This assessment and recommendations chapter focuses on the external and internal governance arrangements of Peru’s energy and mining infrastructure regulator (Osinergmin), and presents policy recommendations that aim to improve the performance of the regulator. The review finds that Osinergmin’s key challenge is to build on widespread recognition of its technical competency and autonomy and strive for greater institutional maturity. This requires renewed attention to external governance arrangements, such as co-ordination mechanisms and greater accountability, aiming for constructive dialogue with all stakeholders. It also calls for internal organisational frameworks, management systems and capabilities to evolve so that Osinergmin can continue to tackle current and emerging challenges effectively. In doing so, the regulator will evolve from a reactive organisation, competently able to address emergencies and resolve crises, to a proactive institution with a vision for the energy and mining sectors and a relationship of trust with key stakeholders.
Driving Performance at Peru's Energy and Mining Regulator
Assessment and recommendations
Introduction
High-level message
Osinergmin has gained a strong reputation as an autonomous and technically competent regulator for energy and mining infrastructure over the last 20 years. The regulator has evolved by absorbing new functions and developing new competencies, mirroring a shift in national policies from a narrow focus on infrastructure expansion and investment attraction to wider goals of universal access and affordability.
This review considers that Osinergmin has absorbed its new functions with a relatively high degree of success. Following a period of growth in size and functions, it is only natural that Osinergmin should assess its strategic objectives and role as a step forward in its institutional maturity. The key challenge for Osinergmin is to progress its development from a reactive organisation, competently able to address emergencies and resolve crises, to a proactive institution with a clear vision for the energy and mining sectors and a relationship of trust with its key stakeholders.
In doing so, there are a number of issues requiring renewed attention and action. Osinergmin needs to ensure that it retains the full confidence of all actors in the energy and mining sectors, thereby providing the degree of stability necessary to ensure the participation of businesses, consumers and other stakeholders in these markets. This is particularly important at a time of high instability in the Peruvian public sector.
Internally, Osinergmin needs to strive for organisational frameworks, management systems and capabilities that allow the regulator to engage effectively with current and emerging challenges. Osinergmin and the government can promote initiatives that guarantee the regulator’s autonomy while ensuring greater accountability, including through more transparent and robust external governance arrangements. In addition, enhanced and more formal co-ordination mechanisms with other sector regulators and market players are essential for limiting, and ultimately resolving, the conflicts that may arise.
Role and objectives
Osinergmin’s mandate
Osinergmin is one of four regulators with autonomy from central government created in the 1990s to oversee Peru’s transition to a liberalised economy. Osinergmin and the other economic regulators share a legal framework (Ley marco de los organismos reguladores de la inversión privada en los servicios públicos, Law 27332 or LMOR) that grants them technical, administrative, economic and financial autonomy but places them under the aegis of the Presidency of the Council of Ministers (PCM).
As the safety and economic regulator for energy and mining infrastructure Osinergmin’s role, mandate and structure have changed substantially over the past 20 years:
In 1997, Osinergmin was created to oversee infrastructure safety and compliance with environmental regulations and occupational health and safety in the energy sector.
In 2000, soon after its creation, the regulator was given additional functions in tariff setting for the regulated energy markets.
In 2004-05, Peru’s energy landscape changed dramatically since natural gas reserves first came to fruition. Osinergmin began supervising the hydrocarbon sector in 1997. As of 2017, the sector produced 70% of all primary energy in the country and is the input to an increasing share of electricity generation.
In 2006, further competencies were attributed to Osinergmin with the management of auctions for renewable energy; over time, national policies have placed emphasis on decentralised solar energy in rural areas.
In 2007, the supervision of the mining sector (medium and large mines) was transferred to Osinergmin, in part due to the regulator’s strong reputation as a technical body.
In 2009 and 2011, because of institutional reforms and the creation of new public entities, the regulator forewent some regulatory functions that it originally had been granted, namely environmental and occupational health supervision.
Since 2012, the Ministry of Energy and Mining (MEM) granted Osinergmin the additional role of administering the Energy Social Inclusion Fund (FISE) and supervising its deployment. The main policy goal of FISE is to overcome Peru’s energy gap between the country’s rural and urban zones. Osinergmin created a team in charge of FISE that seems capable of managing the fund effectively. Their mandate, initially only temporary, has been extended every year. However, the regulator’s role in the programme may raise doubts about its independence from central government as MEM directs Osinergmin in all aspects of the programme. Furthermore, by means of a Decree (Decreto de Urgencia) in 2017, after the concession contract failed, the Executive granted Osinergmin the additional function of nominating an assets administrator of the Southern Pipeline (Gasoducto Sur Peruano) concession.
Osinergmin’s role has changed, incorporating new teams and functions, but an organisation-wide review has not been carried out – this can affect the regulator’s role and purpose in the eyes of all stakeholders. Osinergmin has grown in size and mandate, adding departments and teams that were previously housed elsewhere. In addition, FISE activities tend to spill over to other departments within Osinergmin which are not, on paper, involved with the programme (for example, tariff regulation experts are called upon to advice on finance schemes for gas prices). Whilst the Board and executive team of Osinergmin have made some changes to internal functions and governance, there has not been, to date, a thorough and holistic review. Without this, there are risks associated with a mandate growing in a patchwork fashion, including that stakeholders (government, industry, citizens) may lose sight of the central purpose of the regulator, damaging role clarity.
Limitations and requirements imposed by government, coupled with growth in scope and functions, could hinder rapid and effective decision-making. Compounding the growth in scope, whilst the applicable legal framework (LMOR) ostensibly grants Osinergmin technical, administrative, economic and financial autonomy, it nonetheless requires the PCM’s approval for a number of critical matters. These include limitations on budget expenditure and industry funding arrangements, internal organisational arrangements, and the design and administration of key processes. These requirements may hinder rapid and effective decision-making and provides for potential pinch points to challenge the independence of the regulator. Ultimately, these limitations could undermine confidence in the regulator and the efficacy of the markets that it regulates and the government’s ability to deliver on its objectives.
Recommendations:
Proactively engage with stakeholders to communicate more effectively Osinergmin’s core mandate and functions in economic and safety regulation. Constructive engagement can improve stakeholders’ understanding of the role played by the regulator, in an effort to preserve the regulator’s legal and de facto autonomy.
Undertake a holistic mapping review of Osinergmin’s mandate to ensure that it has the appropriate resources, structures, systems and capabilities it requires to deliver on its growing role and objectives. For instance, the regulator could assess the impact of uncertainty surrounding its role as administrator of FISE, including the extent to which the renewal of Osinergmin’s mandate on a temporary basis affects the regulator’s resources, autonomy and perception by external stakeholders.
Institutional co-ordination
Osinergmin operates within a complex governance system that requires interactions with several public agencies and departments and within a policy framework that has been rapidly evolving. Osinergmin regularly liaises with the oversight body in the Executive (PCM) as well as the Ministry of Finance (MEF) on issues of budget and organisation; with MEM on policy and technical matters; with Indecopi on consumer protection and competition; and with ProInversion in relation to investment promotion, including concessions. Congress can also call upon Osinergmin through the two permanent committees that oversee its areas of competence. Interaction with other institutions is informal often depends on personal relationships and, on occasion, the establishment of ad-hoc working groups, such as the one formed in 2017 by MEM, Osinergmin and the Economic Operating Committee of the National Interconnected System (Comité de Operación Económica del Sistema Interconectado Nacional, COES)1 to review and propose updates to the Law on Electric Concessions.
In light of the reallocation of roles among supervisory authorities, the need for institutional co-ordination has become even more pressing. The government has transferred environmental and occupational health competencies from Osinergmin to the Agency for Environmental Assessment and Control (Organismo de Evaluación y Fiscalización Ambiental, OEFA) and the National Superintendence of Labour Inspection (Superintendencia Nacional de Fiscalización Laboral, SUNAFIL) respectively. This has limited the scope of Osinergmin’s regulatory and supervisory powers and increased the number of public agencies with whom regulated companies and users interact.
Recommendations:
Set up a forum of economic regulators of Peru to harmonise external communication on the role of economic regulators, share good practices (e.g. in regulatory management tools), and jointly advocate for governance-related topics as relevant. The leadership of the group could rotate between the regulatory authorities and the group should aim to focus on concrete deliverable and activities, rather than setting up a bureaucratic system of collaboration.
Develop specific instruments to ensure more structured and regular co-ordination among the public agencies (OEFA, SUNAFIL) involved in the supervision of the energy and mining sectors, as well as the COES in the electricity sector. These instruments can include the following:
Regular working groups both at high level (e.g. presidents, executive leadership) and at a technical level (e.g. area managers, experts), providing a recognised channel for inter-agency communication and a commonly agreed timeline to co-ordinate strategies and actions;
Memoranda of Understanding between Osinergmin and other entities, establishing more formal co-ordination mechanisms on common issues such as sharing information and good practices on supervision schedules, data requests and emergency responses, avoiding ah-hoc agreements whenever joint action is required.
Box 1. Examples of co-ordination among regulatory agencies
The challenges faced by regulators often transcend sectoral and geographical boundaries; hence, greater co-ordination and collaboration are needed. There are a number of experiences with co‑ordination among regulatory agencies domestically, including:
Australia: the Utility Regulators Forum aims to facilitate the exchange of information, understanding of the issues faced by regulators, consistency in the application of regulatory functions and the review of new ideas about regulatory practices. The newsletter of the forum is published quarterly and contains articles on common challenges, summaries of recent journal articles on regulatory matters, and updates on regulatory decisions.
France: the Club des Régulateurs provides a forum for both established and new economic regulators to share common problems with a few thematic meetings every year, most recently on issues of data privacy and data handling. A third party, currently an academic institution, hosts it.
Mexico: following the OECD’s peer review of three energy regulators (ASEA, CNH and CRE), a permanent co-ordination group for the energy sector was established, leading to joint briefs, inspections and an exchange programme, better equipping regulators to implement wide-ranging sector reforms.
United Kingdom (Scotland): As part of the Strategic Review of charges for 2021-2027, stakeholders in Scotland meet on a monthly basis to ensure collective buy-in and collaborative working around the key issues faced by the water and wastewater sectors. The meetings involve high-level representatives from the water operator (Scottish Water), economic regulator (The Water Industry Commission for Scotland, WICS), the quality regulator (Drinking Water Quality Regulator for Scotland, DWQR) and the environment regulator (Scottish Environment Protection Agency, SEPA), as well as the Customer Forum and the consumers association. More granular analysis from the working groups feeds into those high-level discussions.
Ireland: a new Economic Regulators’ Network is convened around four times a year and hosts discussions on common challenges such as the legal interpretation of new regulations. Participants recognise that further work is needed to address technical regulatory issues across sectors.
Source: Network of Economic Regulators (NER) at the OECD.
Box 2. Co-ordination in the Mexican energy sector
The recent energy reform that opened the oil and gas sector to private investment in Mexico in 2013 enhanced the institutional set-up of the existing economic regulators: the upstream regulator, the National Commission for Hydrocarbons (Comisión Nacional de Hidrocarburos, CNH) and the downstream regulator, the Energy Regulation Commission (Comisión Reguladora de Energía, CRE). The reform also created a new cross-cutting technical regulator to oversee safety and environmental protection throughout the whole hydrocarbon value chain: the Safety, Energy and Environment Agency (Agencia de Seguridad, Energía y Ambiente, ASEA).
Recently the three regulators have come together and formalised a Cooperation Agreement and a joint working group (the Group) around four main objectives:
1. Planning: to share a common vision of the future and plan accordingly.
2. Operational co-ordination: to address operating priorities in a timely manner.
3. Resources: to address common necessities concerning talent attraction and retention and financial autonomy.
4. Conflict resolution: to address and resolve conflicts between regulators.
The Group is chaired by a rotating presidency, whose leadership changes every six months.
One of the common tools now available to the energy sector in Mexico – and the result of inter-agency co-ordination – is a “one-stop-shop” electronic portal where companies can register and fulfill all administrative and reporting obligations. The website connects users to specific regulatory agencies where filings must be made. This tool facilitates the interaction of industry participants and regulatory agencies. Each agency conserves and executes its regulatory role, and companies are granted faster access to all agencies, with the confidence of being directed to the appropriate regulatory authority depending on the subject matter. The Group has also proven to be a good mechanism for putting together a package of statutory and legal proposals that aim at bolstering the integrated system of regulators institutional set-up and independence. These proposals are being jointly discussed with relevant government stakeholders.
Source: Information provided by the Mexican National Commission for Hydrocarbons, (OECD, 2018[1]).
Strategic objectives
Osinergmin sets out its medium to long-term strategic objectives in the Strategic Institutional Plan (Plan Estratégico Institucional, PEI) which acts as the main reference framework for the management of its internal activities (see Table 1) Osinergmin’s current PEI runs from 2014 to 2021. The regulator prepared the PEI at a time of changing priorities for energy policy nationally, given the increasing importance of universal access and affordability concerns alongside investment attraction and system efficiency laid out in the National Energy Plan 2014-25 and the National Energy Policy 2010-40. As such, the PEI rightly aims to align the long-term strategies and goals of the regulator with those of the government and sets out initiatives to achieve those goals.
Table 1. Osinergmin’s Strategic Plan
|
Category of focus |
Strategic objective |
|---|---|
|
Stakeholders |
1. Achieve credibility and trust of the society in the role of Osinergmin. 2. Develop rules and processes, with autonomy, transparency and predictability for the business sector. 3. Promote the improvement of coverage at the national level of sufficient, affordable and quality services. 4. Serve the requirements of stakeholders in an understandable, quick and efficient form. 5. Encourage that the operations of the companies are safe for the community, workers and the environment. |
|
Internal processes |
6. Integrate and improve the regulation, supervision and audit processes. 7. Incorporate a long-term global vision in energy and mining that promotes the development of initiatives for a sustainable industry policy. 8. Promote decentralisation and linkage processes between consumers and companies. 9. Strengthen communications with stakeholders. 10. Develop the conditions for regional energy interconnection. 11. Monitoring and regulating investment commitments in new infrastructure. |
|
Human resources development, learning and technology |
12. Develop innovation and creativity through organisational learning and knowledge management. 13. Build an attractive organisation through the professional and personal development of its employees. 14. Have adequate information systems and technologies that provide support to Osinergmin’s activities. |
|
Financial resources |
15. Use the budget efficiently. |
Source: Information provided by Osinergmin, 2018.
The values of commitment, excellence, service, integrity and autonomy underpin the strategy. The PEI has a balance of input-related, process-related and output-related objectives. Five objectives are devoted to improving stakeholder relationship (through greater trust, autonomy and transparency) and an additional internal process indicator focuses on better communication with stakeholders, hence placing emphasis on the outward-facing aspects of the regulator’s activity.
Osinergmin has an active communications strategy to convey information about its work and increase the reputation of the regulator, while also providing simple and easy ways to report problems by users with services. Osinergmin is very active on social media with over 45 000 followers on Twitter, 24 000 on LinkedIn, and 62 500 followers on Facebook. The regulator has also launched both app-based (Facilito Electricidad) and SMS-based (Tikuy Rikuy) services enabling users to report issues to the electricity company that provides the service – subsequently, the information reaches Osinergmin as the regulator supervises compliance. The regulator also provides information to the wider public on matters that it does not directly regulate, such as petrol pump prices allowing drivers to find the cheapest in their area (Facilito Combustible). Their communication in inclusive, utilising methods to communicate with disabled persons as well as non-Spanish speaking communities, such as the Quechuan population.
Recommendations:
Carry out a mid-term evaluation of the PEI in order to:
Prioritise objectives more systematically across the short, medium and long-term, thereby providing a timeline for actions linked to each objective;
Develop in more detail a forward-looking vision for the sector, reasserting the regulator’s role to provide a predictable framework for investors and citizens within the policy directions set by government – and link strategic objectives to such vision;
More closely link budgeting and planning to forecast needs and minimise risks.
Input
Financial resources
Osinergmin is funded by contributions from the industry, set at a rate approved by the PCM upon proposal of the regulator. The Law caps contributions to 1% of total industry turnover but Osinergmin has, since 2013, proposed specific rates for different sectors well below maximum thresholds based on an estimation of its funding needs. In 2016, the regulator also proposed marginally declining rates across all sectors for 2017-19 (see Table 2), responding in part to industry’s concerns that rates were too high. Revenues from contributions constitute around 90% of Osinergmin’s total budget and the regulator does not receive any funding from government.
Table 2. Rate of regulatory contributions to Osinergmin, 2017-19
|
Sector |
Rate of regulatory contribution (% of annual income) |
||
|---|---|---|---|
|
2017 |
2018 |
2019 |
|
|
Electricity |
0.52% |
0.51% |
0.50% |
|
Hydrocarbons |
|||
|
0.36% |
0.35% |
0.34% |
|
0.57% |
0.56% |
0.55% |
|
Mining |
0.15% |
0.14% |
0.13% |
Source: Information provided by Osinergmin, 2018.
Osinergmin plans its budget on a three-year rolling basis, balancing the needs of each department (bottom-up) and revenue projections (top-down) from the proposed industry contributions. As such, industry contributions are not determined nor adjusted in accordance with an ex post cost recovery principle and, in any given year, resources may exceed or fail to meet actual needs. However, Osinergmin’s management agrees that the regulator has had sufficient funds to cover costs and meet its objectives historically.
The main indicator that the Executive monitors is budget execution, but at the same time, central government rules raise some concerns with respect to the regulator’s ability to use its budget fully. Budget execution at Osinergmin was around 90% in 2015 and 2016 but below 80% in 2017 (see Table 3). However, existing public sector-wide rules, such as on salary scales, as well as recent austerity measures (that may or may not be temporary in nature), affect Osinergmin’s ability to execute its budget. These include:
Limitations to the budget for communications and outreach, resulting in fewer public awareness events and the decision, inter alia, not to produce an executive summary and print out hard copies of the annual report
Limitations to the budget for travel expenses, limiting the ability of Osinergmin’s senior staff to participate in international fora and networks
Table 3. Osinergmin Annual Budget and Execution, 2015-17
|
Year |
2015 |
2016 |
2017 |
|---|---|---|---|
|
Budget (million PEN) |
328.5 |
349.5 |
402.6 |
|
Execution (%) |
90.9% |
89.5% |
77.7% |
Source: Information provided by Osinergmin, 2018.
Additionally since 2017, the Ley de Equilibrio Financiero requires that all surplus funds of public institutions (including those collected from industry) be returned to the Treasury if not executed in a given fiscal year. Government needs to renew this measure explicitly every year. When coupled with austerity measures this can translates into Osinergmin accumulating a surplus at the end of the year and having to forward any unspent funds to the Treasury. In 2017, Government also directed Osinergmin to return its accumulated surplus from previous years.
Recommendations:
Take a proactive stance in order to explain the impacts of emerging uncertainty in public financing and fiscal rules on budget execution. The regulator should seek clarity on the extent and duration of recently imposed measures, document to Government the direct impacts of those measures on its activities and advocate that the principles of cost-recovery and transparency should be key drivers of its funding model.
Co-ordination among regulators in Peru on this issue would be beneficial. For example, regulators could advocate that the resources collected by regulators and coming from industry contributions should only be directed towards programmes in the same industry. There are numerous examples of industry levy models from OECD countries that Peruvian regulators can look at. The risk is that, otherwise, industry will perceive its contributions as a de facto tax.
Map Osinergmin’s costs against predicted resources and, where shortfalls are predicted, evaluate future needs. In light of funding uncertainty, prioritisation as part of the annual plans becomes ever more important. Prioritisation can be based on more specific “value for money” assessments of different expenditure items and detailed costing of regulatory and supervisory activities. Measures of funding gaps and value for money can accompany budget execution statistics as a measure of success.
Box 3. Budgeting in Portugal and Canada
The Portuguese Water and Waste Services Regulation Authority (ERSAR)
In 2013, the approval of a new legislative framework for public services sector regulators (Law No. 67/2013) has brought new dispositions on the independence of regulators in Portugal. The law established that these authorities would have administrative, financial, management autonomy, and organic, functional and technical independence to perform their role. The law specifically establishes that these authorities should have their own boards, staff and property, as well as regulatory, inspection and sanctioning powers.
Regarding financial independence, this law establishes that regulators’ funding should come from levies in the sectors where they act. Therefore, Portuguese regulators are funded by the regulated market through levies charged by the regulator according to the dimension of each operator. For instance, ERSAR, the Water and Waste Services Regulation Authority, is funded through levies that are charged to water and waste services operators according to the population served and to the activity level of each operator. This practice brings additional independence, since the regulator's activity is perceived as a service to the regulated sectors. The regulator considers these levies an admissible cost for tariff determination, which means that, ultimately, they are transferred to consumers in the tariff they pay. These levies represent less than 1% of the monthly charges paid by consumers, which is considered a very reasonable value for money for the regulation “service”.
According to ERSAR's statutes (Law No. 10/2014), if there is a net surplus from the annual budget execution, these amounts should be transferred for the following year and should be used in the development of specific actions aiming to benefit the sector, namely technical capacitation of the operators and other stakeholders. The net surplus could also be returned to the consumers in the form of lower prices.
National Energy Board of Canada (NEB)
Pursuant to the regulatory scheme in place, the Canadian NEB’s cost recovery mechanism is premised on commodity charging costs that are allocated to specific entities within those sectors (oil – oil pipelines, gas – gas pipelines, etc.). Companies pay their share of recoverable costs to the Consolidated Revenue Fund of Canada, through greenfield levies, fixed levies (small, intermediate companies and other commodities) or proportional levies (large companies). The allocation of costs to commodity categories is based on time spent on each commodity.
The NEB also has an advisory committee, which is composed of the staff from the regulator and representatives of the regulated companies, that reviews planned expenditures and discusses cost recovery issues. The NEB does not receive this funding directly from companies; rather, it receives its appropriations through Parliament, on an annual basis.
Source: Information provided by ERSAR, (OECD, 2018[1]), Driving Performance at Ireland's Comission for Regulation and Utilities, OECD Publishing, Paris, https://doi.org/10.1787/9789264190061-en.
Human resources
Osinergmin’s employees have recorded a low level of turnover and a high level of satisfaction in recent years, testimony to the regulator’s efforts to provide an attractive and rewarding working environment. Osinergmin is able to attract competent analysts and support staff at the entry and middle levels. Osinergmin offers its employees a generous benefits package that includes full health care coverage for employees and their families (subject to co-payments), training programmes supported by corporate partnerships with universities, and team building initiatives (for employees hired until Law 728, as discussed below). In addition, growth opportunities are present thanks to frequent openings across departments. For 16 years, Osinergmin has also operated a national recruitment programme for engineering, economics and law graduates through internship programmes often leading to full employment. Osinergmin has a robust performance assessment system that links staff objectives to the PEI. Thanks to all these efforts, Osinergmin’s staff turnover rate has been stable (around 16% for all staff and 4% for permanent staff over 2015-17) and staff satisfaction reached a 10-year high in 2017.
The recruitment of senior staff poses more challenges, mainly because salaries have been frozen in nominal terms by the government since 2006 and a dual employment system exists. Osinergmin employs around 680 professional staff members (more than 100 new positions were added over 2015-18). Staff are mostly hired through open and transparent procedures based on a recruitment skills model, whereby the recruitment committee indicates the selected candidate for the General Manager to formally appoint. The President directly appoints some senior management positions (puestos de confianza). Appointees need to have certain qualifications and skills that the internal operating manual describes in detail. Osinergmin has two vastly different employment regimes for contracts: staff members hired under Law 728 have permanent contracts and benefits as described above, in line with private sector conditions. Meanwhile staff hired under Law 1057 are only granted renewable 6-month contracts and lower benefits. The existence of parallel frameworks may be problematic for accountability (hiring) and incentives for staff (remuneration, benefits). Law 30057 (Ley del Servicio Civil) was approved in 2013 with the aim of establishing a single labour regime for civil servants including staff of economic regulators. Implementation, led by the public agency SERVIR, has been slow.
Recommendations:
Continue to attract and retain competent staff, regularly updating existing plans for maintaining technical expertise, monitoring salaries compared to the private sector, addressing current needs and future expectations in collaboration with existing staff. Planning for technical expertise is particularly important as the regulator competes with the private sector for specialised and technical staff in the energy and mining sectors, where salaries can be significantly higher than national averages
Continue investing in recruitment strategies in order to remain an attractive choice for new graduates. Graduate programmes, including through specific agreements with universities across Peru, are useful to ensure that new skills and new thinking can enter the institution as well as to diversify the workforce.
Process
Decision making
By design, the members of the Board are appointed on staggered contracts following a balanced process involving different state actors. Board members are selected by a multi-step process with checks and balances that includes review by an inter-institutional selection committee, submission of selected candidates to the President of the Republic by the President of the Council of Ministers, appointment by the President of the Republic by Supreme Decree, and finally endorsement by the PCM, MEF and MEM. The Osinergmin Board normally comprises six members (one of whom is the President). At the time of writing, one position is vacant and the other five members have the following background: two lawyers, two engineers, and one economist. There have been no women on the Board in the last ten years.
Board meetings are not very frequent and are dominated by operational matters, with little time dedicated to strategic planning and longer-term thinking. Board members receive remuneration to meet twice per month, significantly limiting their capacity to weigh in on complex strategic and technical decisions. Requests can be made to meet additionally under extraordinary circumstances by the President or a majority of its members; although this happens, the law forbids any additional remuneration for this time. The President is the only member of the Board who is remunerated on a full-time basis and can have a number of advisors. The other four members have no supporting staff for their duties as members of the Osinergmin Board and their internal requests for information to different departments can at times take a long time before they are processed.
Recommendations:
Assess whether the activity and duties of the Board reflect its mandate and structure. In its current configuration, the Board appears to have a hybrid model with elements of both executive and non-executive arrangements. Building on the professional experience of Board members, the by-monthly meetings should focus more on strategic discussions to advance and improve Osinergmin’s actions and less on detailed operational decisions. The Board could look for opportunities to delegate some of those decisions (particularly the more operational and non-controversial ones where a precedent already exists).
Make existing advisory resources available to Board members, as already provided by the internal manual (MOF). Board members should be able to access succinct and consolidated information ahead of meetings to support more informed decision-making. Advisory resources could also help Board members dedicate more of their limited time to strategic matters.
Internal organisation and management
Osinergmin is directly managed by the President of the Board, with the support of the General Manager (GM). The President appoints the GM and other senior management of the organisation without open recruitment (and can remove them from their posts), approves the institutional budget, balance sheets and financial statements as well as the Institutional Management Plan and administrative policies. The President and the GM chair a weekly meeting with Osinergmin senior management. The GM is responsible for the legal, administrative, communication and technology departments of Osinergmin and plans, organises, manages, executes and supervises the administrative, operational, economic and financial activities of Osinergmin. He or she prepares draft annual reports, budgets and senior management recruitment decisions for decision by the President. The GM also oversees the work of the economic and legal analysis departments. Therefore, a large number of decision-making functions are concentrated in these two executive positions, placing very high expectations on the individuals and over-centralising risk for the organisation.
Osinergmin has demonstrated institutional agility and adaptability through changes in mandate and functions that have required organisational change. The regulator has integrated new teams and competencies in recent years. It has done so by striving to develop common guidelines, ways of working and co-ordination processes. The sense of pride that brings together Osinergmin’s employees is an important asset to achieve this goal. However, as recognised in the PEI, more needs to be done to foster a shared institutional culture. Some of the concrete steps currently underway to achieve this goal include:
The application of similar legal requirements, quality management processes and analytical tools across all departments;
The introduction of regulatory management tools common to all rule-making and tariff-setting processes, most notably a common Regulatory Impact Assessment (RIA) methodology;
The creation of a joint Energy and Mining Observatory (OEM) pulling together all the data collected by the regulator and fully accessible by both citizens and businesses;
Streamlined communications and outreach campaigns through the official channels (TV, radio, online) and increasingly through apps and social media, as well as greater accessibility by making available guides in Braille.
Effective communication of objectives and strategies is essential. This review calls for a more robust external relations strategy that communicates the core objectives of the regulator, greater co-ordination with other institutions and a renewed focus on stakeholder engagement as well as regular liaison with the regulated sectors. This will not be possible unless the regulator invests further human and financial resources in external liaison and institutional relations functions. Currently different departments within Osinergmin interact with different external actors and the Communications and Inter-Institutional Relations Department comprises only nine employees.
The Regional Offices under the Energy Supervision Department have promoted Osinergmin’s presence in the regions but their role is at times unclear. The fact that over 20% of the organisation’s budget goes to Regional Offices and that their staff numbers are growing reflects widespread recognition that they have the potential to contribute to improving citizens’ awareness of Osinergmin. Regional Offices have indeed been providing decentralised support to the most remote areas, including in case of emergencies and user complaints. They have also managed the creation of the Energy and Mining Observatory (OEM). However, some of their competences are not clearly defined and overlap with other departments. For instance, it is unclear which issues should be resolved at the local level or in Lima in the case of user complaints.
Another area for improvement is on the management of the Users Council (Consejo de Usuarios, established by Law for all independent regulators). Osinergmin complies with the legal requirement to have at least one Users Council, and its only Council comprises five members from a number of civil society organisations, industrial associations, and professional body associations. However, the Council does not provide meaningful inputs to the regulator’s decision-making processes. The potentially positive impact of the Council is not being fully exploited. Advisory bodies and councils of users exist around OECD countries as an effective means for the regulator to keep their finger on the pulse of the market and inform policy development. This is especially important in the energy and mining sectors where environmental and social impacts can deeply affect indigenous and rural populations, who then react with protests and blocking new developments.
Recommendations:
Map roles, obligations and functions of the executive management team (President, General Manager, Board Members, and Department Managers) to the various areas of responsibility of the organisation with a view to spread executive responsibilities more widely and broaden the existing decision-making structure.
Set up appropriate accountability measures, aiming to establish formal mechanisms for quality control of internal decisions. These should be formalised in a Board/Management Charter, starting from the existing Manual de Organización y Funciones (MOF). Ongoing work towards the adoption of international standards and the promotion of an integrated management system goes in the right direction by streamlining the regulator’s processes and ways of working.
Strengthen and clarify some of Osinergmin’s internal functions. In particular, the regulator would benefit from:
Strengthening the role of inter-institutional relations by leading the co-ordination with other supervisory authorities and liaising more closely with government and Congress. The existing Communications and Inter-Institutional relations Department could take up this role but would require strong support and leadership from senior management as well as an assessment of the need for additional resources.
Clarifying the competencies of the Regional Offices vis-à-vis other Departments, making their work more crosscutting as part of Osinergmin’s efforts to improve its public recognition, and assessing the impact of their advocacy activities on litigation and user complaints.
Reform the Users Council to advance Osinergmin’s practices of consultation and engagement by attracting new applicants and redefining roles for the 2020-22 Users Council would advance. For example, the Council could be assigned well-defined tasks linked to specific regulatory interventions and aimed at eliciting views and evidence from users and consumers. Participation could be broadened to research institutes and think tanks. One of the areas of interest could be involving users in expressing their views about local infrastructure projects before conflicts arise. Osinergmin should assign clear responsibilities for managing the Council(s), and match this with resources (e.g. funding, training).
Regulatory quality processes
Osinergmin has been a pioneer amongst government agencies in Peru at implementing regulatory impact assessments (RIA), along with other regulatory agencies and the PCM. In response to the 2016 OECD Regulatory Review of Peru, the PCM began developing a Regulatory Quality Assessment (RQA) framework that implements measures for simplifying administrative processes, including a requirement for assessing the impacts as well as conduct stock reviews and ex post evaluations of regulations that add administrative processes. Osinergmin, independently and in parallel developed a manual with guidelines for applying Regulatory Impact Assessments (RIA) to all regulatory decisions and not just administrative processes. In 2016, the manual and guidelines were released, which allow for multiple types of analysis ranging from a full cost-benefit analysis to a ‘mini-RIA,’ whereby the decision is proportional to the issue at hand. As of October 2018, one full RIA was completed, a second full RIA was underway, 16 mini-RIAs were completed and a further 18 were underway.
Osinergmin practices stakeholder engagement consistently at the later stages of rule making, but there is no permanent forum with regulated entities to discuss early regulatory developments. All regulators are required to publish new norms and regulations in the Official Gazette and on the institutional website 30 days before their entry into force. Where applicable, a RIA is included in the supporting documentation. Osinergmin opens the consultation period for comments and logs all comments received and actions taken in response in a ‘comments matrix’, which is published alongside the final regulation for transparency. Osinergmin does not usually conduct early-stage consultations and mainly relies on an open-door policy to encourage regulated entities to provide feedback on the sector or regulatory developments, which places the onus on the entities to be proactive about providing this feedback. However, in the case of tariff-setting decisions, Osinergmin’s engagement process includes early proposals from the regulated companies, the pre-publication of resolutions and supporting documentation for comments.
The PCM RQA only requires ex post evaluations for administrative procedures in Peru, while Osinergmin has conducted evaluations voluntarily on some of its regulatory decisions and funds it administers. In accordance with the RQA, regulations adding administrative procedures must be reviewed every three years, with some exceptions. In Osinergmin, the Department for Economic and Policy Analysis (GPAE) produces Policy Evaluation Documents (DEPs), which are evaluations conducted on a case-by-case basis. DEPs seek to quantify ex post the impacts of supervisions and control activities to assess their effectiveness at meeting intended goals. Additionally, both investment programmes FISE and FOSE (Electric Social Compensation Fund) must undergo impact analyses in accordance with methodologies defined by MEF. The PCM RQA also requires government agencies to undergo a review of their stock of regulations and, at the time of writing, Osinergmin is working with the PCM to advance this review.
Recommendations:
Continue to invest in improving Osinergmin’s regulatory management tools and processes. This will provide returns in terms of transparency, accountability and engagement. The GPAE co-ordinates Osinergmin’s efforts in developing the practice of RIA and ex post evaluation. It is important for the Department to strengthen this role with appropriate powers and responsibilities, and push for full implementation of the recent guidelines across all regulatory areas.
Outline a process for regular external engagement and dialogue with stakeholders, particularly outside the tariff-setting processes and at the early stages of rule making. Extensive consultation before implementing any new rules is useful to minimise future areas of misunderstanding of the norms and therefore litigation. Structured dialogue around planned infrastructure projects can also help Osinergmin understand and tackle the root causes of those investment projects currently blocked due to force majeure.
Box 4. Consumer engagement in economic regulatory determinations in electricity regulation in Australia
The Australian Energy Regulator (AER) has always enabled consumers to make submissions to its consultations, such as at public forums, draft determinations on regulatory proposals and issues papers. However, as part of the Better Regulation program in 2013, the AER introduced a series of measures to strengthen consumer engagement in the energy sector. This included internally focussed measures, such as establishing a Consumer Challenge Panel (CCP) and Consumer Reference Groups, as well as providing clear guidance for regulated businesses on consumer engagement through the production of a Consumer Engagement Guideline.
The CCP was the main institution established to advise the AER on consumer interests in regulatory processes. The CCP is a panel of experts appointed to champion the long-term interests of consumers, rather than an advocacy body for consumers. The CCP’s main role is to analyse whether regulatory proposals are aligned with the long-term interests of consumers, as well as examine the effectiveness of related consumer engagement activities. While it is not a decision making body, the CCP advises the AER on the interests and concerns of consumers in relation to broader issues. For example, a subpanel of three members was formed to advice on the development of cost reflective pricing for electricity distribution networks.
In addition to the CCP, the AER also established Consumer Reference Groups to provide guidance on specific issues. For example, in 2017 the AER established a Consumer Reference Group to provide input to the review of the rate of return guideline. This group directly engaged with industry bodies and was given resources to commission consultancy support to establish an aligned position on behalf of all customers. The group was able to establish evidence to influence elements of this review, such as the averaging period for the risk free rate, for the long run interests of all consumers.
The Consumer Engagement Guideline outlines key principles and components to inform regulated business’ strategies and processes. The guideline acknowledges that the appropriate level of consumer engagement in any situation depends on factors like the objectives, timeframes, resources, and level of interest. So it encourages business to consider its objective and capacity for engaging with consumers (including the number of consumers) when contemplating different approaches. In addition to exploring the appropriate level of engagement, the Consumer Engagement Guideline contains four best practice principles to guide engagement strategies. These principles are that the engagement should be clear, accurate and timely communication; accessible and inclusive; transparent; and, measurable.
Source: Information provided by the Australian Energy Regulator (AER).
Inspections, enforcement and compliance
Enforcement and inspections on the safety of energy and mining infrastructure are core functions of Osinergmin, but the regulator often delivers this function in a vacuum. There is little co-ordination between different inspection authorities (Osinergmin, OEFA and SUNAFIL) on planning joint schedules and data requests. This can place burdens on regulated entities that face overlapping data requests and re-inspections on the same issues. The lack of co-ordination can also translate in poor use of public resources.
In addition, the proliferation of binding standards and new norms can reduce the regulator’s ability to manage the volume and frequency of inspections and can undermine its ability to enforce standards and norms effectively. A growing number of requirements also results in reduced predictability for industry players. Altogether, Osinergmin may find itself struggling to ensure compliance and relying heavily on the threat of sanctions in its relationship with supervised entities. The regulator recognises this risk and aims to revise its approach by strengthening the role of preventative actions.
Recommendations:
Improve the efficiency of enforcement and inspections by minimising burden on regulated entities and maximising effectiveness of public resources. Co‑operation with OEFA and SUNAFIL (as described in previous recommendations) can result in better information sharing, with agencies acting as “eyes and ears” for others. Mapping the enforcement and inspection journey from a user/regulate perspective could help identify opportunities for joint interventions that maximise impacts while minimising burden.
Develop an Enforcement and Compliance Strategy and communicate this to all stakeholders through a Statement of Approach, updated annually to reflect the strategic priorities of the organisation (e.g. which aspects of safety may be the focus of this year’s reviews). This will establish transparent working arrangements ahead of physical inspections, working towards the goal of establishing a closer working relationship with regulated entities as detailed in the PEI.
Make accidents, disasters and emergencies prevention a key priority through soft instruments such as the establishment of a safety culture and technical recommendations (non-binding instruments) on processes and procedures, in order to change behaviours over time in the regulated entities. The 2018 OECD Regulatory Enforcement and Inspections Toolkit provides a useful checklist (see Box 6).
Box 5. The ACCC’s compliance and enforcement strategy
In Australia, the ACCC (Australian Competition & Consumer Commission) developed a compliance and enforcement strategy that is communicated to all stakeholders. The agency uses four integrated strategies to achieve the compliance objectives:
Encouraging compliance with the law by educating and informing consumers and businesses about their rights and responsibilities.
Enforcing the law, including resolution of possible contraventions both administratively and by litigation and other formal enforcement outcomes.
Undertaking market studies or reporting on emerging competition or consumer issues with a view to identifying any market failures and how to address them, and to support and inform the compliance and enforcement measures and identify possible areas for policy consideration.
Working with other agencies to implement these strategies, including through co‑ordinated approaches.
The ACCC is selective in the matters to investigate and the sectors in which the agency engages in education and market analysis. The ACCC uses annual compliance and enforcement priorities to inform decision making in this regard.
In deciding which compliance or enforcement tool (or the combination of such tools) to use, the first priority is always to achieve the best possible outcome for the community and to manage risk proportionately. The ACCC’s enforcement actions seek to maximise impact across an industry sector. For example, the agency uses the outcome of one court proceeding to encourage other industry participants in the sector to improve their practices.
The ACCC’s role is to focus on those circumstances that will, or have the potential to, harm the competitive process or result in widespread consumer detriment. ACCC therefore exercises discretion to direct resources to matters that provide the greatest overall benefit.
Each year the ACCC reviews the compliance and enforcement priorities. Priorities are determined following external consultation and an assessment of existing or emerging issues and their impact on the regulated matters.
Source: (ACCC, 2018[2]), “Compliance & enforcement policy & priorities”, https://www.accc.gov.au/about-us/australian-competition-consumer-commission/compliance-enforcement-policy-priorities#the-accc-s-compliance-and-enforcement-strategy.
Box 6. The 2018 OECD Regulatory Enforcement and Inspections Toolkit
The OECD Regulatory Enforcement and Inspections Toolkit offers government officials, regulators, stakeholders and experts a simple tool for assessing the level of development of the inspection and enforcement system in a given jurisdiction, institution or structure. It presents a checklist of 12 criteria to identify strengths and weaknesses as well as areas for improvement:
1. Evidence-based enforcement: Regulatory enforcement and inspections should be evidence-based and measurement-based: deciding what to inspect and how should be grounded in data and evidence, and results should be evaluated regularly.
2. Selectivity: Promoting compliance and enforcing rules should be left to market forces, private sector actions and civil society activities wherever possible: inspections and enforcement cannot take place everywhere and address everything, and there are many other ways to achieve regulations’ objectives.
3. Risk focus and proportionality: Enforcement needs to be risk-based and proportionate: the frequency of inspections and the resources employed should be proportional to the level of risk, and enforcement actions should aim at reducing the actual risk posed by infractions.
4. Responsive regulation: Enforcement should be based on “responsive regulation” principles; that is, inspection enforcement actions should be modulated depending on the profile and behaviour of specific businesses.
5. Long-term vision: Governments should adopt policies on regulatory enforcement and inspections, and establish institutional mechanisms with clear objectives and a long-term strategy.
6. Co-ordination and consolidation: Inspection functions should be co-ordinated and, where needed, consolidated: less duplication and fewer overlaps will ensure a better use of public resources, minimise the burden on regulated subjects, and maximise effectiveness.
7. Transparent governance: Governance structures and human resources policies for regulatory enforcement should support transparency, professionalism, and results-oriented management. The execution of regulatory enforcement should be independent from political influence, and compliance promotion efforts should be rewarded.
8. Information integration: Information and communication technologies should be used to maximise a focus on risks, promote co-ordination and information sharing and ensure an optimal use of resources.
9. Clear and fair process: Governments should ensure that rules and processes for enforcement and inspections are clear. Coherent legislation to organise inspections and enforcement needs to be adopted and published, and the rights and obligations of officials and of businesses, clearly articulated.
10. Compliance promotion: Transparency and compliance should be promoted through the use of appropriate instruments such as guidance, toolkits and checklists.
11. Professionalism: Inspectors should be trained and managed to ensure professionalism, integrity, consistency and transparency. This requires substantial training focusing not only on technical but also on generic inspection skills, and official guidelines for inspectors to help ensure consistency and fairness.
12. Reality check: Institutions in charge of inspection and enforcement, and the regulatory enforcement and inspection system as a whole, should deliver the levels of performance expected from them – in terms of stakeholder satisfaction, efficiency (benefits/costs), and overall effectiveness (safety, health, environmental protection etc.).
Source: (OECD, 2018[3]), OECD Regulatory Enforcement and Inspections Toolkit, http://dx.doi.org/10.1787/9789264303959-en.
Appeals
Citizens and businesses have access to a dispute resolution system at a reasonable cost to adjudicate user and inter-company complaints as well as sanctions, while the Board handles appeals to tariffs imposed by the regulator. The different appellate bodies housed within Osinergmin are staffed with lawyers and engineers to hear and rule on matters presented to them.
A significant rise in the number of appeals is raising the toll of unresolved cases in all tribunals, including the JARU (1 522 unresolved cases in 2016 and 2 339 in 2017) and the TASTEM (407 unresolved cases in 2016 and 274 in 2017). Osinergmin has been addressing this issue by hiring extra resources in 2018, leading to a 20% increase in personnel working across tribunals. Osinergmin is also considering the reason behind the growth in litigation. The following four areas have been identified, and deserve further analysis leading to remedial action by the responsible departments:
Complexity of the regulatory framework and a large number of new rules and norms issued each year leading to non-compliance
A punitive supervision approach leading to a growing number of fines levied
Delays in nominating some of the TSC (Tribunal de Solución de Controversias) members by the PCM
The increase in activities in more remote areas raising awareness about consumer rights and ways to complain
Judicial review is the only recourse for citizens and companies dissatisfied with outcomes from the internal appeals process, which users and industry may also use to delay regulatory decisions. After the appellate bodies, businesses and citizens can further appeal through judicial reviews in administrative courts. Judicial reviews can scrutinise Osinergmin’s and other regulators’ decisions both on legality and merit grounds. As well, all sanctions can be appealed. This has led to some disagreements between Osinergmin and the courts in recent years, mainly in relation to the interpretation of norms in the electricity sector. In addition, the payment of user fees is suspended and no interest accrues on bills during a litigation process, providing an unintended incentive to seek and prolong judicial review.
Recommendation:
Complete the ongoing investigation into the underlying reasons for an increase in disputes and take remedial action to address root causes. For instance, simplification of the regulatory framework and language could be a strategic goal for the coming years, as businesses have raised the issue of normative interpretation on several occasions. Improving information provision and dialogue with market players at the earlier stages of rule-making can also lead to better awareness on the part of citizens and users and hence less, rather than more, complaints. Advocating for timely appointments of tribunal members by the PCM will also contribute to reducing delays.
Transparency and accountability
Osinergmin places a high priority on transparent and accountable decision making. Osinergmin is committed to publishing all regulatory, supervisory, and normative decisions on its website supported by the raw datasets and other relevant non-confidential information used to render the decisions. It makes available raw data collected from industry on its website, and uses social media tools to disseminate information to a wide audience. It also publishes information on its activities, such as meetings held and a list of people met. Osinergmin proactively adheres to international standards and independent verifications for their management processes.
Different reporting requirements result in a fragmented flow of information going from Osinergmin to the Executive and the Legislature. For example, Osinergmin must send its financial information to MEF in the context of budget performance assessment. However, the PEI is overseen by the PCM. Reporting to Congress is sporadic: while Osinergmin can be called to appear before the Congress and its committees; at the time of writing, for instance, different parliamentary enquiries about high-profile corruption cases (none of them involving Osinergmin officials) are ongoing. However, the work of the regulator is not scrutinised on a regular basis and the regulator only engages with Congress on an ad-hoc basis.
The events linked to those investigations in Peru highlight the importance of strong mechanisms across the public sector to promote a culture of integrity, transparency and justice. Codes of conduct are a useful tool for regulators to define the informal and formal means of engagement with stakeholders, including regulated sector representatives, lobbying and interest groups. Osinergmin does not have an institutional code of conduct, but rather is governed by the ethical principles of the Civil Service Ethics Code (Law 27815). It is included in the Internal Regulation of Civil Servants (Reglamento Interno de los Servidores Civiles) of Osinergmin. Some provisions of the Law deal with conflicts of interest, but not with undue influence specifically. Osinergmin has been certified with anti-bribery international standards as detailed in ISO 37001:2016.
Recommendations:
Advocate for more structured reporting requirements to both the Executive and the Legislature – for instance, reporting once a year to Congress, presenting and discussing the results of the regulator’s annual report. Official channels can serve the dual role of providing greater opportunity for feedback, while also familiarising the administration and Congresspersons with the work of the regulator to alleviate concerns over a lack of technical understanding of the regulator’s work. Regulators in Peru could co-ordinate in their request for more formal accountability channels building on existing legislative proposals.
Strengthen Osinergmin’s organisational policies in line with OECD recommendations on integrity, given the recent high-profile corruption cases in the Peruvian energy sector. This could involve building on the public sector-wide Ethics Code and adapting it to the role and functions of the regulator, ensuring that appropriate mechanisms exist to supervise internal adherence to the Code. Ongoing work towards the adoption of international certifications will support efforts in this area.
Output and outcome
Performance of the regulator
Osinergmin’s strategic framework consists of the overarching Strategic Institutional Plan 2014-2021 (PEI) that sets out 15 strategic objectives underpinned by 40 strategic initiatives. There is little evidence that the PEI is used to drive the regulator’s performance. The large number of objectives and initiatives in the PEI may be too large to empower Osinergmin’s management to prioritise their actions and resources against those objectives. This also adds additional complexity to the monitoring of outputs since it does not indicate priority areas with respect to timing and resources.
In its current form, the PEI lacks some strategic components. While the areas included in the PEI are fairly balanced between input, the quality of the regulator’s processes, and the output and outcome of regulatory activities (Table 4), the PEI’s objectives are closer to a list of actions rather than of strategic objectives. The PEI is not accompanied by a forward-looking regulatory plan that would allow decision-makers to see trade-offs and synergies between objectives. The PEI does not contain a timeline for action. In addition, industry performance measures are not included as outcomes in the PEI but rather reported separately as part of the operational plan (Plan Operativo Institucional, POI).
The regulator assesses its performance through several mechanisms but these do not contribute to shaping and updating strategic objectives over time. Osinergmin assesses the PEI through an annual Strategic Plan Evaluation, a detailed document that tracks the number of initiatives completed and describes the actions taken by different departments. This measures performance mechanically, based on the amount and timeliness of internal projects completed, and places a lot of emphasis on the indicators of budget execution. In turn, the Board of Directors is informed about progress against the PEI but does not provide inputs to update the objectives over time.
The Strategic Plan establishes a key focus on improving relationships with external stakeholders but performance measures in this area could be stronger. While the annual reports include some measures of external reputation, all key strategic documents fail to integrate other important measures that track the performance of the regulator, such as the industry satisfaction surveys (EPERS). These documents neither reflect the results of the consumer research carried out by the Communications Department on social media interactions nor the fluctuations in the numbers of complaints and appeals.
Recommendations:
Update a dashboard of performance measures aimed at enhancing the strategic drive of objectives and rationalising the number of initiatives. This can help the Board and senior management prioritise the most important initiatives and facilitate their ability to scrutinise the appropriateness of objectives and initiatives over time.
Examine the quality of the regulator’s actions in addition to their timeliness. For example, internal perception surveys to map the quality of service of different Departments could also be useful.
Continue to map satisfaction and trust in the regulator through industry perception surveys (EPERS). Co-ordinate with industry and other supervisory authorities such as Indecopi who carry out biannual surveys on the reputation of various public organisations.
Consider integrating measures of online interactions and user engagement, including at the regional level, in annual reports and performance monitoring. Additional performance metrics could include the number of user complaints and the amount of appeals, after careful consideration of the underlying reasons for fluctuations in these figures.
Table 4. Osinergmin strategic objectives according to the OECD Input-process-output-outcome framework
|
Indicator |
Strategic objectives |
|---|---|
|
Input : Efficiency and effectiveness of input (organisational and financial performance) |
1. Use the budget efficiently. 2. Build an attractive organisation through the professional and personal development of its employees. 3. Have adequate information systems and technologies that provide support to Osinergmin’s activities. |
|
Process : Quality of processes for regulatory activity (existence and effective use of regulatory tools and processes) |
4. Develop rules and processes, with autonomy, transparency and predictability for the business sector. 5. Serve the requirements of stakeholders in an understandable, quick and efficient form. 6. Integrate and improve the regulation, supervision and audit processes. 7. Strengthen communications with stakeholders. 8. Develop innovation and creativity through organisational learning and knowledge management. |
|
Output from regulatory activity (effective regulatory decisions, actions and interventions) |
9. Achieve credibility and trust of the society in the role of Osinergmin. 10. Monitor and regulating investment commitments in new infrastructure. |
|
Outcome: Direct outcome/ impact of outputs (compliance with regulator’s decisions) and Wider outcomes (market structure, service and infrastructure quality, consumer welfare, industry performance, etc.) |
11. Promote the improvement of coverage at the national level of sufficient, affordable and quality services. 12. Encourage that the operations of the companies are safe for the community, workers and the environment. 13. Incorporate a long-term global vision in energy and mining that promotes the development of initiatives for a sustainable industry policy. 14. Promote decentralisation and linkage processes between consumers and companies. 15. Develop the conditions for regional energy interconnection. |
Source: OECD analysis based on Osinergmin’s strategic objectives.
Performance of the regulated entities
Osinergmin collects a large amount of data from the supervised and regulated entities but does not systematically assess sector performance. Osinergmin reports on the performance of regulated entities through a number of different channels including its annual reports and other sectoral analysis in its quarterly newsletter and statistical reports. The recently created Energy and Mining Observatory (OEM), available on Osinergmin’s website, represents a sizeable step forward in the provision of integrated, accessible data and analysis for the electricity, hydrocarbons and mining sectors. This integrated approach is not yet reflected in the regulator’s publications such as the annual report.
In the absence of comprehensive data management and systematic performance assessments, Osinergmin has not set overall performance targets for the regulated sectors. At present, different departments within Osinergmin monitor certain aspects of performance. For instance, the Tariffs Department has recently developed measures of service quality and incorporated those in price regulation models; the Osinergmin team administering FISE has developed numerous indicators of energy access in more remote regions; and the Mining Department collects detailed statistics on safety and the causes of accidents and incidents in mines across the country. However, the Departments do not set performance for the entities to achieve and Osinergmin’s strategic documents do not present comprehensive targets for sectors.
Osinergmin is stepping up efforts to work collaboratively with the energy sector on performance issues. Osinergmin has been liaising with distribution companies under the National Fund for Financing Public Enterprise Activity (FONAFE, bringing together 10 public electricity distribution companies) to examine their progress and remaining challenges linked with reducing interruptions to electrical services. In addition, Osinergmin aims to share good practices for providing higher quality electricity services through a dedicated programme (Mejora de la Calidad del Servicio Eléctrico).
At present, Osinergmin reports performance through its dissemination channels using data at the national scale; however, important differences exist in sector performance across regions. In the electricity sector, there is a clear difference in performance between the privately owned companies operating in and around Lima and the public companies operating in the regions. This results in lower service levels (with more frequent and longer interactions) and lower investment (slowing down modernisation and interregional connections). The mining sector also faces a number of issues that are typically local in nature, such as the management of relationships between mining companies and the local population. Several extractive activities are currently on hold due to force majeure episodes, mainly caused by local protests.
Recommendations:
Adopt a comprehensive approach to data management to avoid burdensome data flows and improved data interfaces with regulated entities, as the example of the Observatory shows. As regulators across the world adopt new approaches to managing big data, Osinergmin can build on its technical expertise and become a leader in this domain. Continued participation in international for a will be useful to this end. An additional benefit is the potential to develop market studies and foresight analysis in co-operation with regulated entities, allowing the regulator to have a reliable source of information to inform RIA analyses and to provide inputs to the policy-making process authoritatively.
Streamline Osinergmin’s approach to measuring performance and set high-level targets for the supervised and regulated entities. When performance issues emerge, this will provide a stronger rationale to demonstrate why and how Osinergmin needs to regulate certain sectors. Work with FONAFE companies on improving the quality of electricity distribution and the inclusion of initial performance incentives in tariff setting are positive steps in this direction. In addition, incorporating some sector indicators in strategic planning documents will show which outputs are directly influenced by the regulator activities and which are second-order impacts that the regulator can nonetheless influence through some of its actions.
Renew the regulator’s focus on local dynamics and issues. The persistence of performance issues in more peripheral regions of Peru points to the continued importance of strengthening the role of regional activities and in the provision of data, as ‘ears on the ground’ for Osinergmin. Better co-ordination with local governments would also be beneficial. In parallel, the regulator should consider publishing regional performance reports to better support the policy goal of bridging the rural-urban divide, which is a national priority, and evaluate progress in universal access to electricity.
Box 7. Market studies by the Italian telecommunications regulator (AGCOM)
The Italian telecommunications regulator (Autorità per le garanzie nelle comunicazioni-AGCOM) monitors market and technical trends. The agency collects information through questionnaires regularly submitted by operators. Key indicators are grouped under four categories: i) revenues; ii) volumes; iii) investment plans; and iv) employment.
These data provide a complete set of information available to policy makers and stakeholders, updated quarterly and published on AGCOM’s website. AGCOM uses these data to analyse market performance and identify strengths and weaknesses in the Italian telecommunications sector.
AGCOM has implemented several web based systems, all fed by stakeholders’ data. They include:
Informativa Economica di Sistema (IES): this database collects demographic and economic data on the activities performed by operators, in order to collect information needed to fulfil legal and regulatory obligations (including, inter alia, market analysis, AGCOM annual report to Parliament, annual assessment of the Sistema Integrato delle Comunicazioni) and to regularly update the statistical internal data base.
Registro degli operatori di comunicazione: this database collects information on the ownership structure of communications companies and allowing the application of media rules (anti-concentration thresholds, limits for investments of foreign companies etc.).
Catasto Nazionale delle Frequenze: this database collects information on the use of the electromagnetic spectrum for broadcasting services (this information is used for spectrum management and planning).
Broadband map: this database collets information on internet networks in Italy. This map offers users the possibility to search for information related to internet technologies such as speed and access in different areas, as well as the available telecommunications infrastructure. It is possible to search for 40 million geographical points; therefore, users can verify internet availability and speed even in small areas. The Italian broadband map has had almost five hundred thousand views since the beginning of the project in June 2017.
AGCOM uses collected data to prepare its annual report to Parliament. In addition, the agency provides data to the European Union broadband map project (www.broadbandmapping.eu).
Source: Information provided by AGCOM.
References
[2] ACCC (2018), Compliance & enforcement policy & priorities, https://www.accc.gov.au/about-us/australian-competition-consumer-commission/compliance-enforcement-policy-priorities#the-accc-s-compliance-and-enforcement-strategy.
[1] OECD (2018), Driving Performance at Ireland's Commission for Regulation of Utilities, The Governance of Regulators, OECD Publishing, Paris, https://dx.doi.org/10.1787/9789264190061-en.
[3] OECD (2018), OECD Regulatory Enforcement and Inspections Toolkit, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264303959-en.
Note
← 1. The system operator for the electricity market in Peru.