AS Tallinna Vesi is disclosing the Competition Authority’s decision

AS Tallinna Vesi is disclosing the full correspondence with the Competition Authority over the 2011 tariff application on its website, the Company hopes that this move adds to the transparency of utilities regulation in Estonia.

AS Tallinna Vesi’s CEO Ian Plenderleith said that this is an unprecedented level of disclosure for an Estonian utility company. „We are disclosing the full details of the tariff application and correspondence and we invite all other regulated companies to do the same, as this greatly contributes to bringing more transparency to the price formation process and also helps the consumers better understand the price and quality aspects of the service they are provided with,“ said Plenderleith.

Believing that consumers must be made fully aware of the price, the detailed reasoning for the increase and the quality standards that customers should expect, AS Tallinna Vesi already published its full tariff application in November 2010. „AS Tallinna Vesi has also published an audited review of the company’s past performance against quality standards and an independent verification of the company’s returns by expert group Oxera,“ noted Plenderleith.

The correspondence between the parties reveals how persistently the Competition Authority ignored the issues and proposals raised by AS Tallinna Vesi for considering the terms of the privatization agreement in the implementation of the Authority’s methodology. „We remain hopeful that publishing the dispute materials in full will also contribute towards improving the quality of regulation in Estonia and opens up an opportunity for a truly open discussion on regulation principles and their implementation,“ added Plenderleith.

The Competition Authority has completely ignored its own regulatory objectives, such as protecting the customers, while it has chosen to restrict the investor‘s justified expectations regarding the rate of return they would be allowed to earn on their investment. „The only objective of the Competition Authority‘s analysis seems to be to limit AS Tallinna Vesi’s profitability,“ noted Plenderleith. Despite a principle regulatory objective to guarantee justified returns to the investors, the Competition Authority has decided that the capital paid by the investor during the privatization should be not included in the calculation of a justified rate of return, thus reducing the value of the shareholders‘ investment to half of it.

Also, the methodology applied by the Competition Authority makes no reference whatsoever to service and quality standards. „If you don’t check or cannot prove what level of service a company plans to provide, then how can you set a “justified” price – this omission is completely inconsistent with all regulatory practice across the world,“ said Plenderleith.

AS Tallinna Vesi’s tariff application, the Competition Authority’s decision and the interim correspondence together with the Company’s summary of the dispute (attached) can be found on AS Tallinna Vesi’s website under „About us -> Regulation“ –