OFREG FALLING SHORT - CONCLUDES OAG REPORT

The agency charged with keeping utility companies in Cayman under constant scrutiny on behalf of consumers has found itself the subject of a similar degree of examination over its internal operational shortcomings.

The Utility Regulation and Competition Office (OfReg) is currently appearing before the Cayman Islands Public Accounts Committee(PAC) following a scathing report by the Office of the Auditor General (OAG).

The 73-page report submitted paints a worrying picture of OfReg’s effectiveness role in looking out for the interest of consumers over fees and service by the companies providing fuel, electricity, telecommunications and water.

The parade of OfReg officials grilled by the PAC, comprised of Members of the Legislative Assembly (MLAs), has been a theatre ranging from combative defence to resigned acceptance of the findings of the OAG report.

A series of questions led by PAC chairman Hon. MLA Ezzard Miller with mainly Hon. MLAs Chris Saunders, Austin Harris and Bernie Bush probed OfReg stewardship in its three years of existence based on the findings of the OAG report.

A recurring theme revolved around concerns about the degree of oversight by Ofreg in light of persistent complaints about high utility bills and petrol prices, less-than-adequate service from the utility companies, and how OfReg regulates the utility companies especially their pricing policies.

In addition to those concerns, administrative operations, including transparency within the agency, characterised the first week of the PAC hearings into the regulator.

The report by Auditor General Sue Winspear found in the main that “more could be done (by OfReg) to protect consumers.”

In arriving at that conclusion, the OAG observed a range of shortcomings alongside a few areas where it felt OfReg was making an effort at meeting its objectives.

It said the challenges facing the agency, while not insurmountable, were in part of its own making.

But it also placed some of the responsibility at the door of the government citing a lack of proper planning resulting in a number of problems for OfReg in its first three years since it was set up in January of 2017.

While a government funding shortfall was a major factor, the OAG points a direct finger at OfReg as being the architect of its own deficiencies painting a picture of a lack of strategic planning and direction for the first three years, limited governance and oversight, and inconsistency in leadership.

Expectations that it would have cost less to operate OfReg, which replaced a previous regulatory body, have in fact resulted in OfReg costing more to run than its predecessor agency, the OAG report said.

It found while that governance in OfReg has improved over time but noted that “the board hasn’t always functioned as we would expect.”

For example, it says that in the first five months of operation the board consisted only of the board chairman and the chief executive.

“Some of the principles of good governance have only recently been put in place or do not yet exist,” it added referring to management failings.

“There’s no risk management framework, and the board has not been focussed on performance or holding management to account,” it concluded.

Some of the more glaring findings revolved around OfReg’s financial management.

In two examples, the OAG said the regulator “wasted over CI$355.000 on a leased property it never occupied."

It also reported that OfReg “received additional funding from the government as it was not able to generate enough revenue from regulatory fees...which it should have done as regulator fees are a major source of income for OfReg.”

The use of costly consultants was another point of concern.

Overall, the OAG concluded, “It is difficult to assess OfReg’s performance because of poor performance measures and a lack of monitoring and reporting.”

It made 16 recommendations, most to be implemented by OfReg itself, with several directed at the government.

These include that government should ensure that for all future mergers it prepares a merger plan that sets out timelines, deliverables and success measures that cover the period up to the merger and that extends beyond the start date.

Among the recommendations directed specifically at OfReg management are:

• OfReg should publish board minutes on its website to improve the transparency of decision-making

• OfReg should update its Strategic Plan to ensure that strategic objectives align with its principal functions and to make clear how it intends to contribute to the government’s broad strategic outcomes

• OfReg should develop a set of Key Performance Indicators that clearly link to its performance objectives, are comparable over time and will drive its improvement

• OfReg should ensure that it complies with procurement legislation and good practice to ensure that it gets the best value for money from its use of consultants

• OfReg should establish sufficient oversight and business cases for travel to ensure that they are in line with the new Official Travel Policy

• OfReg should ensure that business cases including appraisals of options are prepared for future lease options and that they are scrutinised and approved before future lease options are signed

• OfReg should revise its regulatory decision-making framework to align with good practice for regulatory impact assessment

• OfReg should prioritise work to complete consumer protection legislation as soon as possible

The Public Accounts Committee’s hearings into OfReg continue the week of July 20th when top executives of the utility companies will be summoned.