responsibilities more widely, promote accountability measures and establish formal mechanisms for quality control.
Continue to invest in regulatory management tools and processes, including by strengthening processes for regular engagement and dialogue with stakeholders.
Develop an Enforcement and Compliance Strategy with a view to establishing a closer working relationship with regulated entities and improving the efficiency of inspections activities.
Output and outcome
Osinergmin’s strategic institutional plan for 2014-21 has a balance of input-related, process-related and output-related objectives. Five objectives are devoted to improving stakeholder relationships and an additional internal process indicator focuses on better communication with stakeholders, placing emphasis on the outward-facing aspects of the regulator’s activity. However, the various performance measures collected by the regulator predominantly focus on internal management goals such as timeliness of projects and budget execution. Indicators on the quality of regulatory actions and stakeholders’ perception are collected but not presently streamlined into the strategic framework.
Osinergmin reports on the performance of regulated entities, mainly at the national level, through a number of different channels, including its annual reports, quarterly newsletter and statistical reports. The online Energy and Mining Observatory represents a significant step forward in the provision of integrated, accessible data and analysis for the electricity, hydrocarbons and mining sectors.
Different reporting requirements result in a fragmented flow of information going from Osinergmin to the Executive and the Legislature.
Key recommendations
Update a dashboard of performance measures aimed at enhancing the strategic focus of objectives and reducing the number of initiatives.
Examine the quality of the regulator’s actions in addition to their timeliness, both through internal and external perception surveys.
Adopt a comprehensive approach to data management with improved interfaces with regulated entities, building on the Energy and Mining Observatory.
Renew the regulator’s focus on sub-national dynamics, including by strengthening the role of regional activities and publishing regional performance reports.
Advocate for more structured reporting requirements to both the Executive and the Legislature.
