The Cabinet decided to enact new legislation to establish a multi-sector regulatory agency to be known as the Utility Regulation and Competition Office (URCO) which will assume the responsibilities and functions currently carried out by Information Communications Technology Authority (ICTA) and the Electricity Regulatory Authority (ERA).

Cabinet has also decided that URCO will assume the regulatory responsibilities discharged by the Water Authority. This will address certain perceptions of conflicts of interest where the Water Authority, as a service provider, not only regulates itself but also regulates other service providers of water supply and waste water services. The Water Authority and other service providers such as Cayman Water Company will therefore be subject to a transparent and structured regulatory environment as are the service providers in the other utility sectors. Also, in response to increasing concerns about the lack of transparency in the pricing mechanism used by importers and retailers URCO will be assigned responsibility for that market.

The Utility Regulation and Competition Bill, which is the umbrella legislation that establishes URCO, reflects best practices in the design of similar regulatory institutions and provides:

• URCO with clear unambiguous powers to effectively and independently discharge its regulatory duties while ensuring that it must act transparently and impartially;
• URCO with clear and unambiguous consumer protection functions;
• for URCO to be concerned with facilitating economic development (consistent with Government’s policies) in the sectors for which it has responsibility; and
• for the URCO to promote innovation in the sectors for which it has responsibility as enablers for national development.

In the case of the fuels sector URCO will also take on the competition functions for that sector. The remit of the URCO is therefore significantly wider than that originally conceived and its reach and outcomes are expected to have economy wide impacts.

The statutory framework will be embodied in a number of laws but principally there will be:

• A new law, the Utility Regulation and Competition Law, which establishes URCO as the multi-sector regulator, setting out its broad functions, governance and administrative arrangements
• Amendments to the       ICTA law – to replace ICTA with URCO as the regulator for the ICT sector and other consequential amendments
• Amendments to the ERA law – to replaces ERA with URCO as the electricity sector regulator and other consequential amendments
• A new law – to give effect to the new arrangements which transfers the economic regulatory functions from the Water Authority to URCO       and other consequential provisions including the role and functions of the URCO in that sector.
• Consequential amendments to the Water Authority Law will be necessary to repeal the economic regulatory functions of the Authority
• Consequential amendments to the Water (Production and Supply) Law, the Wastewater Collection and Treatment Law providing for the URCO to issue licences consequent on the grant of concessions by the Government
• A new law addressing the operation of the Fuel market including the role and functions of URCO in that market
• Amendments to the Dangerous Substances Handling and Storage Law (DSHSL) bringing the operations of the Chief Petroleum Inspectorate under URCO

The critical first actions are the enactment of the new legislation to establish URCO and the related amendments to the ICTA and ERA laws. These have to be enacted at the same time as with the coming into effect of URCO, under the Utility Regulation and Competition Bill, the ICTA and ERA will be simultaneously dissolved under the respective amending Bills. The slate of Bills which have been approved by Cabinet are the Utility Regulation and Competition Bill, the ICTA (Amendment Bill), the ERA (Amendment) Bill and the Dangerous Substances Handling and Storage (Amendment) Bill.

In summary:

URCO Bill – The Utility Regulation and Competition Bill is the main piece of legislation, which establishes URCO, provides for its administrative and governance arrangements, for its broad functions and powers as well as for general regulatory responsibilities that apply to all sectors.

The principal functions of URCO are:

1. To promote objectives set out in any Policy in relation to the markets and sectors for which it has responsibility;
2. To promote fair and effective competition;
3. To protect the interests of consumers and in so doing –
   1. supervise, monitor and regulate any sectoral utility, in accordance with this Law, the regulations, and sectoral legislation and any general policies made by Cabinet in writing;
   2. ensure that utility services are satisfactory and efficient and that charges imposed in respect of utility services are reasonable and reflect the efficient costs of providing the services; and

• publish information, reports and other documents relating to utility services and the markets and sectors for which it has responsibility; and

1. To promote innovation facilitate economic and national development in the markets and sectors for which it has responsibility.

ICTA Amendment Bill – This bill repeals the administrative and governance arrangements of ICTA which will have been transferred to URCO and establishes URCO as the regulator for the sector. The opportunity has been taken to do some minor updates of the law having regard to emerging best practices and the impacts new technology on the ICT markets and also to provide URCO with clear responsibilities to address issues such as cyber security and issues related to the Islands’ international connectivity.

ERA Amendment Bill – This bill repeals the administrative and governance arrangements of ERA which will have been transferred to URCO and establishes URCO as the regulator for the sector. Care has been taken not to disturb the existing regulatory arrangements/framework as these arose from direct negotiations between the Government and CUC at the time of the renegotiation of CUC’s (2008) Licence. It is envisaged, in any event, that this law will have to be revisited after the Energy Policy is promulgated. This should involve amendments to the CUC Licence and would be one of the early priorities for URCO.

DSHS Amendment Bill – This provides the administration of the Law by the URCO and the transfer of the Petroleum Inspectorate to the URCO. In doing so, the Chief Petroleum Inspector is accountable to the Board of the Office (the provisions constituting a Board of the Inspectorate is repealed) and the staff of the Inspectorate are transferred. The title “Chief Petroleum Inspector” is changed to “Chief Fuels Inspector” to reflect and confirm the expanded remit of the scope of the law to cover all fuels rather than the narrow restriction to petroleum. It also anticipates the enactment of the Fuels Markets Law which will provide for the Chief Fuels Inspector to have a significant role in enforcement.

Next steps – The Government is keen to complete this regulatory reform and the remaining legislation related to the water and fuels sectors are expected to be tabled at the first Sitting of the Legislative Assembly in 2017.