Vertically Integrated with Private Participation
BERA was established in 2016 by an act of parliament, the Botswana Energy Regulatory Authority Act No 13 of 2016 (revised 2020) to regulate the energy sector (including electricity) in Botswana. Thus, backed by law, BERA enjoys credibility, which has an impact on investor and consumer confidence.
Clarity of Roles and Objectives
BERA’s regulatory functions are clearly set out in the primary legislation that established the agency. The obligations of regulated utilities are set out in other secondary legislations and license conditions. This eliminates overlaps in roles and ambiguities in the obligations of entities.
BERA maintains a substantial “arms-length” relationship with government. The primary legislation defines the skills set required of the chief executive officer (CEO) and board members of the regulatory institution. The regulatory law includes a mechanism for staggering the terms of commissioners that ensures continuity to allow for institutional memory and transfer of regulatory knowledge to new commissioners.
The Minister appoints the chairman and board members for a term of five to seven years (renewable more than once) and the minister’s further involvement in the appointment of the CEO, limits the full “arms-length” relationship required by the regulator to operate.
BERA is rated substantial with respect to independence from stakeholders. The regulatory Act does not prohibit the appointment of a CEO or Board Members of the regulatory authority, if any of them has previously held a position in the regulated utility but Clause 16 of the Act prohibits the CEO and Board Members of the regulatory institution from accepting employment in the regulated utility after the end of their term in office. A cooling-off period of between 1 and 2 years is required before they could accept employment in a regulated utility after the end of their term in office. The CEO and Commissioners are prohibited from having any personal interest in the regulated electricity utility or any regulated entity.
BERA’s rating in decision making independence is substantial. There is a strict requirement in the regulatory law that requires BERA to consult other stakeholders and the public on key regulatory decisions. BERA is the final decision maker in issuing and amending licenses. However, there are formal provisions in the law that allow the executive (the minister) to overturn BERA’s decisions on tariffs. BERA also plays a consultative role to the sector minister in the approval of tariffs. The ministry/cabinet takes the final decision on tariff reviews once BERA has made its recommendations. This can negatively impact investor confidence in the agency’s regulatory powers. Government guidance should be restricted to policy and long-term strategy.
BERA rates low in financial independence. Although BERA depends 100% on government subvention, which impacts on its financial independence, its board has some appreciable level of control in the usage of approved funds. The board determines staff salary levels, which enables BERA to attract and retain qualified staff.
BERA rates substantial in accountability. The regulator reports to the sector minister, to whom annual reports on the regulator’s activities are presented. Regulated entities may contest the regulatory decisions of the authority only through the use of the existing judicial system. This process could be lengthy and impacts investor confidence.
Transparency of Decisions
BERA rates substantial in transparency of decisions. The public can access key regulatory documents like acts and those guiding license application procedures online. The publication of regulatory documents and decisions is mandatory under the law, but the board is given the discretion to select which decisions may be published.
BERA is rated low with regards to the level of predictability. There is a documented and published tariff methodology that is accessible to the general public and stakeholders. Procedures and schedules for obtaining licences is also published. A separate document contains a tariff review schedule. However, investor confidence can be weakened by the fact that key regulatory documents like licenses, contracts and authorizations can be modified by regulatory and ministerial actions without the involvement of regulated stakeholders.
BERA rates high in stakeholder participation in decision making. Stakeholder consultation is mandatory and regulated utility companies, other industry players, and consumers are consulted through public hearings and ad-hoc meetings and the regulator publishes comments received during the consultation exercise. Furthermore, the regulator always considers stakeholders’ input and responses during the consultation process and provides feedback on comments received.
Open Access to Information
BERA rates high in open access to information. It has a public website, www.bera.co.bw/ . This website contains all the necessary regulatory information that the public and particular stakeholders may require.
There is a low level of development in economic regulation. BERA has a well-documented tariff setting methodology, which it inherited from the ministry responsible for energy. It contains a schedule for major tariff reviews but not minor reviews. There is a written formula that prescribes how end-user tariffs are to be set and a requirement that the utility has to seek approval from the regulator prior to making major investments.
There are no regulatory mechanisms to compensate generators for the provision of ancillary services and the cost of stranded assets. A lifeline block, connection subsidy, cross-subsidy and capital subsidy from government are used to support low-income consumers. The utilities receive direct subsidy payments from the government. However, commercial, and industrial consumers provide the cross-subsidy, which is used to support residential/domestic consumers. This may impact the cost of doing business in Botswana.
There is a low level of development in technical regulation. BERA is still in the process of developing quality of service regulations. Key regulatory documents such as the grid code, distribution code, grid connection and access technical requirements are also outstanding. The regulatory authority has not carried out and published a comprehensive analysis on customer satisfaction. However, it monitors the utility through review of submitted reports and compliance audits. Quality of Service (QoS) indicators like System Average Interruption Duration Index (SAIDI) and the System Average Interruption Frequency Index (SAIFI) are collected and reported to the regulator but there are no penalties if the limits are exceeded. Time-based performance indicators such as “time for actual connections to be made” are covered in the QoS regulations.
BERA is rated medium in the development of its licensing framework. It uses a framework developed by the ministry responsible for energy prior to the establishment of BERA. This framework covers both large and small grid and off-grid systems. There is a separate simplified and light-handed licensing framework and procedure for off-grid and small sized systems.
BERA is rated low in terms of institutional capacity. The regulator reports that it has inadequate levels of highly skilled staff to deal with all the aspects of its regulatory functions. This includes the areas of economic and tariff analysis and utility performance analysis.
Renewable Energy Development
The level of renewable energy development is medium. Botswana has carried out renewable energy assessments and implementation is backed by the National Energy Policy 2021. The Department of Energy is responsible for the formulation, development, and implementation of a renewable energy strategy and the legal, policy and regulatory framework that encourages the private sector to participate in grid-connected renewable energy investments is in place. The regulator is yet to develop technology-specific model contracts or power purchase agreements for different renewable energy technologies. In addition, there are no rules or codes that guarantee access to the grid for renewable energy but the Electricity Act 2016 allows private sector investments in RE. There is a need to streamline the RE policy and regulatory framework to remove all ambiguities to enable sustainable development of the RE sector in Botswana.
Mini-Grid and Off-Grid Systems
The level of development of the regulatory framework for mini-grid and off-grid systems is low. There is a national program to support the development of mini-grid systems, and the electrification plan sets out a least-cost electrification pathway. It includes grid, mini-grid, and off-grid systems and it clearly demarcates areas for each system. It is for grid-connected systems only. Yet, there are no regulatory policies or technical standards, and all the basic requirements and financial incentives are yet to be developed for both mini-grids and stand-alone systems.
Energy Efficiency Development
There is a medium level of development of an energy efficiency framework in Botswana. The National Energy Policy (2021) and the National Energy Efficiency Strategy (2018) provide the policy framework for energy efficiency in Botswana. BERA is the institution in charge of energy efficiency regulation and the Department of Energy is responsible for the formulation, development, and implementation of an energy efficiency strategy. MEPS and labels have not been developed for electrical appliances yet and this could open the country up for dumping of obsolete inefficient electrical appliances
Financial Performance and Competitiveness
The level of regulatory development for the financial performance and competitiveness of the utility is rated medium. A cost-of-service study has not been carried out on the utility’s operations within the last five years but the utility reports that the current level of the average end-user tariff is in accordance with the utility’s costs of operation. The regulator uses a predictable mechanism to disallow costs incurred by the utility as a result of non-transparent procurement practices and which are considered unreasonable. The mechanism thus protects consumers from paying unreasonable costs. Power Purchase Agreements are approved before the utility purchases power through PPAs and cost escalation clauses in such agreements are recognised by the regulator for tariff adjustment. The regulator has formulated a transparent procedure for reviewing tariff levels and schedules for the reviews which it always follows. A regulatory mechanism is in place to deal with electricity theftt and involves regular audits by the utility.
Quality of Service Delivery
There is low level of development on quality-of-service regulations. A QoS regulation has not been developed yet and important indicators like SAIDI and SAIFI are not regulatory requirements. Ceilings are not set for them, and they are not factored into tariffs. Under the current circumstances, quality of service delivery is at the discretion of the utility. It is not driven by regulatory action or decisions. Consumers may not be guaranteed any form of consistency in service delivery. Consumer confidence may be undermined.
Facilitating Electricity Access
There is a low level of regulatory development for facilitation of electricity access. There are regulatory mechanisms in place which are aimed at providing access to electricity. The government provides funds for rural electrification. Funds provided by communities or non-governmental organizations are considered for the utility company to recover the investment made by these institutions in rural electrification projects. The utility company does not refund investments made by government, communities, or NGOs for rural electrification but funds provided by the utility in rural electrification projects are reflected in the tariffs. The low level of regulatory development may be as a result of uncoordinated implementation of the policy on access to electricity.
The regulatory law should be amended, or secondary legislations be developed to make provision for:
- Prohibition of the appointment of commissioners who previously were staff of a regulated company;
- Parliament to approve the level of the annual regulatory fees and levies charged by the regulator;
- The regulator to present annual report directly to parliament;
- Ceding tariff setting and approval functions solely to the regulator without any interference from the minister responsible for energy;
- Enabling the regulator to seek alternative sources of funds, such as levies and license fees to reduce the reliance on government subventions;
- Removal of the discretionary powers of the regulator to select which regulatory decisions and rationale to publish.
The regulatory law should be amended, or secondary legislations be developed to make provision for the creation of specialized and independent bodies outside the regulator and the usual court system for aggrieved regulated entities to contest regulatory decisions
Regulators’ decisions and reasons should be accessible to the public
Carry out regular cost of service studies and implement the findings therein. The regulator should develop and implement a tariff methodology that clearly outlines procedures for tariff setting and review. It should contain tariff indexation and automatic adjustment mechanisms. A schedule for major and minor tariff reviews would also be useful. A network connection policy could be developed as part of the tariff methodology or as a separate document to address related issues of commercial access to the grid.
The regulator should conduct a cost-of-service study, which should be updated regularly to provide information on the true cost of service for tariff setting.
The grid code should be developed to guide technical access and operation of the transmission grid.
Develop its licensing framework to cover both grid and off-grid systems. This will provide a transparent entry route to the sector for potential investors. In developing the framework, provision should be made for a separate simplified and light-handed license procedure for off-grid and small sized systems.
- Establish and enforce a ceiling and thresholds on key quality of service indicators such as the System Average Interruption Duration Index (SAIDI) and the System Average Interruption Frequency Index (SAIFI) with incentives and penalties to instigate compliance by the utilities.
- Develop a distribution grid code for the distribution network
- Carry out an assessment on the quality-of- service performance of the utility
- Develop quality of service code
A labelling system for electrical equipment should be developed and adopted as an energy efficiency measure.
Develop model technology-specific Power Purchase Agreements for all renewable energy technologies to guide investors and utilities in concluding their negotiations.
Establish a policy framework on development of mini grid and off grid system Technical standards for mini grids should be developed and applied.
The regulator should develop a and implement a comprehensive capacity building program to ensure adequate capacity of staff in areas of tariff setting and utility performance analysis.