Vertically Integrated with Private Participation.
Manages state-owned assets within the sector.
The Electricity Control Board (ECB) was established by the Electricity Act, 2000 (Act No. 2 of 2000) and amended by Electricity Act, 2007 (Act No.4 of 2007). Having been established by an act of the legislature, the credibility of ECB is enhanced, which has a positive impact on investor and consumer confidence.
Clarity of Roles and Objectives
ECB’s regulatory functions are set out clearly in the primary legislation establishing it. Secondary legislations, license conditions and other regulatory instruments spell out the obligations of regulated utilities. This eliminates overlaps in roles and ambiguities in the obligations of entities.
ECB is rated substantial with regard to “arms-length” relationship with government. Although the sector ministry appoints the five-member board, for a term of 2-4 years renewable more than once, the selection is based on their expertise and experience. Furthermore, in accordance with good corporate governance, the board members appoint the CEO. There are no requirements for institutional representation on the board and there is no provision for staggering the terms of the commisioners to allow for institutional memory and transfer of knowledge to new commissioners. The minister also appoints the chairperson and vice chairperson. The possibility of the minister appointing members of the board for many terms reduces the political independence of the board.
ECB is rated low with regards to stakeholder independence. Although there are legal provisions in the regulatory law that prohibit the CEO/board members from holding other public offices in the energy sector during their tenure and prohibit the appointment of a person who has previously held a position in a regulated utility, the chairperson and commissioners are not restricted from accepting employment in the regulated utility immediately after the end of their terms in office.
ECB is rated at a high level of development on independence in its decision making because the executive arm of government cannot overturn a regulatory decision of the regulator and ECB is the final decision maker in approving tariffs and in resolving disputes between regulated companies on one hand and between companies and their customers on the other. The regulator is also required to consult the public and stakeholders on regulatory decisions but does not need approval from the executive before making such decisions. However, ECB shares decision making authority with the sector minister on issuing and amending licenses.
The level of financial independence is substantial, as ECB is funded from fees levied on regulated utilities and license fees stated in the primary legislation at levels approved by the minister. The board decides on the regulatory authority’s staff salary level, which enables ECB to set salaries, based on the utilities scale and equal to that of the utility, at levels high enough to attract and retain qualified staff.
The level of regulatory development in terms of accountability is substantial. ECB reports to the sector minister and is not required by regulatory laws to answer requests from Parliament or attend hearings that it organizes. Although there are no formal independent mechanisms through which regulated utilities may contest the regulatory decisions of ECB, grievances may be addressed through the normal judicial system.
ECB is rated high in terms of level of transparency. ECB publishes its regulatory decisions and the rationale behind all of its decisions and makes them publicly accessible online.
ECB is rated high on predictability. Its tariff methodology, which was adopted in 2018, sets out the procedures and timetable for major tariff reviews, is available to the public and may be changed by the regulator, only in consultation with regulated firms and stakeholders. There is a predictable mechanism used by the regulator to disallow costs considered unreasonably incurred by the regulated utility. ECB has published documented procedures for securing licences which also has timelines attached to the procedures.
The regulator can modify key regulatory documents like licenses, contracts and authorizations by regulatory decision instead of through consultation with stakeholders.
ECB receives a high rating in stakeholder participation in the regulatory processes. Stakeholder consultation is mandatory under the law and the regulator involves all stakeholders in its decision-making processes through public hearings, ad-hoc meetings with stakeholders, and submission of written comments. ECB considers stakeholders’ inputs during the consultation process, publishes the comments received from all parties and provides feedback on the comments.
Open Access to Information
ECB rates high on open access to information. It has a public website www.ecb.org.na, which contains all the necessary regulatory information that stakeholders, including the general public, may require on regulatory issues and activities.
Economic Regulation -Tariff Setting
There is a substantial level of development in economic regulation. ECB has developed a well-documented tariff setting methodology, which includes a schedule for major tariff reviews and a mechanism for tariff indexation and a written formula for end-user tariff determination. The tariff setting regulations avoid passing on inefficient costs, incurred by the utility, to consumers. Utility companies are required to submit financial information according to regulatory accounting standards. The utility requires approval from the regulator prior to making major investments and there are regulatory mechanisms to compensate generators for the provision of firm capacity or ancillary services. The regulator has developed a network connection policy as part of its tariff-setting methodology and has carried out a cost-of-service study within the last five years. This study enabled it to confirm the cost reflectivity of the current tariff level. A Lifeline block tariff policy and mechanism has been adopted to make tariffs affordable to support low-income consumers. Regulated entities are however not compensated for the costs of stranded assets and this has an attendant impact on investor confidence.
Technical Regulation – Quality of Service
There is a high level of development in the quality-of-service framework of ECB. All the appropriate regulations/codes, including transmission and distribution codes, have been developed to govern quality of service performance of utilities. Financial sanctions are applied on utilities that fail to meet quality of service standards but this excludes SAIFI and SAIDI, and could have impact on consumer satisfaction. ECB collects utility performance indicators, which includes those that show economic performance of the regulated sector, compliance with legal obligations by the regulated utilities, and financial performance. The last technical performance evaluation and assessment report was published in January 2019. The time for utility company to respond to customer request for new connection, time for actual connection to be made , response time to customer complaints, time given from issuance of “Notice-to-pay” until disconnection, time taken for reconnection after payment is made, response time for metering queries and time given to correct over billing are areas of customer service with respect to connections and service delivery are covered in the Quality of Service regulations. ECB has carried out and published a comprehensive analysis on regulated utilities’ commercial (customer satisfaction) quality performance. It discussed its findings with the regulated utilities. The regulator monitors the utility to address findings in the performance analysis through annual follow-up reports.
There is a highly developed licensing framework which covers both grid-connected and off-grid systems to guide potential investors interested in entering the market.There is however no separate simplified and light-handed licence framework or procedure for off-grid and small sized systems
ECB is rated substantial as it has an adequate level of highly skilled staffing to deal with all the aspects of its regulatory functions, including the areas of economic and tariff analysis and utility performance analysis.
Renewable Energy Development
There is a high level of regulatory development for renewable energy. Namibia has carried out a renewable energy assessment to inform the commercial development of the country’s renewable energy resource. ECB is in charge of renewable energy regulation and the Ministry of Mines and Energy is responsible for the formulation, development and implementation of renewable energy strategy.
Namibia has formulated a legal, policy and regulatory framework that encourages the private sector to participate in grid-connected renewable energy investments. ECB has developed technology-specific tariffs, and model power purchase agreements for different renewable energy technologies. The grid code guarantees access to the grid for renewable energy, but least cost dispatch procedures have not been developed. The reseller rules and net metering rules provide a legal framework that allows a private operator the right to produce electricity from renewable energy sources on behalf of a consumer or a group of consumers connected to the national grid under the bulk customer permit regime.
Mini-Grid and Off-Grid Systems
There is a high level of development of the regulatory framework for mini-grid and stand-alone systems – both grid-connected and off-grid systems with a level playing field for investment. Clear arrangements in terms of technical and quality standards and incentives are in place to facilitate mini-grid and off-grid systems. There are regulatory instruments – specified in license conditions – that clarify the arrangements for a transfer of asset ownership and/or ongoing operation and maintenance when the national grid encompasses a privately owned mini-grid system, with market models, single buyer market model, that enable the sale of renewable energy electricity into the national grid. There are no mini-grid-specific licensing/registration regulations (in the off-grid electrification policy) where small systems (up to 100 kVA) are exempt from licensing. Duty exemptions and capital subsidies are the incentives available to promote the development of stand-alone systems. There are technical and quality standards for stand-alone and individual home systems. They are supported by a licensing or certification scheme for installers of autonomous/individual home systems, who must be licensed or certified.
Energy Efficiency Development
There is a substantial level rating for development of the energy efficiency framework in Namibia. Although there is no legislation aimed at improving the scale and scope of energy efficiency adoption, energy efficiency targets have been set at the national level, and a plan to reduce network losses are part of the annual tariff review. ECB is not in charge of energy efficiency regulation but the Ministry responsible for Energy is responsible for the formulation, development and implementation of the country’s energy efficiency strategy. Minimum energy performance standards (MEPS) have been adopted for refrigerators, lighting, industrial electric motors and some other appliances although importers or manufacturers are not required to report on the energy efficiency levels of appliances they deal in. There is a monitoring, reporting and verification mechanism in place for Greenhouse Gas (GHG) emissions in the power sector, but there is no carbon pricing mechanism in Namibia.
Financial Performance and Competitiveness
There is a substantial level rating in regulatory development for financial performance and competitiveness of the utility. The current level of the average end-user tariff is in accordance with the utility’s costs of operation and at the prevailing loss levels and collection rate, the utility is covering its actual cost through the tariffs. Losses of 12% and collection rate of more than 90% are factored in the tariffs. The regulator also recognizes price adjustment clauses in the power purchase agreements for tariff adjustments. The regulator approves the utility’s power purchase agreements before signature. A regulatory mechanism, implemented by the utility and local authorities, has been put in place to deal with electricity theft, including establishment of a security working group to discuss the theft-related issues affecting utilities. The utility has also put in place a mechanism to deal with theft. The regulator uses a predictable mechanism to disallow costs considered unreasonable – costs incurred by the utility as a result of non-transparent procurement practices of the utility. All procurements are done in accordance with Namibia’s Public Procurement Act. Although a loss reduction target agreed with the regulator is absent and the utility appears to be doing well, there is the need for a loss benchmark to avoid complacency and deterioration of the financial performance of the utility.
Quality of Service Delivery (Commercial and Technical)
There is a high level of regulatory development in quality-of-service delivery. It is a regulatory requirement – specified in the license – for the utility to undertake periodic technical audits, or a valuation of its facilities to establish the true state of the facilities. The utility’s license also requires for the utility to calculate and publish its System Average Interruption Duration Index (SAIDI) and the System Average Interruption Frequency Index (SAIFI) and discuss the reports with the regulator. Regulatory ceilings on SAIDI and SAIFI set by the regulator are specified in legislation and are not factored into electricity tariff setting by the regulator. Regulatory (financial) sanctions are not applied if the utility records SAIDI and SAIFI above the regulatory ceiling.
Facilitating Electricity Access
There is a low level of regulatory development in facilitating electricity access. Rural electrification is the responsibility of the sector Ministry, guided by the Rural Electricity Distribution Master Plan and Off-grid energy masterplan. Funds for rural electrification in the country are provided by government, utility companies, communities/consumers and non-governmental organizations. However, there are no provisions in the tariff set by the regulator to recover investment made by these entities in rural electrification. According to the utility, there are no ceilings (legislation, license or code) on the number of days to provide electricity connection to a customer after making payments, however according to the regulator, the Quality of Service regulations covers time for the utility company to respond to customer request for new connections and time for actual connections to be made.
- Staggering of terms of commissioners to ensure maintenance of institutional memory and knowledge transfer.
- A cooling off period after the terms of office of the CEO and commissioners before they can accept employment in a regulated entity.
- Restriction of the CEO and all board members from holding other offices in government within the energy sector during their tenure in office.
- Parliament to approve the level of the annual regulatory fees and levies charged by the regulator
- Regulator to report directly to parliament.
ECB should develop a separate, simplified and light-handed license procedure for off-grid and small sized systems.
- Carry out assessment on the quality-of- service performance of the utility