28 September 2016
REPORT ON RAROTONGA FUEL PRICE REVIEW RELEASED
The Cook Islands Price Tribunal has today released its report on the review of the effectiveness of the fuel pricing arrangements that were introduced on Rarotonga in July 2015.
The report, completed in August 2016, confirms that the new arrangements have reduced prices to consumers due to structural changes to the pricing model and due to global price reductions.
There is now also improved compliance of Price Orders on Rarotonga but the prices set for the Pa Enua do not adequately reflect the actual costs of supplying fuel and LPG in the Pa Enua and therefore there is greater non-compliance by businesses seeking to recover costs.
A key recommendation from the review is the need to review all costs of supply to the Pa Enua to ensure that the Price Order represents a fair price. The Price Tribunal is in the process of determining actual fixed and variable costs over the next review period now that data has been collated and will then be better positioned to address the situation.
There are still considerable inefficiencies in the current Rarotonga supply model if compared to a single consolidated fuel supply arrangement but these efficiencies cannot be achieved without substantial impact on current market players.
The report makes 9 short-term recommendations including maintaining the current arrangements with some adjustments which will be implemented. Three long term recommendations were also made that look at applicability of other pricing models used in the Pacific and other potential areas for reviews outside the fuel industry.
Consultations commenced in February 2016 with a comprehensive process of meeting with all key stakeholders in the fuel industry and relevant Government agencies, review of public submissions and questionnaires on Rarotonga and Pa Enua (excluding Aitutaki) as well as data analysis of global and local price movements.
As Aitutaki has direct supply arrangements with Rarotonga, it was excluded from this review. The Price Tribunal will be commencing a separate review of the Aitutaki pricing arrangements in October 2016.
Copies of the report are available to download from the Ministry of Internal Affairs website.