World Bank: Cheaper, faster electricity connections power Trinidad's economy
Trinidad and Tobago has been recognised in the World Bank's 2014 Doing Business report for significant regulatory improvements in its cost of electricity connections, good news for investors who are expanding their operations or launching new businesses. For 2014, the country is ranked 10th among 189 economies worldwide for its ease of electricity connectivity.
These regulatory policy changes were spurred by business customer feedback that required capital contributions (advance lump sum payment to facilitate infrastructure works for an electricity supply) were resulting in too heavy of a burden on the initial customer. The previous policy also produced an unrecouped benefit to later customers using the same network expansion (called a “free rider”). Customers were also not clear as to how figures were calculated.
Electricity connectivity can be one of the greatest barriers for new and expanding businesses. According to the 2014 report, “in 2013 the cost to connect a single warehouse to a power supply ranged from an average of $19,112 in South Asia to $38,500 in Sub-Saharan Africa.” In Latin America and the Caribbean, the average cost was just under $25,000.
But with Trinidad and Tobago’s new regulatory changes, the country’s capital contribution costs have decreased due to resolution of the free rider issue. Several other improvements benefiting new and expanding businesses were also put in place.
Trinidad's effort to address the issue began in 2006 with the establishment of a working group of various businesses by T&T's Regulated Industries Commission (RIC), the official regulator. Multiple recommendations were put in place between 2009 and 2013. The business investor coming to Trinidad now benefits from a set of clear, formal capital contribution policies and calculation methods, as well as defined, transparent processes for addressing typical issues such as exemptions, reimbursement and dispute resolution.
Trinidad's RIC brought together individuals from many economic levels and various cultural and business groups to tackle the problem. Their first step was to examine Trinidad's existing procedures and regulations for capital contributions and to look at what utilities in other economies were doing to address the capital contribution issue. As a result, new and expanding businesses now benefit from a set of clear, formal capital contribution policies and calculation methods, as well as defined, transparent processes for addressing typical issues such as exemptions, reimbursement and dispute resolution.
The processes, all put in place by 2013, include a reimbursement plan to share assets with capital contributors once expansion costs were recouped from later customers. Another requires T&TEC (the Trinidad and Tobago Electricity Commission, the country’s sole retailer of electricity) to demonstrate that a new connection would not be commercially viable without a capital contribution. T&TEC must also show that the cost incurred would be no more than that required to be commercially viable. Finally, T&TEC is required to keep a list of pre-qualified contractors for customers, specifying technical criteria and informing customers about the average costs of work in various areas.
Businesses coming to or expanding in Trinidad are benefiting from the electrical connectivity cost savings, more predictable capital contribution calculations and eventual partial recoup of their connectivity investment. They will also benefit from the strength of RIC as a utility regulator. The RIC’s guiding hand in the improved connectivity processes will ensure improved business responsiveness.