The Sierra Leone Electricity and Water Regulatory Commission (SLEWRC) regulates electricity and water. SLEWRC is a multi-sectoral regulatory institution established by an Act of Parliament, the Sierra Leone Electricity and Water Regulatory Commission Act No. 13 of 2011. As an institution established by law, SLEWRC has credibility, and this has a positive impact on investor and consumer confidence.
Clarity of Roles and Objectives
SLEWRC’s regulatory functions are set out clearly in the primary legislation that established it and in other regulations. The obligations of regulated utilities and their functions are spelt out in secondary legislations, license conditions and other related regulatory instruments. This eliminates overlaps in roles and ambiguities in the obligations of the entities.
SLWERC maintains a substantial “arms-length” relationship with government. The SLEWRC board has institutional representation, as specified by the law. Members of the board and the Chairperson are appointed by the President on the recommendations of sector ministers for a term of three years, renewable once. Although the Director General (DG) is appointed from among the board members by the board after consultations with the Public Services Commission, the appointment of the board by the executive limits the full independence required for the regulator to operate.
SLEWRC maintains a low level of stakeholder independence. The law does not prohibit the Director General (DG) or board members from holding other offices in government or private sector within the energy sector during their tenure. Neither the regulatory law nor any other law prohibits the DG or board members, from having any personal interest in the regulated electricity utility and there is also no provision in the law for a cooling-off period after the term of office of the DG or board members before they can accept employment in regulated entities. The lack of restrictions on the relationship with the industry could lead to conflict-of-interest situations.
SLEWRC rates as substantial in terms of decision making independence. The executive arm of government cannot overturn regulatory decisions of the regulator and neither does the regulator require approval from the executive on regulatory decisions. In accordance with best regulatory practice, there are provisions in the regulatory law that require the regulator to consult the public and stakeholders or seek the views other entities on regulatory decisions. The regulator is the final decision maker on tariffs and on issuing and amending licenses. While the regulator plays a facilitative role in resolving disputes between companies on the one hand, and between companies and their customers on the other, the regulator’s decision on disputes is final and binding.
By allowing the regulator to approve and charge fees and levies to fund parts of its operations with the approval of Parliament, SLWERC maintains substantial financial independence in terms of sources and adequacy of funds to enable it to attract, maintain and retain qualified staff. However, the government and the regulatory authority board are responsible for allocation of expenditures and they decide on the regulatory authority’s staff salary level which is based on public service salary scale.
SLEWRC maintains a high level of accountability with stakeholders. This is because it reports to parliament through the sector minister and is required to answer requests from parliamentary committees and attend hearings organized by them. SLEWRC has a legal obligation to produce annual reports on its activities, which is presented to Parliament for scrutiny. Regulated utilities may challenge the regulatory decisions of the authority through a specialized body thus avoiding a potential lengthy and cumbersome process using the normal judicial system.
SLWERC receives a substantial rating in terms of transparency of decision making. It is mandatory for the regulator to publish major egulatory decision and also publishes the rationale behind all its decisions and makes this accessible to the public.
SLEWRC maintains a high level rating for predictability. It has a documented tariff methodology, adopted in 2019, which sets out the procedures for tariff reviews. A predictable mechanism exists which is used by the regulator to disallow costs considered unreasonably incurred by a regulated entity. Although, it has not been changed for over five years, the methodology may only be changed in consultation with the regulated firms and stakeholders. The Electricity and Water Licencing rules, 2019 provides procedures for obtaining licences. Key regulatory documents such as licenses, contracts and authorizations may be modified by mutual agreement between parties to the regulatory instrument. A downside is that there is no timetable for major tariff reviews in the tariff methodology.
SLEWRC maintains a substantial level rating for stakeholder participation in decision making. Stakeholder consultation is mandatory and the regulator involves all relevant stakeholders in its decision-making process through public hearings, ad-hoc meetings and submission of written comments. Although the regulator does not publish comments received from stakeholders during the consultation exercise, it considers stakeholders’ input during the consultation process to influence regulatory decisions. However the regulator does not provide feedback on comments received from stakeholders.
Open Access to Information
There is a high level of open access to information. SLEWRC has a public website – https://ewrc.gov.sl/ – which contains information on legislations, codes and regulations, regulatory decisions, reasons and annual reports of the regulator. SLEWRC has information technology officers, responsible for updating the website regularly.
Economic Regulation -Tariff Setting
SEC is rated low in the development of its economic regulation framework. SEC has not developed a tariff setting methodology and there is no written formula by which end user tariffs are set. The utlity is not required to seek approvals before it makes major investments. A regulatory accounting framework has not been developed and there are no mechanisms for payment for ancillary services or for stranded assets.
On the positive note, a validated network connecting policy has been developed. A recent (less than 5 years) study on the cost of service has been carried out and the current tariff level is reported to be cost-reflective. A cross-subsidy mechanism is used to support low-income consumers, the poor and vulnerable. Utilities receive direct subsidy payments from the government to support operation and maintenance activities.
Technical Regulation - Quality of Service
SEC is rated low in its technical regulation framework. Quality of service regulations for monitoring the performance of the regulated utility regarding technical performance, quality of service performance, grid connection and access to technical requirements is not yet developed. A grid code has been developed and is being implemented but a distribution code is yet to be developed. Data on utility performance indicators are not collected.
The regulator receives low rating for the licensing framework. The licensing framework covers only large grid connected systems and includes procedures and guidelines for application, documentation required to be submitted by the applicant, approval process, time required to process applications and inform applicant of the outcome.
SEC is rated low in terms of institutional capacity. The regulator reports that it has inadequate levels of highly skilled staff to deal with all regulatory issues, including tariff modelling and engineering analysis.
Renewable Energy Development
SEC is rated low for its renewable energy development framework. The Seychelles Energy Policy 2010-2030 provides a policy framework for renewable energy development. SEC is in charge of RE regulation and is also responsible for RE strategy development. There are rules in the grid code that guarantee access to the grid for RE but RE has no dispatch priority. There are no technology specific model contracts or PPA for different RE technologies.
Mini-Grid and Off-Grid Systems
The framework for mini-grid and off-grid systems is rated low . As the country has has achieved 100% national electricity access rate, therefore, developing a regulatory framework for mini-grids and off-grid systems may not be a priority for the country. However, there is consideration of mini grid and stand alone systems for productive uses in communities as well reducing reliance on fossil fuels.
Energy Efficiency Development
The energy efficiency development framework is rated low. There is no policy aimed at improving the scale and scope of energy efficiency adoption. There is no National Energy Efficiency Action Plan (NEEAP) but there is an action plan to reduce the distribution (technical and commercial) losses. As an incentive, the government of Seychelles subsidises interest rates on loans for energy efficiency projects and VAT exemptions are granted to importers of certified energy efficient appliances. Although minimum energy performance standards (MEPS) and a labeling scheme have not been established for major household appliances, importers of A/C, refrigerators, washing machines and lighting are required to periodically report on the energy efficiency levels of the appliances they import. There is a building code enforced by the Seychelles Planning Authority and compliance is high at 80%.
Financial Performance and Competitiveness
The development of the regulatory framework for the financial performance and competitiveness of the utility is rated low from the perspective of the utility. A cost of service study was conducted by the utility in 2019 but is yet to be approved or applied by the regulator. Collection rates which stand at 71-99% are not factored in the tariffs. The loss level that is factored into the tariff is 8% although is not prescribed by the regulator. The ratio between the rate of collection and average EUT is reported to be more than 95%. At the current collection rates, loss levels and tariff, the utility is recovering its total cost of operations from the tariffs. There is an automatic adjustment in fuel charge component of tariffs related to fuel price changes.
Seychelles has a strong legislation on electricity theft. The PUC Act 1986 provides for fines and terms of imprisonment for up to 2 years for tampering with power installations and up to 6 months for theft. The regulator does not approve power purchase agreements between the distribution utility and bulk suppliers and does not approve price adjustment clauses in the power purchase agreements.
Quality of Service Delivery (Commercial and Technical)
Quality of service delivery is rated low. The regulator has not developed QoS regulations and does not require the utility to undertake annual technical audits or a valuation of its assets to establish the true state of affairs. It is not a requirement for the utility to calculate and publish its System Average Interruption Duration Index (SAIDI) and System Average Interruption Frequency Index (SAIFI).
Facilitating Electricity Access
Seychelles has achieved 100% electrification.. Funds for electrification are provided by the government, the utility and consumers but there are no provisions in the tariffs for the recovery of funds invested by these entities.
- Regulator to report directly to parliament.
- Prohibition for the regulator CEO from holding other offices in the government.
- Prohibition of the appointment of commissioners who were previously staff of a regulated company.
- Staggering of terms of commissioners to ensure maintenance of institutional memory and knowledge transfer;
- Enabling the regulator to be the final decision maker on tariffs, licensing and dispute resolution between the utility and customers;
- Parliamentary approval of the level of the annual regulatory fees and levies charged.
- Basing the salaries of regulatory staff on the utility salary scale and higher than the utility salaries.
- Amend the law to abolish the decision sharing relationship on tariff with the ministry. The regulator should be the sole and final decision maker on tariffs.
Amend the regulatory law to make it mandatory for the regulator to publish all major regulatory decisions and the reasons behind them.
- SEC has to develop and publish a tariff methodology under which rates charged by the utility shall be determined by the regulator through a consultative process involving all stakeholders.
- Develop documented procedures for obtaining a license for investor
Amend the regulatory law to provide for mandatory requirement for stakeholder consultation prior to making regulatory decisions by the regulator
- Establish a law/ legislation on renewable energy
- Develop specific model contracts for different renewable energy technology
- Develop a detailed tariff methodology
- 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 model regulatory accounting framework for utilities in tariff applications
- Utilities must seek approval from the regulator before making major investments.
- Develop Quality of Service regulation/ Code to guide the operations of the utility.
- Carry out assessment on the quality-of- service performance of the utility
- Develop a Distribution grid code for distribution network
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.