ABSTRACT
In Latvia, public energy and telecommunications utilities and transport services are natural monopolies which operate within a complex infrastructure where competition is limited. These large monopolies have a dominant position in the domestic market and operate in a loosely regulated environment. There are relatively few regulatory and legislative control mechanisms governing Latvia’s energy and public utilities. Whereas in the UK, regulatory authorities like Oftel, Ofgas and Ofwat operate effectively within a clear legal framework and with the power of legal and financial sanctions available to them, in Latvia there is no comparably comprehensive system of supervision over the business activities of the utilities. The Latvian Cabinet of Ministers has assigned the tasks of regulation (especially of the politically sensitive issue of price and tariff setting) to several public institutions which, due to a lack of resources and ineffective coordination, spasmodically analyse the activities of these monopolies based mainly on information provided by the firms themselves. These regulatory functions have been organized in an ineffective manner, and are largely impotent because they are executed by several public institutions which do not co-ordinate their activities. Although some action has been taken to split up conglomerates, the recently established agency for prices and competition has no effective powers to break up monopoly enterprises. Profit margins of many distribution networks remain very high. Competitive pressures come mainly from the liberal trade regime and tight monetary and fiscal policies.
