URA Annual Report July 2016 - June 2017.

ANNUAL REPORT FOR THE YEAR 01 JULY 2016 - 30 JUNE 2017 UTILITY REGULATORY AUTHORITY Level 8, 1 Cybercity Building, Ebene, Mauritius Tel: (230) 454-8070, 454-8079 Email: ura.mauritius@gmail.com 2 Table of Contents Pg. Chairman's Overview 3 Background 4 The Board 5 Corporate Governance 7 Activities of URA 8 Report of the Director of Audit 12 Financial Statements: 01 July 2016 to 30 June 2017 16 Notes to Financial Statements for the year ended 30 June 2017 18 3 Chairman's Overview On behalf of the Board of the Utility Regulatory Authority (URA), I am pleased to provide a brief overview of URA's performance for the Financial Year ending 30 June 2017. This is the first Annual Report of the URA, the Board having been appointed in September 2016. As a newly-established Authority, our immediate priorities were to recruit appropriately experienced professional staff and to set up an independent office. I wish to extend my gratitude to the dedicated staff of the Ministry of Energy and Public Utilities who provided assistance to the URA as it establishes itself. The coming year will be a very challenging one with the major tasks of the elaboration of the Authority's three-year Strategic Plan, progressive recruitment of technical staff and providing them with the necessary training, establishing the Authority's regulatory processes that are both universally acceptable and capable of implementation in our country's environment, as well as a thorough review of the key Acts so that a clear and unambiguous legal framework is in place. In accordance with the URA Act, the Authority can only regulate the electricity sector at present. But even in that sector, the URA cannot exercise its regulatory function until the Electricity Act of 2005 has been proclaimed. And this proclamation can only be made once all the relevant Acts have been harmonised and the URA has recruited the necessary technical staff. In that process, the Authority expects the full support of all stakeholders in helping it to ensure that the interests of all of them are effectively balanced. I finally take this opportunity to express my deep appreciation to my colleague Board members for their undivided commitment, support and collaboration during the year under review. Prof/Goolamhussen Mohamedbhai, GOSK Chairman, URA Board 4 BACKGROUND Historical Background In 2004, the Government of Mauritius approved the setting up of a Utility Regulatory Authority (URA) and the URA Act was enacted in November 2004 to set up a regulatory framework for the electricity, water and wastewater sectors. However, the Authority did not become operational since the Board was not constituted. Some amendments were made to the Act in 2008, essentially with regard to the method of appointment of the Chairperson and Commissioners. In 2016, further amendments were made, this time with regard to the qualifications and experience of the Chairperson and Commissioners. Objects of the Authority The objects of the Authority, as per section 5 of the Act, are to: (a) ensure the sustainability and viability of utility services; (b) protect the interests of both existing and future customers; (c) promote efficiency in both operations and capital investments in respect of utility services; and (d) promote competition to prevent unfair and anti-competitive practices in the utility services industry. Functions and Powers of the Authority Section 6 of the Act lists the functions and powers of the Authority, which are to: (a) implement the policy of Government relating to applicable utility services; (b) grant, vary and revoke licences in respect of a utility service; (c) enforce the conditions laid down in an undertaking authorisation; (d) regulate tariffs and other charges levied by a licensee in accordance with any rules specified in the relevant Utility legislation; (e) mediate or arbitrate disputes between a customer and a licensee, or between 2 or more licensees; (f) determine whether a licensee has an obligation to extend a utility service to customers or to an area not adequately supplied with such utility service; (g) establish an appropriate procedure for receiving and enquiring into complaints by customers in relation to any utility services; and (h) establish and implement adequate systems for monitoring the compliance by licensees with standards and applicable regulations and making such information publicly available. (i) take measures for the better protection of customers in relation to any utility services; (j) take measures to suppress any abusive, illegal or dishonourable practices in relation to any activity of a licensee; 5 (k) take measures and make recommendations to a licensee in respect of any Power Purchase Agreement which a licensee proposes to enter into; and (l) examine and make recommendations to a licensee in respect of any management services contract, operation and maintenance contract or any other contract which a licensee proposes to enter into in relation to water services or waste water disposal services. These functions and powers, however, are subject to the relevant utility legislation. At present, the only utility mentioned in the URA Act is the electricity services (1st Schedule, Part B), and the relevant legislation is the Electricity Act 7 of 2005, which has not yet been proclaimed. THE BOARD The Board of the URA, comprising a Chairperson and three Commissioners, was appointed on 14 September 2016 by the President of the Republic of Mauritius on the advice of the Prime Minister given after consultation with the Leader of the Opposition. The Board was constituted as follows: Professor Goolamhussen Mohamedbhai, GOSK, Chairperson Mr Philip Ah-Chuen, Commissioner Mr Luc Eddy Astruc, Commissioner Mr Rampiar Luchmun-Roy, Commissioner In October 2016, Mr L. E. Astruc stepped down as Commissioner for personal reasons and on 28 October 2016, Mr Sadatmanund Narain was appointed as Commissioner to replace him. Profile of Board Members Professor Goolamhussen Mohamedbhai, GOSK, Chairperson Goolamhussen (Goolam) Mohamedbhai, aged 72, obtained a BSc (Hons) and a PhD in Civil Engineering from the University of Manchester, UK. He later undertook postdoctoral research at the University of California, Berkeley. He joined the University of Mauritius in 1972 and served successively as Head of Department of Civil Engineering, Dean of Faculty of Engineering, Pro-Vice- Chancellor and finally Vice-Chancellor from 1995 to 2005. He served as Secretary-General of the Association of African Universities in Accra, Ghana from 2008-2010. He was also President of the International Association of Universities and a member and Vice-Chair of the governing Council of the United Nations University, head quartered in Tokyo. He is the recipient of several honorary doctorates and awards. He is currently a member of the Council of the National University of Lesotho, the Council of the Mauritius Academy of Science and Technology (MAST), the Board of the Centre for Higher Education Trust (CHET) (South Africa) and the Board of the University World News (Africa). 6 Mr Philip Ah-Chuen, Commissioner Philip Ah-Chuen, aged 68, studied and worked in the UK from where he obtained a BTech (Hons) from Brunel University and an MSc in Industrial Administration from Aston University. He is a Fellow of both the Mauritian Institute of Management(FMIM) and the Mauritius Institute of Directors (FMIoD). He has been a Lecturer in Management Studies at the University of Mauritius (1976-1980),a management consultant at De Chazal Du Mee& Co.(1980-1985) and the Executive Director of ABC Motors Co. Ltd(1985-1993). He has also been Chairman of the Mauritian Institute of Management (1990,1991,1995,1996,2014 and 2015) and Chairman of the Senior Appointments Committee of the Mauritius Institute of Education (2007-2015). He is presently the Executive Director of Allied Motors Co. Ltd, a non-executive director of Chue Wing & Co. (ABC Foods), an independent, non-executive director of SBM Bank (Mauritius) Ltd. and a Commissioner of the Public Service Commission. Mr Rampiar Luchmun- Roy, Commissioner Rampiar (Ram) Luchmun-Roy, aged 70, was admitted Fellow of the Association of Chartered Certified Accountants (UK) in 1983. In 1984-85, he followed the International Tax Program at the Harvard Law School, USA. He joined the Income Tax Department as Junior Assessor in 1971 and, after working for a few years as Accountant at the Ministry of Finance, he returned to the Income Tax Department where he was appointed first Investigating Officer, then Deputy Commissioner of Income Tax. He served briefly as Acting Commissioner of Income Tax in 1991-92 and then left the public service to join Pricewaterhouse Coopers, first as Tax Manager, then Senior Manager and finally Tax Director. He retired in 2008. From 1988-1997, he was part-time lecturer in Accounting and Taxation at the University of Mauritius. He is currently a member of the Assessment Review Committee at the Ministry of Finance and Economic Development. Mr Sadatmanund Narain, Commissioner Sadatmanund Narain, aged 78, obtained a B.E. (Electrical Engineering) from the University of Roorkee, India, after which he proceeded to the UK for practical training with different firms, including the South Wales Electricity Board. He joined the Central Electricity Board (CEB) of Mauritius in 1964 as Assistant Engineer. In 1969, he followed a Post-Graduate Diploma in Electrical Power Systems Engineering at the University of Manchester Institute of Science and Technology, UK. He then continued his career at the CEB and successively served as Senior Engineer, Transmission and Distribution Engineer, Administrative Manager/Secretary, Assistant General Manager and finally Deputy General Manager. Over the period 1983-1985, he was appointed Secrétaire Générale of the Ecole Supérieure Inter-Africaine de l'Electricité, Bingerville, Cote d'Ivoire. He retired from the CEB in 2003. He is Member of the Institution of Electrical Engineers, UK (MIEE), Chartered Engineer of the Council of Professional Engineers, UK (C.Eng) and a Registered Professional Engineer, Mauritius (RPEM). 7 BOARD MEETINGS During the year under review, 14 Board meetings were held, the first one on 29 September 2016 and the fourteenth one on 28 June 2017. The Chairperson and the three Commissioners attended all the meetings, except for the following: (a) Second meeting held on 13 October 2016: Mr S. Narain was not present as he had not yet been appointed Commissioner to replace Mr L. E. Astruc. (b) Fourth meeting held on 14 December 2016: Mr R. Lutchmun-Roy did not attend as he was overseas. All the meetings were held at the premises of the MEPU, SICOM Building, Ebene. CORPORATE GOVERNANCE Effective corporate governance practices are essential to achieving and maintaining high level of public trust, corporate success and sustainable economic growth. As a regulator of the country's utility services, the URA is duly bound to operate within a strong governance framework that rests on a value system of transparency, accountability and trust. In accordance with section 32 of the URA Act, the Chairperson and the Commissioners filed with the Independent Commission Against Corruption a declaration of their assets and liabilities within 30 days of their appointment. No Board member has any interest in any enterprise involved in the provision of a utility service. All staff appointments were made by the full Board. All purchases were made in accordance with the purchasing procedures prevailing at the Ministry of Energy and Public Utilities (MEPU) and were approved by the Board. Commissioner Philip Ah-Chuen declared interest and recused himself from any meeting or part of a meeting where matters related to the purchase of a car for URA were discussed. 8 ACTIVITIES OF URA The Launch On 29 September 2016, the Deputy Prime Minister and Minister of Energy and Public Utilities, Hon. Ivan Leslie Collendavelloo, GCSK, SC, presented the Board members at a launch ceremony attended by the potential stakeholders of the URA and representatives of the media. In his speech, the Deputy Prime Minister mentioned that the URA represented a major development for the public utilities sector as it would constitute a pillar of transparency for the protection of consumers and would boost investments in a framework conducive to development. He added that the Independent Power Producers, the renewal of Power Purchase Agreements and renewable energy would also constitute priority areas for the URA. The Chairperson, Professor Mohamedbhai, mentioned in his address that the four key attributes that would guide the operations of the URA would be independence, autonomy, responsibility and expertise. He pointed out that the URA was starting from scratch and the Board would have to work both sequentially and in parallel so as to set up the Authority speedily. He acknowledged that a major challenge for the Authority would be to find appropriately experienced professional staff. Support Staff from MEPU Pending the appointment by URA of its own staff, the Ministry of Energy and Public Utilities (MEPU) designated several of its staff to provide assistance to the URA in different capacities on a part-time basis. These were: (a) Mrs Mohna Shadu, Office Management Executive (to act as Secretary to the Board) (b) Mrs Sharda Choolun, Principal Finance Officer (to provide assistance in financial matters) (c) Mrs Ruma Gya, Human Resource Executive (to provide support on human resources issues) Several other staff of the MEPU also provided assistance to the URA on an ad-hoc basis. URA Logo In October 2016, the Authority launched a competition in the local press for the design of a corporate logo of the URA, with a prize of Rs 25,000 to be awarded to the selected best entry. A jury panel comprising representatives of the Open University, the Mahatma Gandhi Institute and the Mauritius Institute of Education was set up to select the best entry. Six applications were received by the closing date. The Board approved the recommendation of the jury panel that the winner of the competition was Mr Kooshalnath Bhungy. However, the Board decided that the logo would be launched, and the prize awarded to Mr Bhungy, at a reception when the URA moved to its premises and the Director had been appointed. 9 Staff Appointments (a) Director An international call for applications for the post of Director was launched on 4 January 2017. By the closing date of 17 February 2017, six applications were received, two from Mauritius and four from overseas. However, only one candidate from overseas fully met the eligibility requirements. That candidate was interviewed by the Board through Skype on 15 March 2017 and was offered the post. He, however, subsequently declined the URA's offer. A second international call for applications was launched on 3 May 2017. In addition to the usual circulation channels, the advertisement was posted on LinkedIn and circulated to several regional utility regulatory associations in Africa. By the closing date of 5 June 2017, 22 applications were received, 10 from Mauritius and 12 from overseas. However, 13 of these candidates did not have the relevant qualifications and/or experience as advertised. A shortlisting of the remaining 9 candidates was carried out by the Board, preference being given to those who had utility regulatory experience at senior management level. The first three candidates were then interviewed by the Board on 28 June 2017. An offer of contractual appointment was made to the first candidate, Mr Alfred Dusenge Byigero, Deputy Director General in charge of Energy, Water and Sanitation Regulation at the Rwanda Utility Regulatory Authority (RURA). (b) Administrative Officer The post of Administrative Officer at the URA was advertised in the local press on 4 January 2017. By the closing date, 78 applications were received. However, only 7 candidates met the eligibility requirements. They were interviewed by the Board on 24 March 2017. Mr Suraj B. Naiko was found to be the best candidate and he was offered the post on a contractual basis. Mr Naiko joined the URA as Administrative Officer on 10 May 2017. (c) Finance Officer The post of Finance Officer was advertised, together with that of the Administrative Officer, on 4 January 2017. By the closing date, 36 applications were received but only 9 of them met the eligibility requirements. The 9 candidates were interviewed by the Board on 25 March 2017. None of the candidates was found suitable for appointment. A second call for application for Finance Officer was made on 29 March 2017. Twenty-seven applications were received and 7 of them met the eligibility requirements. These candidates were interviewed by the Board on 9 May 2017. Two candidates were found suitable for appointment but both of them subsequently turned down URA's offer of appointment. The Board decided to re-advertise the post of Finance Officer for a third time. 10 Renting of Office Space In January 2017, the URA invited bids in the local press for renting of office space in the Ebene/Plaines Wilhems region. By the closing date, only one bid was received. The Board found the location of the building not suitable and the monthly rent too high. It was therefore decided that two staff of the MEPU should visit office accommodations available for rental, preferably in the Ebene area, as advertised on line or in the press, and submit their findings to the Board. Five offices were visited in the Ebene area and the cheapest and most suitable one was the office on the 8th Floor of 1 Cybercity, Ebene. The Board approved the rental of that office for URA for a period of five years with effect from 1 May 2017. Several items of furniture, computers and other electronic equipment, electrical appliances and stationery were purchased for the office. Blinds were also fitted to the windows and an Access Control System at the entrance of the office was installed. Road Map for URA In February 2017, the Senior Chief Executive of the MEPU, Mrs N. Nababsing, approached the National Renewable Energy Laboratory (NREL), USA, which had previously undertaken studies on energy issues for the MEPU, to prepare a Road Map for the operationalisation and institutional strengthening of the URA. The NREL agreed to support the request and commissioned the Regulatory Assistance Project (RAP), USA, to undertake the study. The RAP submitted a first draft of the report which was considered by the URA Board and senior technical staff of the MEPU. The views and suggestions were communicated to RAP which, in June 2017, submitted a revised version of the report. The final report covers a wide range of topics, including integrated planning, financial analysis, tariff structure and analysis, licensing, renewable energy integration, and consumer protection. The report also provided observations on a phased plan of action for the URA that had been prepared earlier by the MEPU. The Road Map would prove to be a useful guide for the URA Director. Overseas Visits by Board members (a) On 28 October 2016, Prof. G. Mohamedbhai, Chairperson, while attending a higher education conference in Nairobi, Kenya, visited the Energy Regulatory Commission (ERC) of Kenya, where he met and had discussions with the Director General of the Commission. (b On 21 December 2016, while attending a meeting in Accra, Ghana, Prof. G. Mohamedbhai, Chairperson, visited the Public Utilities Regulatory Commission (PURC) of Ghana, which regulates the electricity and water sectors. He had discussions with the Director for Water and the Technical Manager for Energy. (c) In January 2017, Mr S. Narain, Commissioner, attended the 7th Annual General Meeting of the Regional Association of Energy Regulators for Eastern and Southern Africa (RAERESA), which was held in Lusaka, Zambia. His attendance was sponsored by the Common Market for Eastern & Southern Africa (COMESA). 11 Indicative Work Programme for Next Financial Year The Director, who has now been recruited, will assume duty in October 2017. The URA, with the advice of the Director, would consolidate its staffing positions and, in particular, start recruiting the basic technical staff necessary for it to perform its regulatory role. Among other activities scheduled during the next financial year are: (a) Harmonisation of the Electricity Act, the Central Electricity Board Act and the URA Act in preparation for the URA to progressively develop the required regulatory instruments in terms of secondary legislations/regulations including those relating to licensing operations in the electricity sector. (b) Holding of a seminar/workshop, facilitated by an external expert, to sensitise all relevant stakeholders on the role of a regulatory body for the utilities. (c) Preparation of a three-year Strategic Plan for the URA. 12 13 14 15 16 Financial Statements for the Year 1 July 2016 to 30 June 2017 17 30-Jun-17 Notes Rs. Revenues 4 5,000,000 Expenses Operating Costs 5 3,795,728 Administrative Costs 6 98,678 3,894,406 Surplus for the year 1,105,594 Other Comprehensive Income - Total Comprehensive Income 1,105,594 Statement of Financial Performance for the year ended 30 June 2017 18 General Fund Total Rs. Rs. Balance at 01 July 2016 - - Surplus for the Year 1,105,594 1,105,594 Balance at 30 June 2017 1,105,594 1,105,594 for the year ended 30 June 2017 Statement of Changes in General Fund 19 Note 30-Jun-17 Rs. OPERATING ACTIVITIES Surplus for the year 1,105,594 Adjustment for items not involving cash Depreciation on P. P. E 1,031 NET CASH GENERATED FROM OPERATING ACTIVITIES 1,106,625 WORKING CAPITAL CHANGES Increase/Decrease in Trade and other Receivables - Increase/Decrease in Trade and other Payables 228,764 NET MOVEMENT IN WORKING CAPITAL 228,764 INVESTING ACTIVITIES Purchase of PPE -122,700 NET CASH IN INVESTING ACTIVITIES -122,700 FINANCING ACTIVITIES Capital Grant - NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 1,212,689 CASH AND CASH EQUIVALENTS AT PREVIOUS YEAR - CASH AND CASH EQUIVALENTS FOR THE YEAR ENDED 2 1,212,689 Statement of Cash Flows for the year ended 30 June 2017 20 Notes to financial Statements for the year ended 30 June 2017 General Information The Utility Regulatory Authority (URA) is an independent body set up by the Government of Mauritius to regulate the utility services, namely electricity, water and wastewater. Its objects are to ensure the sustainability and viability of the utility services; protect the interests of consumers; promote efficiency in both operations and investments in respect of utility services; and promote fair competition in the utility services industry. URA Act was enacted on 2004 and subsequently amended in September 2008. The Act was again amended in June 2016 and gazetted on 29 June 2016 to allow for the appointment of the Chairperson and the Commissioners. The Board was finally set up in September 2016. a) Accounting Policies The Financial Statements of the Authority comply with the Statutory Bodies (Accounts and Audit) Act and have been prepared in compliance with the Financial Reporting and Accounting Standards issued under section 72 of the Financial Reporting Act. The going concern basis has been adopted. b) Revenue Recognition Re-current Government grants are recognised on accrual basis as income is matched against the Re- current expenses of the entity. Interest and other income are recognised on an accrual basis. c) Expenditure Expenditure is recognised on accrual basis. d) Property, Plant and Equipment Property, Plant and Equipment are stated at historical cost less depreciation. Depreciation is the systematic allocation of funds representing the use of an asset over its useful life. Depreciation is provided on the straight-line basis so as to write off the depreciation value of the assets over their expected useful economic lives. The annual rates of depreciation used for the purpose are as follows: - 21 d) Property, Plant and Equipment (continued) Equipment 20% Furniture and Fixtures 10% Computer and Software 20% Depreciation was charged in the year of purchase on a pro-rata basis. e) Cash and Cash Equivalent Cash and Cash Equivalent comprise of bank balances and cash in hand. Cash equivalent are short- term balances readily available. f) Provisions A provision is recognised when there is a present obligation as a result of past event, and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimates. g) Comparative figures The current Financial Statements are prepared for one year. There are no comparative figures since it is the first-year operation. h) Currency and Rounding Off of Figures The figures in the Financial Statements are in Mauritian Rupees and have been rounded off to the nearest rupee. i) Related Party Transactions Related Parties are individual and Companies where the related party or the authority has the ability directly or individually to control the other party or exercise significant influence over the other party in making financial and operating decision. For the year under review, payments were effected to the Board comprising the Chairperson and three Commissioners. 22 1. Property, Plant and Equipment (P.P.E) All fixed assets are stated at historical cost less depreciation. Historical cost includes expenditures that are directly attributable to acquisition of the items. Equipment Furniture and Fittings Total Cost Rs. Rs. Rs. At 1 July 2016 - - - Additions during the year 20,000 102,700 122,700 At 30 June 2017 20,000 102,700 122,700 Depreciation At 1 July 2016 - - - Charge for the year 289 742 1,031 At 30 June 2017 289 742 1,031 Net Book Value 30 June 2017 19,711 101,958 121,669 2. Cash and cash equivalents 30-Jun-17 Rs SBM Bank Balance 1,212,689 1,212,689 23 3. Trade & other Payables 30-Jun-17 Rs. Accruals: PAYE ( Mar17-Jun17) 191,754 TDS (May-Jun 17) 37,010 228,764 4. Revenues The Revenues are grants received from the Ministry. 5. Operating Costs Rs. Fees to Board Members 2,284,865 Staff Salary 90,871 Allowances to MEPU staff 100,611 PAYE (Dec 16- Feb 17) 229,211 Accruals PAYE/TDS (Mar 17-Jun 17) 228,764 Rent 672,100 Depreciation for PPE 1,031 Agency fee 187,040 Bank Charges 1,235 3,795,728 24 6. Administrative Costs 30-Jun-17 Rs. Publicity 91,264 Miscellaneaous expenses 7,414 98,678 7. Pending Litigation There was no litigation pending. 8. Events after the Statement of Financial Position date There have been no other material events after Statement of Financial Position date which would require disclosure or adjustment to the 30 June 2017 Financial Statements.