Introduce performance metrics and monitoring capability. For state-owned utilities, it is time for a new corporate and sustainable model that is open to change and quick to modernize and evolve. The board is expected to exercise its powers and functions with independent judgment, authority and accountability, maximizing return on investments and ensuring financial viability, following internationally recognized state-owned enterprise corporate governance practices. While appointing the utility board, the government, as a shareholder, should ensure transparency of the process and selection of suitably skilled and qualified board members with strong integrity.Īll board appointments by the state should be based on the capability of proposed candidates to exercise their legal duty and responsibility toward the power utilities’ corporate objectives rather than fulfilling the government’s political objectives. The board of the power utility needs to be empowered legally to fulfill its fiduciary duties and the achievement of commercial viability in maximizing shareholder value. The interaction of the government with the utility board should aim to maximize profitability and sustainability, and where there is a management contract with a private concessionaire this intent should be determined in the legal framework. This will not only improve the financial performance of the utility, it will contribute to broader economic, social, and service delivery improvements. The government should act like any other shareholder and be concerned with corporate performance, particularly the return on investment, as well as the economic viability of the company.

To enable the power utility to be managed commercially, the government should create a transparent and simple tariff methodology and petition procedures establish independent tariff setting procedures by regulators and replace subsidies with direct monetary compensation to poor and low-income households to help them pay their power bills without undermining the financial viability of the utility. Creating transparent tariff systems that recover operational costs is a must for governments. How can governments in the Pacific transform these underperforming utilities into sustainable businesses? Here are three basic steps to achieve that goal:Īllow the utilities to set tariffs that recover their costs. During the pandemic, such subsidies compete with the government’s funding for health care, education, and other critical public services. This is due in part to the subsidies and financial support the companies require because they are not allowed to recover their operational costs through the fees they charge to consumers. With the COVID-19 pandemic, these utilities become even more critical for sustainable health care services that need uninterrupted power and water supply.ĭespite their strategic national value, many of these utilities increasingly pose a fiscal risk to the fragile economies of the Pacific.

Many governments have argued that this influence is needed because power utilities play a strategic role in delivering basic services to communities and enabling economic growth. This has hindered their ability to change and improve. Like in many developing countries, state-owned utilities in the Pacific have been influenced by governments’ involvement in their operations and decision making.

Power utility companies