The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Utilities Regulation and Competition Authority (URCA) is for the second consecutive year proposing a major hike in its operating budget via a near-20 percent increase for 2024.

The communications and energy sector regulator, unveiling its 2024 annual plan for public consultation, produced a budget showing a more than $1.5m increase in planned operational spending to $9.221m as opposed to $7.692m for this calendar year.

To cover these costs, it will rely on a similar-sized 19.5 percent jump in fee income obtained via statutory levies on its licensees, such as the Bahamas Telecommunications Company (BTC, Cable Bahamas/Aliv and Bahamas Power & Light (BPL). It is forecasting that total fee income will also rise by $1.5m to $9.517m in 2024 as opposed to 2023’s projected $7.967m.

The increased fee burden is unlikely to sit well with URCA’s licensees given that the 2024 expansion of the regulator’s operating budget follows last year’s even greater 23 percent growth. That produced a negative reaction and, over a two-year period, URCA’s operating costs and fee income will both have risen by close to $3m.

“Overall, URCA proposes an increase to its 2023 operating budget approximately 20 percent compared to 2023,” the regulator confirmed in its annual plan, with staff compensation set to increase by 13.1 percent or around $420,000 to $3.615m.

“Notwithstanding an increase in URCA’s staff count (one) anticipated for budget year 2024, increases in base pay and the attendant increases in benefits - health insurance, pension and gratuity costs - are the main drivers for the increase of 13 percent in staff costs,” URCA said.

“Non-executive compensation decreased in budget year 2024 due to the settlement of legal action brought by the former non-executive director in the previous year. In budget year 2024, there is budgetary provision for the settlement to two non-executive directors. Executive compensation increased by 10 percent due to the confirmation of the executive director, a nominal increase in base pay and associated benefits.”

Elsewhere, URCA added: “Budgeted spending on professional services in 2024 will increase by 29 percent year-over-year due to new regulatory projects (specifically in the electricity sector) and continuation to completion of 2023 projects. Regulatory projects, including various surveys, reviews, market assessments and continued litigation before the Utilities Appeal Tribunal (UAT) and court for adjudication.”

URCA’s budget for field operations is set to grow by 9 percent year-over-year as it plans to undertake greater monitoring “to ensure regulatory compliance by licensees”. However, general and administrative expenses are due to increase by 71 percent to $1.64m “due to increased bad debt due to continued non-payment of major licensees”.

“In the prior year, bad debt was under budget, thereby requiring recovery of the deficit in the current year,” URCA added. As for other major line item increases in 2024, it added: “Premises costs and utilities [to] increase significantly by 80 percent year-over-year due to repairs planned for Frederick House, budgeting for an anticipated increase in utility rates and continued preventative maintenance projects...

“Information technology is budgeted to increase by 22% percent due to acquiring additional productivity enhancement software licences and increased costs associated with external IT support.” Last year’s URCA budget increase, though, provoked an unhappy reaction from its licensees.

Cable Bahamas blasted the 2023 increase as “an assault on the finances” of itself and other communications operators who will pay for it. The BISX-listed communications provider, in its response to last year’s draft annual plan, proclaimed itself “astounded” by the magnitude of the $1.26m year-over-year increase and demanded that URCA slash this jump by more than 50 percent in percentage terms.

Urging URCA to instead opt for a 5-10 percent budget increase, Cable Bahamas and its Aliv mobile affiliate said the days of communications operators being “a ‘cash cow’” were long over yet itself and the likes BTC are being expected to finance the rise via increased licence fees despite facing a variety of other cost and investment pressures.

Cable Bahamas suggested the situation also exposed the folly of amending the URCA Act, the regulator’s governing legislation, which previously allowed it to retain any excess licence fees above those used to finance its budgeted operations and apply them to costs incurred in future years.

However, the Act was reformed more than a decade ago, on July 1, 2013, to require that such sums instead be transferred to the Government’s Consolidated Fund to cover its general costs rather than being specifically used to finance communications industry regulation.

And the BISX-listed provider argued that the increased licence fees needed to finance URCA also threaten to undermine the Government’s policy of import tariff waivers on communications equipment designed to incentivise investment by itself and other operators in 5G (fifth generation) technology and Family Island networks.

When it came to URCA’s planned projects for 2024, the regulator pledged it will audit and review BPL’s fuel charge in the aftermath of huge customer bill hikes throughout 2023 to regain previously under-recovered fuel costs.

“This project aims to determine how the BPL fuel tariff is calculated and whether charges to customers since 2021 comply with the law and regulatory frameworks,” URCA said. “This project aligns with URCA’s mandate to ensure efficiently incurred costs, consumer protection, and efficient operation, per the Electricity Act.

“By reviewing and auditing fuel tariffs, URCA can ensure that energy prices reflect reasonably incurred costs and are fair to consumers, supporting ‘goal two’ of the National Energy Policy.” As for its communications responsibilities, the regulator said the sector policy should be published by the “end of the first trimester” which puts the timing around April.

“Since the last retail fixed market review was completed in 2014, there is a need to review the retail fixed markets, which include retail fixed voice, broadband and pay television services,” URCA said. “The review will assess the state of competition in those markets and whether existing regulations are fit for purpose. The project commenced in the third trimester of 2023 and is expected to be completed in 2024.

“The project requires significant data from BTC and Cable Bahamas. Because of this, the project has been hampered by numerous delays due to both operators asking for extensions to submit the required data and the need to clarify submissions.

“There have also been challenges with the reliability and accuracy of some of the operator data. Following a review of the fixed market, URCA may deem specific market remedies or regulations necessary.”