In the 1980s and 1990s Belize privatised its state-owned utilities. The underlying rationale behind this privatisation varied from seeking to stem losses caused by ailing state enterprises to selling the state assets in order to generate much-needed government income. Regardless of the rationale, the overall objective was always to deliver improved and reliable utility services at affordable prices to as many consumers as possible. The process started with the privatisation of the state-owned telecommunications monopoly, followed by the state-owned electricity monopoly and finally the state-owned water company. The results have been mixed.
The privatisation of the state-owned telecommunications operator into what is today Belize Telemedia Limited achieved significant improvements in services to consumers and dramatically reduced the cost of services. Telemedia remains an extremely profitable company. In the past few years the telecommunications industry has also seen competition in the mobile sector. Speednet Communications Limited, trading as Smart, has gained a significant share of this market and competition with Telemedia is robust.
In the electricity sub-sector, Belize Electricity Limited (BEL) – owned primarily by Fortis Inc of Canada – is the main player. It continues to be the sole distributer and supplier of electricity to consumers in Belize. There are several companies that generate electricity and sell power to BEL for supply and distribution to the public. Belize remains dependent on some supply from Mexico, especially during peak periods.
The government privatised Belize Water Services Limited (BWSL) in 2001 in a sale to Cascal, a British and Dutch-owned company. However, in 2005 the government reacquired the company. There is no other service provider in the water sub-sector except for a Cayman-based company that sells water to BWSL in San Pedro, Ambergris Caye.
Initially, the privatised utilities were regulated directly by the government. Rates and standards, investments and returns on investment were negotiated directly with ministers and government officials. There was no legally authorised process for seeking approvals, which were granted on an ad hoc basis depending on the needs of the entity and the government at the relevant time. The government ostensibly protected the interests of consumers.
In each sector, privatisation was gradual, with the government maintaining an equity stake and significant influence on the boards of directors. Additionally, the government held the so-called 'special' or 'golden' share, which carried certain rights, including veto power over certain decisions.
A fundamental change to the regulatory environment was introduced with the advent of the commission in 1999. The commission then became the regulator of utility companies in each sub-sector, assuming the power of the minister to set rates and service standards directly. The commission is headed by commissioners and an executive chairman who are all appointed by the governor general on the advice of the prime minister after consultation with the leader of the opposition. The technical staff of the commission manage the regulatory affairs of the sub-sectors.
In discharging its main functions, the commission seeks to:
- foster competition;
- ensure the continuity of supply;
- deliver services to as many consumers as possible;
- decrease rates;
- ensure adequate returns to investors so that they can meet their commitments; and
- protect the environment.
The commission, with the approval of the government, has the power to promulgate regulations setting rates and standards of service. In effect, these regulations set the regulatory framework for each industry.
As the government owns BWSL, there is very little activity in the water sector. BWSL recently sought a rate increase of 25% from the Public Utilities Commission and was ultimately awarded an increase of 12%.
Rate setting in the electricity sub-sector is achieved through regular rate reviews by the commission. BEL is obliged to undertake a full tariff review procedure every four years. Through this process BEL forecasts its costs, capital investment programme and required rate of return. These forecasts are then reviewed by the commission and electricity rates are set for the services to be delivered by BEL. An annual review measures the actual results against the projected performance and adjustments are made if necessary.
Over the years, the rate-setting methodology has been changed four times. This has caused serious conflict between BEL, the government and the commission, and the rate-setting procedures have been the subject of keenly contested litigation. In a recent decision the Supreme Court ruled that 'good regulatory practice' as recognised and practiced worldwide does not apply in Belize under the rate-setting methodology which is being used by the commission. This important case is now on its way to the Court of Appeal.
Rates in the mobile telecommunications sector are determined by competition between the two market players, subject to approval by the commission. In those sectors of the telecommunications industry where there is no competition, rates are set by the commission. In late 2009 Telemedia interrupted the delivery of services to Speednet. This resulted in Speednet's customers losing service and otherwise experiencing substandard service. Speednet was able to resume full services when the Supreme Court granted an injunction that obliged Telemedia to return services to the status quo ante. Speednet alleged that Telemedia's actions were an abuse of its dominant position in the market. However, the Supreme Court held that Telemedia had not be said to have abused a dominant position as no proper market assessment had been carried out by the commission to establish whether Telemedia was dominant in the market. The court called on the commission to consider carrying out the required assessment.
Another consequence of the Supreme Court's decision is that all the agreements between Telemedia and Speednet must be renegotiated. These negotiations are to take place without any service interruptions. In the meantime, the commission is designing and implementing new regulations for the telecommunications sector.
The regulatory environment in the telecommunications and electricity sectors in Belize is extremely unstable. Owing to the inability of the utility providers and the commission to reach agreements on fundamental matters, the further involvement of the courts is to be expected.