Public utilities’ sectors (electricity, gas, heat supply, telecommunications, water supply, sewerage and railway) are usually characterised by natural monopolies. This is because capital-intensive and complicated infrastructure allows only one large company to operate in the limited market place and provide services to a wide group of consumers. Public utilities regulation prevents abuse of monopoly power and provides consumers with services of adequate quality for reasonable price. The international experience shows that special regulatory agency must be set up to provide professional regulation of public utilities.

In Latvia these services are provided by historically established monopolies. Although the market of public utilities is gradually liberalised and new players enter some sectors, the large enterprises still dominate. Quite often efficiency of utilities is low and quality of these services does not correspond to their prices. Due to economic reasons not all these sectors can be opened up for competition. Therefore a unified public utilities regulation system on central and local government levels was established in autumn 2001.  Utilities in the state-regulated sectors, namely, energy (except heat supply), telecommunications, post and railway are regulated by the Public Utilities Regulation Commission. While household waste management, water supply, sewerage and heating industries are regulated on local government level by institutions established by the respective municipalities.

Strategic goals of utilities regulation are:

– To provide users with high quality, continuous and safe public utilities for economically reasonable prices (tariffs),


– To stimulate efficiency and sustainable development of public utilities ensuring profitability levels consistent with the prevailing economic conditions,


– To promote economically justified competition in the regulated sectors.

To reach these goals the regulator carries out the following functions:

– Sets tariff calculation methodologies,

– Approves tariffs for utilities,

– Issues licences and supervises implementation of the set conditions,

– Supervises compliance of utilities with requirements for quality and environmental protection, technical regulations, standards;

– Performs dispute out-of-court settlement, etc.