RECOPE plant. Photo Alonso Tenorio, La Nacion

Q COSTA RICA – Perhaps a public outcry, calling for the government to open the fuel market and some even calling for a complete break up of the state refinery, is the reason behind the Refinadora Costarricense de Petroleo (RECOPE) proposal for a change in its fuel pricing methodology, from monthly to weekly price adjustments.

Currently, the RECOPE makes a request for a price adjustment to the Autoridad Reguladora de los Servicios Públicos (Aresep) – the regulator of public prices and services – every second Friday of the month, taking into account aspects not controllable by the company, such as the international market price for oil and the dollar exchange rate.

To arrive at the final price (up or down, but seems mostly up) at the pumps, RECOPE bases it figures on international prices up to 15 days before the request. Once the request has been made, it can take up to another 20 days for the Aresep to approve and the change published in the official government newsletter, La Gaceta, before going into effect.

What this means is that there is at least a 35 day difference between a change in international prices and the price that reaches the consumer in Costa Rica. During that time, there may be ups and downs, that are not taken into account until the next request.

Not bad while the consumer is paying lower prices while international prices have increased, but, then there is the shock of an abrupt price hike, as well, any drops in international prices won’t be in effect until a month or more later.

According to Luis Carlos Solera, head of economic and financial studies at RECOPE, “if the frequency of adjustments increases, this would quickly absorb changes in external prices and there would be no longer weeks of accumulating lags, so consumers would feel prices to be more stable, changes would be less abrupt.”

However, it seems that the RECOPE proposal may not advance, above all because the Aresep, by a mandate of the Constitutional Court of August 2007, must hold public hearings wich take 15 days.

Mario Mora, energy manager of Aresep and responsible for authorizing the price changes, explained that they (Aresep) are obligated to hold a public hearing to give consumers the opportunity to oppose fuel price adjustments, even in the face of changes in the external prices of fuels outside the control of Aresep, RECOPE and the consumers themselves.

The kicker here, as Mora explains, since the effect of this rule, no opposition from consumers, of the few that have been received, had in any way modified Aresep’s final decision regarding price changes.

The official said the process implies, once a request (from RECOPE) has been submitted, the Aresep must call for a public hearing, publish the notice in the press, set a deadline for consumers to file their position, then issue a report and final resolution  (price change). Only then can the Aresep send the price change to the national printer for publication in La Gaceta (the national printer having up to five working days to publish), and the price change taking effect the day following publication.

The reality, says Mora, is that almost no one is interested in the price adjustments hearings, each hearing costing around ¢6 million colones.

According to the Aresep, between 2014 and 2015, it spent at least ¢5.5 billion colones on 900 public hearings where a small number of consumers took part.

If the Aresep fails to approve the proposal for weekly adjustments, RECOPE has a plan B: the refinery going back a mechanisms used by the regulator itself before October 2015, when the current methodology was adopted.

Source: La Nacion, with further editing by the Q