Today the Estonian National Parliament passed the “Establishing Price Limitations on Monopolies Act”. The amendments, subject to proclamation by the President of Estonia, will change the principles of economic regulation, quality regulation and the regulator of AS Tallinna Vesi and 50-60 other larger water undertakings. This is the second time this Act has been approved by Parliament. On the previous occasion is was not ratified by the President for constitutional reasons, however on this occasion the Company does not anticipate such a problem. The details of this change mean that the City of Tallinn will no longer fulfill the role of economic and quality regulator for AS Tallinna Vesi. It is intended that this function will now be carried out by the Competition Authority. The implications of this change for the terms and conditions of Tallinna Vesi's contract are not yet clear. We believe that to date the Competition Authority, the Ministry of Social Affairs, the Ministry of Environment and the City of Tallinn have not yet discussed nor determined any of the quality standards that the Company has to achieve. In addition, in the tariff mechanism and methodology for calculating an allowed rate of return has not been discussed with the Company and is not contemplated within the Act. This is a change of law but as far as we know does not yet constitute a breach of the Services Agreement we have with the City of Tallinn. Currently our performance standards remain the same and there has not been any change to our tariffs nor the tariff adjustment mechanism that we have contractually agreed until 2020. AS Tallinna Vesi will continue to operate in accordance with the terms and conditions of its contract with the City of Tallinn until the new regulator decides otherwise or the terms of the contract are broken by the State of Estonia or the City of Tallinn. The Company has always met or exceeded all performance measures and believes its returns on invested capital are in accordance with accepted norms when international best practice regulatory principles are used. The Company has been and will continue to consult with its legal and economic advisors to better understand the implications of this change in law and the actions it needs to take to ensure the terms of the current contract are respected. The Company will keep its investors informed whether the President of Estonia approves the Act and will provide complete information regarding the forthcoming tariff approval process. AS Tallinna Vesi has no objection to balanced, independent and professional economic and quality regulation of the water industry that is in accordance with international best practice principles. As ASTV understands the situation the AMB's key aim is to de-politicise price setting by implementing a fully transparent methodology that meets with international best practice. The Competition Authority already regulates other industries where it clearly states its key regulatory objectives. These are: • To protect consumers ; • To use regulation principles that allow companies to remain economically and financially viable, i.e. to cover running operating costs and finance necessary investments through equity and debt • To motivate companies to organize their operations more efficiently • to ensure a revenue acceptable for investors from the assets invested by them or at least revenue of equal value, which they could get from other investments with the same risk level“ ASTV would welcome the implementation of a methodology that was developed to ensure the above principles are fully respected. This would require that all aspects of the economic and quality regulation methodology are fully transparent and completely independent. To ensure full independence the legislators will need to consider who will oversee and rule upon any appeals made by companies against the decisions made by the Competition Authority. As, under the current legislation, a company would have to appeal to the Competition Authority against a decision made by the Competition Authority, which is clearly not a situation that accords with good governance principles. This passing of the AMB is only the first step; in addition it will be necessary to ensure the consistent and transparent achievement of quality standards in an efficient manner. To achieve this is a huge amount of works and will require open communication between the MoSA, the MoE, the municipalities and the Competition Authority in order to develop industry wide performance measures and information recording and auditing standards. Without this it will not be possible to ensure quality standards are achieved consistently and efficiently. Furthermore all institutions will need to develop reliable reporting standards and open and transparent communications in order for customers to know what they are paying for and understand the comparative performance of their own and other water companies. Priit Koff Head of Public Relations AS Tallinna Vesi +3726262209 priit.koff@tvesi.ee
Estonian Parliament passes "Establishing Price Limitations on Monopolies Act"
| Source: Tallinna Vesi