NASSAU, BAHAMAS — The Utilities Regulation and Competition Authority (URCA) has been compelled to justify budget increases amid significant concerns regarding fiscal prudence from its licensees in the communications sector, who have urged a balanced approach to budget increases, considering the financial challenges they face.
While URCA generates much of its revenue from fees charged to its licensees, major players in the communications sector, such as the Bahamas Telecommunications Company (BTC) and Cable Bahamas Limited Group, have expressed concerns regarding budget increases outlined in the regulator's 2024 annual plan. URCA's total operating budget recovered through fees is $5.3 million for 2024, compared to $4.8 million in 2023 and $4.1 million in 2022.
The regulator acknowledged: "BTC also shared concerns about the proposed budget increases, warning of potential adverse effects on the telecommunications sector. BTC urged URCA to adopt a balanced budgeting approach that mitigated the financial burden on licensees while promoting sector sustainability. BTC called for increased transparency in budget allocation and urged the alignment of budgets with the industry's realistic capabilities and needs. BTC emphasized that investments should target areas promising significant sector growth and efficiency benefits."
Furthermore: "The CBL Group expressed significant concerns about URCA's annual budgets, stating they did not sufficiently consider the financial impact on licensees. CBL criticized the proposed budget for primarily focusing on catch-up initiatives, with many projects from previous years being carried over. The CBL Group emphasized the need for URCA's budget to reflect economic realities, advocating for a balanced and justifiable approach that fostered sustainable growth in the sector.
In response, the regulator noted that it has taken a balanced approach to financial management and acknowledged the financial challenges licensees face.
This, it said, is evidenced by a negative trendline, indicating an average reduction in the Total Operating Budget Recovered through URCA Fees since 2017. It noted that in 2017, the recovered amount was the highest at $8,199,344 due to the purchase of Frederick House on Frederick Street, which serves as URCA's main office. The following years, however, show a slight decrease in the recovered budget to $6,978,738 and $6,654,477 in 2018 and 2019, respectively, with a more significant drop in 2020 to $6,517,971. The downward trend continued with a sharper decrease in 2021 to $6,217,597 and then a substantial drop in 2022 to $4,147,332, reflecting URCA's decision to cut the budget in acknowledgment of the financial challenges faced by licensees due to the Covid-19 Pandemic.
However, in 2023, there was a minor increase to $4,843,500 as URCA gradually transitioned to its pre-covid operating budget. The trend continued in 2024 with a recovery of $5,315,013, which is still significantly lower than the 2017 peak. URCA stresses that the 2024 budget is below pre-pandemic levels and remains below the average of $5,910,529 for the 15 years of URCA's existence.
URCA further defended its budget, arguing that as an independent regulator, URCA Fees are a significant source of URCA's operating budget.
"The respondents should appreciate that the substantial drop in 2022 to $4,147,332 in response to financial realities during the Pandemic is not sustainable and, if not addressed, could adversely impact the organization's financial health and regulatory effectiveness. We advised that increases in 2023 and 2024 reflect the necessary recovery to pre-COVID operational costs."
Communication providers also raised concerns regarding URCA's project management, with BTC particularly criticizing the delayed and crammed scheduling of projects.
URCA pointed out: "They noted several projects carried over year after year without adequate explanations for delays. BTC criticized issuing multiple consultations quickly, which strains the operators' capacity to respond effectively. BTC emphasizes the need for better planning and prioritization of projects to avoid these issues. BTC highlighted concerns over the repeated delays of the retail fixed market review, emphasizing the project's importance and criticizing its scheduling in the last trimester. Given its history of delays, BTC questioned URCA's ability to complete this critical review within the planned timeframe. BTC emphasized that this review should be a top priority, reflecting skepticism towards URCA's project management and prioritization."
The CBL Group highlighted the need for strategic adjustments in project management and the anticipation of changes due to the ECS Policy 2024-27. The CBL Group expressed concerns about URCA's carryover projects, noting that many projects from previous years continue into 2024 without substantial completion. The CBL Group urged URCA to provide advanced notice of changes, especially regarding carryover projects and highlighted the need to address the interdependencies between the ECS and electricity supply. The CBL Group also emphasized the ongoing challenges requiring solutions in this regard. The CBL Group advocated for a balance between ambition and practicality in project selection, urging URCA to prioritize initiatives that significantly enhance sector efficiency and service quality.
Another respondent, Samuel Thompson, raised concerns about the quality of projects due to the ambitious number planned for 2024, noting that nearly 30 percent were carried over from previous years. He highlighted the need for clarity on projects' priority to enhance the transparency and effectiveness of URCA's efforts. Thompson also encouraged publishing data related to renewable energy to foster sector growth. Thompson proposed making licensee reporting less burdensome and emphasized the importance of including emissions reporting for sustainability assessments.
URCA, in response, noted that it has utilized a three-tiered approach for project management adopted in 2018, with Tier I being significantly important projects. The regulator said it is challenged with project management, highlighting challenges where public consultation and ministerial approval are mandatory.
The regulator said that in 2024, it plans to discontinue the tiered approach, and moving forward, only those projects for which URCA can specify definitive timelines will appear on the list of projects.
"Another issue that adversely impacts URCA's ability to complete the project per the timelines set out in its Annual Plans is URCA's willingness to accede to requests to extend the consultation periods. Before the start of every financial year, URCA, in compliance with Section 41 of the URCA Act, provides a clear and comprehensive overview of the organization's plans for the upcoming year, including consultation and publication schedules. Key stakeholders invariably request extensions to deadlines close to the published deadlines for submission. URCA almost always accedes to requests for extensions because it regards the statutory requirement to consult and recognizes the importance of stakeholders' feedback in the regulatory process. This practice results in delays and rescheduling of project timelines. URCA recognizes it can significantly improve its project management performance by strictly enforcing consultation deadlines. Still, we are hesitant because doing so would mean denying key stakeholders the opportunity to comment on matters that could significantly impact them," the regulator noted.
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