Hubert outlines ICCC’s role

The National Business

THE prices of some goods and services are regulated by the Independent Consumer and Competition Commission. The National’s Assistant News Editor GYNNIE KERO spoke to the Independent Consumer and Competition Commission’s acting chief executive officer AVI HUBERT about what these are and the functions of the commission.

KERO: Does the Independence Consumer and Competition Commission approve or set rates for State-owned entities such as Air Niugini and Telikom PNG?
HUBERT: The ICCC does not control or monitor prices of all goods and services except those declared by law. The jurisdiction of the ICCC on prices only applies to prices of goods and services that are declared for price control and monitoring purposes under the ICCC Act and the PR Act as explained above. Neither the aviation industry nor Air Niugini Limited is a “declared regulated entity”. Hence Air Niugini’s services are not regulated by the ICCC. It therefore follows that the ICCC does not approve or set rates for service such as airfares in the aviation industry. On Telikom PNG Limited, previously the telecommunication industry and PNG Telikom Ltd were both a declared industry and entity for regulation by the ICCC. The ICCC was the economic regulator of the telecommunication sector. The PNG Telecommunication Authority (PNGTEL) was responsible for technical regulation. In 2010 the Government established the National Information and Communication Technology Authority (Nicta) as the successor of PNGTEL and mandated it with both the economic and technical function of the ICT sector. National Information and Communication Technology Authority is therefore the telecommunication sector’s regulator responsible for such matters.
KERO: So which State-owned entities does the Independence Consumer and Competition Commission regulate?
HUBERT: The ICCC does not regulate all State-Owned Entities. The commission only regulates SOEs that operate in a declared industry and therefore are declared by law as regulated entities.  It also regulates certain goods and services that are not necessarily provided by SOEs but are declared as regulated goods and services. Thus the ICCC’s oversight covers declared regulated industries, entities and or goods or services declared for price control or monitoring purpose both under the Independent Consumer and Competition Act 2002 (ICCC Act) and through various other laws such as the Prices Regulation Act (Chapter 320) (PR Act) and Electricity Industry Act. The ICCC Act establishes a regulatory framework for various industries dominated by monopoly utilities, which are currently government owned. This is done through ministerial declaration of “regulated industries”, with regulated goods and services, and declaration by the Commission of “regulated entities”. There are currently four regulated industries and entities:

  • Electricity and PNG Power Ltd;
  • Ports and PNG Ports Ltd;
  • Postal services and PNG Post Ltd;

Third party motor vehicle insurance and Motor Vehicle Insurance Ltd.
In addition, the ICCC regulates water and sewage services of both Eda Ranu and Water PNG as declared services. Water and Sewage industry is not a declared industry, nor are the two water entities. But their services are declared under the PR Act for price regulation purpose. While the above entities are declared entities for purposes of regulation, not all services provided by them come under the scrutiny of the ICCC. The ICCC only regulates certain services that they provide.
KERO: How does it regulate prices and service standard?
HUBERT: The Commission regulates prices and service standards for regulated entities through regulatory contracts under Part III of the Act. The Regulatory contract is binding between the regulated entity and the ICCC.

  • Under the PNG Ports Regulatory Contract, the ICCC only regulates the Essential Ports Services (EPS). These include wharfage, berthage, berth reservation services and stevedoring access. There are seven other services that were newly declared for regulation by the ICCC in accordance with its declaration powers under the ICCC Act.
  • Under the Postal Services Regulatory Contract for Post PNG Ltd, the regulated services are domestic and international stamps and mail boxes. Other services provided by Post PNG such as logistic are not regulated.
  • Under the Electricity Services Regulatory Contract for PNG Power Ltd, all electricity services supplied by PNG Power are regulated. As part of its effort to introduce competition in the electricity generation market, the ICCC has since developed the Grid Code and Third Party Access (TPA) Code. These codes complement each other. The TPA Code sets the overarching framework for third-party connection and access to PNG Power’s existing electricity grid. The Grid code sets the technical and performance standards for the grid covering safety, power quality, reliability, system loss, protection, grounding, equipment, and maintenance, rules, implementation and enforcement procedures. The codes set the regulations, pricing and service standards requirements that must be observed by power service providers.

Under the MVIL Compulsory Third Party (CTP) regulatory contract, only the CTP insurance coverage is regulated by the ICCC.
For Eda Ranu and Water PNG, only the water and sewerage services are regulated. Note that Eda Ranu only operates in NCD while Water PNG operates in all provincial centres except Goroka, Kainantu, Kieta and Vanimo. The respective regulatory contracts outline in detail the service standard requirements, the prices adjustments mechanism, among others, that apply to the respective regulated entity for a specified regulatory period. Currently, the ICCC applies a regulatory period of five years.

KERO: Apart from SOEs, what products/services does ICCC set prices for?
HUBERT: The ICCC regulates PNG Ports, Post PNG, MVIL and PNG Power under the ICCC Act. The ICCC Act also allows the Treasury Minister and the ICCC to issue regulatory contracts to these regulated SOEs. The respective regulatory contracts have certain service delivery requirements that respective regulated SOEs must deliver in order to improve efficiency and quality of services. Respective regulated SOEs must deliver in order to improve efficiency and quality of services. These requirements are called service standards.
KERO: What is the prices monitoring function of the ICCC?
HUBERT: The prices monitoring or control function of the ICCC is taken from the Prices Regulation Act (Amended) (Chapter 320) (PR Act). Under the PR Act, the Minister for Treasury declares certain goods and services to be “declared goods” or “declared services” for the purpose of price monitoring or control. For example, water and sewerage services of both Eda Ranu and Water PNG are regulated under the PR Act. For goods and services regulated under the PR Act, the ICCC enforces two separate forms of price regulation. They are price control and price monitoring.
Price control:

  • The ICCC sets the maximum fares of PMV and taxi services in PNG;
  • The ICCC fixes the maximum wholesale and retail margins for refined petroleum products (petrol, diesel and kerosene) at the wholesale and retail segment of the petroleum market; and
  • The ICCC determines the maximum tariffs of water and sewerage services provided by Water PNG and Eda Ranu.

Price monitoring – The Independence Consumer and Competition Commission monitors (but does not set) the prices of declared regulated goods against international benchmarks prices. The ICCC monitors the following declared monitored good: Ramu sugar products, Roots rice, and  Flour Plain (1kg, 2kg and 5kg) and whole meal (1 kg).