Second Progress Review of Latvia’s Public Utilities Commission

Annex A. At a glance: Progress on 2016 Recommendations

 

Recommendations 2016	Assessment of progress 2020	Status 2020	Assessment of progress 2023	Status 2023
Role and objectives
Focus on high-level goals and outcomes	The PUC now has a stronger focus on goals and outcomes, which it could strengthen by measuring progress on its strategic objectives against key performance indicators.	Moderate progress	The PUC’s new strategy maintains a focus on high-level goals and outcomes and introduces KPIs to track progress, which the regulator can strengthen by defining targets.	Good progress
Clarify goals and priorities	The PUC developed strategic directions that meet the interests of users, but could explain further how it balances the different interests and priorities it sets for itself.	Good progress	The PUC’s new strategy continues the shift towards a user-centric approach, but it remains unclear how the regulator decides and communicates on trade-offs in decision making.	Good progress
Ensure that regulatory functions are fit for purpose	The PUC is better equipped for its designated functions; it now faces the task of fine-tuning the efficiency incentives in order to increase the impact of the new regulatory approach.	Good progress	Fine-tuning the use of incentive regulation in the energy sector has not significantly progressed due to a turbulent sector context, while incentive regulation has not been introduced in other sectors.	Good progress
Assess how to participate in the policy-making process	The PUC provides valuable input to ministries during the policy development process and the drafting of related legislation, whilst maintaining adequate resources to execute its functions. However, it did not assess how to continue participating in this process without losing sight of its independent role.	Limited progress	While the PUC’s contributions to the policy-making process still consume significant resources, the regulator took an important step to signal its independent role by publicly issuing its opinions.	Moderate progress
Set up appropriate mechanisms to oversee implementation strategic framework	The PUC established the Advisory Council in 2020. Going forward, the PUC will need to manage expectations around the work and function of the Council.	Moderate progress	The PUC’s Advisory Council is fully operational and positively perceived by stakeholders; it can be strengthened by keeping an eye on balanced representation and making meetings more member-led.	Good progress
Input
Advocate for alternative fee setting process	The new fee setting process is more robust and reduced the executive’s influence over the fee, but there is a need for clear criteria and procedures to ensure the right fee level in the future.	Moderate progress	The PUC successfully advocated for an alternative fee-setting process in 2017, but there remains a need for clear criteria and procedures for reviewing the fee level to ensure cost-reflectivity in a context of volatile sector revenues.	Moderate progress
Investigate impacts of the salary cap	The competitiveness of PUC salaries has improved following a legislative reform in 2018 that changed the salary cap, but the impact of the salary cap on the PUC’s ability to attract and retain talent for senior positions remains unclear.	Good progress	A new salary cap allows PUC salaries to track sector salaries, but the regulator now needs to assess and enhance its broader attractiveness as an employer beyond financial remuneration.	Good progress
Develop a “total rewards” approach to retain staff	The PUC implemented a new bonus system since 2016, with financial and non-financial incentives.	Fully implemented	The regulator continues to offer a balanced employment package, although its efforts to build a positive work environment could be affected by the structural impact from the COVID-19 pandemic on operations.	Fully implemented
Process
Advocate for staggered board terms	There is a new robust process for the selection of Board members, that further staggers Commissioners’ terms, and allows for maximum two Commissioners to have their terms confirmed or renewed in one calendar year.	Fully implemented	The system of staggered Board terms has been fully implemented, supporting institutional memory and regulatory stability, and providing safeguards for the regulator’s independence.	Fully implemented
Exploit the multi-sector model and facilitate mobility across departments	Staff mobility within the PUC is shown to take place on a case-by-case basis, but the regulator lacks an organisation-wide mobility strategy.	Moderate progress	Staff mobility remains relatively low in absence of incentives, where the Economic Analyses and Legal Departments act as the main intermediaries for the exchange of knowledge and experiences.	Moderate progress
Introduce more regular and formal exchanges between Parliament and the PUC	The PUC presents its Annual Action Plan and the Annual Report to the Saeima. However, the current level of engagement is limited, given the breadth of topics and length of the reports.	Good progress	The PUC frequently interacts with parliamentary committees but could advocate for wider “big picture” engagement and tailored communication, in a context where it faced criticism over recent tariff increases.	Moderate progress
Remuneration of Board members after the end of term	There has been timid advancement on the process of amending the remuneration of Board members during the two-year cooling-off period.	No progress	Board members can now receive three months of remuneration during the two year “cooling-off” period, although this may not be sufficient to promote diversity in their backgrounds.	Limited progress
Focus area: stakeholder engagement			The PUC engages frequently with stakeholders to inform its decision making, which could be strengthened using hybrid public hearings and communication on broader impacts.
Output and outcome
Develop a performance assessment matrix that links goals and priorities to outputs and outcomes	The PUC had not developed a performance assessment matrix that would allow for a specific mapping of goals and priorities against outputs and outcomes.	No progress	The PUC made strong progress by introducing KPIs after consultation with stakeholders, and now needs to define targets and a clear methodology to enable tracking and to maximise accountability.	Moderate progress
Use performance data and information to communicate with key stakeholders	The PUC enhanced transparency through more external communication. However, it is difficult for stakeholders to grasp how the PUC performs in the absence of key indicators.	Moderate progress	The PUC uses interactive tools and reports to share insights on performance with stakeholders in an accessible format and is on track to report on KPIs in the future.	Good progress
Use data to develop choices for consumers	Since the last review, there are limited information comparison tools for e-communications and energy. There is a need for more data-driven tools and consumer education platforms which make use of extensive data.	Limited progress	In absence of any comparison tools for energy and e-communications, the regulator developed information campaigns to educate and guide consumers.	Moderate progress