Vertically Integrated with Private Participation
The Public Utilities Regulatory Authority, a multi-sectoral regulatory institution that also regulates electricity, was established in 2001 by an act of parliament, the Public Utilities Regulatory Authority Act, 2001. The Electricity Act also focuses on electricity. PURA enjoys enhanced credibility, having been established by law, and this impacts positively investor and consumer confidence.
Clarity of Roles and Objectives
The regulatory and policy functions of PURA are set out clearly in the primary legislation that established the regulatory institution. The obligations of regulated utilities are set out in secondary legislations and license conditions. This eliminates overlaps in roles and ambiguities in the obligations of entities.
PURA maintains a substantial level rating for its “arm’s-length” relationship with government. Its board (chairman and members) and CEO are appointed by the President of The Gambia on the recommendations of the sector minister for a term of two to four years, renewable once. Terms for board members are staggered to allow for institutional memory and regulatory knowledge transfer to new commissioners.
PURA rates low with respect to independence from stakeholders. There is no provision in the regulatory law for institutional representation on the board, and no provisions regarding prohibition of the commissioners and CEO of the regulatory institution from accepting employment in the regulated utility company immediately after the end of their term in office. The CEO is prohibited from holding another office in the government within the energy sector during his tenure but there are no provisions in the law that prohibit the CEO /board members from having any personal interest in the regulated utility. The lack of these provisions could potentially impact regulatory decision making to be skewed towards future personal benefits of regulatory officials. The independence of the regulator could be compromised by the stakeholders.
PURA received a medium rating in decision making independence. It shares tariff decision making and licensing authority with the sector ministry. PURA is required to seek approval from the executive on regulatory decisions but the executive arm of government cannot overturn regulatory decisions of the authority. PURA consults the public on decisions through public hearings.
The regulator is allowed to charge fees and levies, at levels approved by parliament, to fund its operations. PURA is therefore rated high in financial independence with respect to sources and adequacy of its funds. Benchmarking with other reputable institutions with similar roles is used to set the salary levels of PURA staff, which is higher than those of the utility. This offers PURA the opportunity to attract, maintain and retain qualified staff and implement its regulatory activities.
PURA rates substantial on accountability because it reports to the sector ministry but also presents its annual report to parliament. Regulated utilities may challenge or contest the regulatory decisions of the authority only through the existing judicial system. The process can be lengthy and frustrating for investors.
The level of transparency in PURA’s regulatory processes is rated high. Although the public has immediate access to key regulatory documents from the authority's website, there is no regulatory requirement to publish major regulatory decisions and to give reasons behind them.
PURA rates high on predictability of its regulatory decisions and actions. The tariff methodology which is reported to have been adopted in August 2019, has procedures and schedules for major and minor tariff reviews and may be changed by the regulator in consultation with regulated firms and stakeholders. Key regulatory documents such as licenses, can be modified by mutual agreement between parties to that regulatory instrument and also by regulatory and ministerial actions. Procedures and timelines for obtaining licences are published. The involvement of the minister in regulatory actions however has the potential of undermining the predictability of the regulator.
There is substantial level of stakeholder participation in regulatory decision making. The regulator involves the utilities, consumers, civil society and other stakeholders in its decision-making process through public hearings and ad-hoc meetings, in accordance with provisions of the PURA Act 2001.
Open Access to Information
PURA rates high in Open Access to information. It has a public website www.pura.gm/ which contains information related to primary and secondary legislations, regulatory documents and annual reports of the regulator. The regulator has an information technology officer in charge of the website, which is updated regularly.
Economic Regulation - Tariff Setting
PURA received a medium rating for the level of development of economic regulation although a tariff setting methodology which includes a tariff indexation mechanism and a schedule for major tariff reviews and procedure for tariff applications is in draft and not yet published. The end-user tariff-setting process has a mechanism to avoid passing on inefficient costs to customers but there is no requirement for the utility to seek approval before making major investments and consumers may be asked to pay avoidable costs. A model regulatory accounting framework is yet to be developed to be used for tariff application. The regulator however requires regulated companies to submit financial information according to regulatory accounting standards although a cost of service study is yet to be conducted on the utility by the regulator. There are regulatory mechanisms in place to compensate generators for the provision of firm capacity or ancillary services and for stranded assets. No mechanisms have been provisions have been adopted to make tariffs affordable to low-income consumers, as well as the poor and vulnerable. The utilities do not receive any direct subsidy payments from the government.
Technical Regulation – Quality of Service
PURA rates low in technical regulation. PURA is yet to develop quality of service regulations, a national transmission grid code and a distribution grid code for the inter-connected power system. Consumers risk being provided with sub-standard service.
There is a low level of development in the licensing framework. This is because PURA has not yet developed a licensing framework and guidelines for the electricity sector.
PURA is rated substantial in terms of its institutional capacity. PURA reports that it has adequate qualified and experienced staff to deal with all regulatory issues, including tariff modelling and engineering analysis.
Renewable Energy Development
The Gambia rates low in terms of the level of development of the regulatory framework for renewable energy. The Renewable Energy Act, 2013 provides the legal framework for RE development in the Gambia. A renewable energy assessment has been carried Ministry of Energy and Petroleum is responsible for the formulation, development and implementation of the country’s renewable energy strategy. Renewable energy power is guaranteed access to the grid, however there is no despatch priority for renewable energy. Further, no technology-specific tariffs, model contracts or power purchase agreements for different renewable energy technologies have been developed.
Mini-Grid and Off-Grid Systems
There is a high level of development of the regulatory framework for mini-grid and off grid systems in The Gambia. The country has a national integrated electrification plan that sets out a least-cost electrification pathway, including grid, mini-grid, and off-grid systems and clearly demarcating areas for each system. There are regulatory policies, such as the Gambia Validated Green Mini-Grids Policy Statement that clarify the options and arrangements for transfer of asset ownership and/or ongoing operation and maintenance, when the national grid envelopes a privately owned mini-grid system and when the national grid encompasses a privately owned mini-grid system. Duty (and other tax) exemptions, capital subsidies and grants are the financial incentives available to promote the development of mini-grids and stand-alone systems. Mini-grid tariffs are based on the national average end-user tariff. Quality standards for stand-alone and individual home systems have been developed. Installers of autonomous or individual home systems require to be licensed or certified.
Energy Efficiency Development
The Gambia’s energy efficiency development framework is rated low. The framework for energy efficiency development has not been developed yet.
Financial Performance and Competitiveness
The regulatory framework for financial performance of utilities is low. No cost-of-service study has been carried out on the utility’s operations within the last five years. Losses are high and revenue from existing tariffs is between 51-70% of the utility’s cost of operation although commercial loss level of 10% and 20% technical is considered acceptable by the regulator. The current level of the average end-user tariff is not in accordance with the utility’s cost of operations, and there is no transitional path agreed between the utility and the regulator to attain a cost-reflective tariff over a specified period. PURA has formulated a transparent procedure for reviewing the level of end-user tariffs. However, it does not always follow this procedure and has no schedule for reviewing the end-user tariffs. There is no regulatory mechanism in place to deal with electricity theft but the distribution utility itself has put in place a mechanism to deal with it and a unit is set up purposely for this.
Quality of Service Delivery (Commercial & Technical)
The level of the Quality-of-Service regulatory framework is low. The utility is not required to calculate and publish its System Average Interruption Duration Index (SAIDI) and System Average Interruption Frequency Index (SAIFI). There is no financial sanctions or incentives to drive the utility towards achieving high quality of service delivery. A regulatory requirement is specified in license for the utility to undertake periodic technical audits or a valuation of its facilities to establish their true state. However, this has not been done.
Facilitating Electricity Access
The framework for facilitation of electricity access is at a low level of development. There are no specific regulatory mechanisms in place aimed at enhancing access to electricity. Government, CSOs and the utility provide funds for rural electrification and the regulator is reported to make provisions in the tariffs for recovery of these funds.
The regulatory law should be amended, or secondary legislation enacted to make provision for the following:
- Prohibition of the appointment as commissioners of persons who were previously staff of a regulated company;
- Regulator to report directly to parliament
- Ceding tariff setting and licensing decisions solely to the regulator without any interference or direct involvement of the minister responsible for energy
- A cooling off period after the terms of office of the CEO and commissioners.
The regulatory law should be amended, or secondary legislation enacted 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
PURA should conduct regular cost of service studies on the utility’s operations and finalize and approve the draft tariff methodology, ensuring that it captures all the key essential features, including procedures and schedules for major tariff reviews and tariff indexation/automatic tariff adjustment mechanism. A network connection policy should be developed as part of the tariff methodology or as a separate document to address related issues of commercial access to the grid.
Develop a national transmission and distribution grid code to guide technical access and operation of the interconnected grid.
Develop Quality of service regulations
PURA should develop a separate simplified and light-handed license procedure for off-grid and small sized systems to facilitate their deployment.
Develop model technology-specific purchase power agreements for all renewable energy technologies to guide investors and utilities in concluding their negotiations.
Establish a law on energy efficiency
Develop national energy efficiency action plan including MEPS and labelling for electrical appliances.
The regulator should undertake a cost-of-service study to determine the true cost of supplying electricity to consumers. A transitional path should be agreed with the utility towards reaching cost reflective tariffs.
Quality of Service regulations that set a ceiling on key quality of service indicators like SAIDI and SAIFI should be developed and enforced.
The regulator should develop, in collaboration with the utility, a loss reduction target and action plan with incentives and penalties to systematically reduce system losses.