ANNUAL REPORT 2010 - Konkurentsiamet

Competition Authority as an independent regulator was necessary. An essential
development compared to the former situation takes place in the procedural stage. While in
the past the local government established the price with its regulation, then according to the
new act the price of a water service shall be established by the water operator, who shall be
completely responsible for the compliance of the price with legal requirements. Before the
price takes force, he shall obtain the approval of a competent regulator, i.e. the Competition
Authority in case of approximately 70 major water operators and local government in case
of smaller operators. The amendment to KKütS also brings under the regulation of the
Competition Authority all smaller heat operators, whose price limit was formerly approved
by the local government. In addition to the preliminary control, the new act entitles the
Competition Authority to control the prices of the water service and subscription fees
through supervision.
In the past, when the prices of water services were established by the local governments,
there was no possibility to ensure the legality of price formation with the means of
competition supervision. Price formation of a water operator could be analysed on the basis
of the Competition Act, but price regulations of local governments remained valid anyway.
Regulations can be disputed in the constitutional review proceedings, which is outside the
competence of the Competition Authority. In case of AS Tallinna Vesi, the Competition
Authority submitted its economic analysis to the Chancellor of Justice. The latter took it
forward to the Supreme Court, which assumed the opinion that the regulation was a general
order, while disputing it is also outside the competence of the Chancellor of Justice. Thus
the former practice of administrative courts, where price regulations had been treated as
regulations and therefore did not proceed, was considered wrong. In conclusion the problem
is fortunately rather theoretical, as the indicated weakness in the supervision system was
corrected with MHKS, according to which prices are not established with an act of public
authority, but by the water operator himself. Before implementation of the price the water
operator shall obtain approval for the price, which shall be effected as a resolution of the
regulator. The new act is undoubtedly a major step forward towards an operative and
transparent economic regulation, even if it will not bring along the expected decrease of
prices immediately. The regulation will start to function proactively and some disputed
issues shall be first clarified, before starting to take extreme coercive measures such as an
establishment of temporary prices, etc.
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