Regulatory measures related to operational distress have to do, on one hand, with prevention and, on the other hand, with taking measures in situations arising out of disasters. From the point of view of prevention, the central role of regulation is to avoid that chronic situations of poor performance become acute crisis as a consequence of the lack of control.
International experience shows that many PPP contracts explicitly provide for rules to tackle these situations and set limits on certain quality parameters. Once such parameters have been overcome, it is possible to take measures such as the auditing or the loss of the concession. A summary of some of these measures is contained in Table 38 below.
Table 38: Operational distress Prevention: Audit Measures
Country |
| Indicators | Regulatory Action |
UK | Water Electricity |
|
|
Railway |
|
| |
Brazil | Electricity | Inadequate service or exploitation of the granted assets | Company's auditing for a 180 days' term |
Colombia | Electricity |
|
|
Australia |
|
| |
Argentina | Electricity | Fines owing to quality matters may not be higher tan 20% of the annual Revenue. | Loss of the concession because of breach of contract. |
Chile | Water |
|
|
Peru | Water | Non-compliance with management goals approved by the regulator | Loss of the concession. |
Electricity | Concessionaire has interrupted the service for 876 accumulated hours in the calendar year | Concession expiration. Administrative auditing and new bidding of the concession. |
In contrast to chronic distress situations, events related to crisis or natural disasters cannot be foreseen or avoided. Regulatory actions in this respect are centered in prevention, with measures such as demanding the development of contingency plans to be applied in a crisis situation. Table 39 summarizes some of these demands in different countries.
Table 39: Mitigation of Operational distress - Contingency Plans
Country |
| Demanded | Comments |
UK | Water
| YES
| Drought Contingency Plan 2006 OFWAT Downstream Gas and Electricity National Emergency Plan 2006 |
Railway | YES | Contingency plans must comprise emergency timetables and their applicability | |
Brazil | Electricity | NA | NA |
Colombia | Electricity | YES | There is a General Guide for Elaborating Sector Emergency Plans |
Australia | NA | NA | |
Chile | Water | YES | The service provider must elaborate a contingency plan and have safety facilities or backup in emergency situations |
Peru | Water |
|
|
Energy | YES | Requirement of a plan as per the Contingency Plan Form |
It is clear that the mere existence of contingency plans does not guarantee their effectiveness in case they need to be used. Imposing the requirement of having a contingency plan is far from being a sufficient condition to ensure the plan's viability. Periodic review and update of the contingency plans along with their testing through mock situations are essential to ensure that, in case of a negative event, the plan is a useful and functional tool in solving the crisis (see BOX 51).
BOX 51: Sri Lanka Experience
Sri Lanka, which began telecommunication reforms in 1991, included conditions related to disaster preparedness and recovery in almost all the licenses issued to operators. The licenses included several conditions pertinent to disaster management including: • A condition requiring the licensee to provide public emergency call services to emergency organizations; • One mandating the provision of maritime and aeronautical emergency service for the safety of life; • A requirement that the licensee make plans for rapid restoration of services during public emergencies, after necessary consultations with relevant agencies and implement them; and • An obligation to provide priority fault repair service to emergency organizations. The regulator developed a pilot study in 1999 to assess the compliance of these provisions. The study included surveys of operators and emergency-related organizations, multiple meetings with operators including a national workshop and media activity. The pilot study on emergency telecommunications found that all parties, including the regulator, had ignored them and that there was little readiness for a disaster or a recovery therefrom. To enforce these license conditions on operators, it would first be necessary to go through some form of public proceeding to establish the precise nature of the obligations set out in the license conditions. It would also be necessary to ensure that the various actions required of government agencies, including the regulatory agency, were duly taken. The Sri Lankan case shows the weakness of relying on license conditions and mandates alone, without effective incentives in the form of clear allocation of responsibilities for costs of disaster preparedness and recovery. |
Source: Regulatory design for disaster preparedness and recovery by infrastructure providers: South Asian experience Leena Srivastava, & Rohan Samarajiva,