Vertically Integrated with Private Participation
The Energy and Water Utilities Regulatory Authority (EWURA) was established by an Act of parliament, the Energy and Water Utilities Regulatory Authority Act, Cap 414 of 2001 and amended in 2008 to promote more competition in the electricity sub-sector. Backed by law, EWURA enjoys strong credibility, which has a positive impact on investor and consumer confidence.
Clarity of Roles and Objectives
EWURA’s regulatory functions are set out clearly in the primary legislation that established the authority. The obligations of regulated utilities are spelt out in secondary legislations, license conditions and other related regulatory instruments. This eliminates overlaps in roles and ambiguities in the obligations of entities.
EWURA maintains a substantial “arms’-length” relationship with government. The appointment of the chairman of the board by the President of Tanzania and members of the board by the Minister(s) responsible for EWURA – for a renewable term of four years. To ensure continuity and to allow for institutional memory and transfer of regulatory knowledge to new board members, the terms of the board members are staggered, although institutional representation on the board is not a requirement.
EWURA maintains a substantial rating regarding stakeholder independence. Although there are no provisions in the law that prohibit the appointment of board members or the chief executive of the regulatory authority, if any of these officers has previously held a position in the regulated utility company, the law prohibits them from holding other public offices within the energy sector during their tenure and from accepting employment in the regulated utility company after the end of their terms in office until after a cooling off period. It is prohibited for a board member or the chief executive to have any personal interest in the regulated utility. The legislation defines the skills required by the EWURA head/board members. The staff of the authority are recruited through competitive processes.
EWURA rates high in decision making independence. It is the final decision maker on tariffs, licensing and in the resolution of disputes between regulated utilities and their customers. In conformity with the law, EWURA undertakes public consultation to engage with the public and relevant ministries before taking regulatory decisions.
EWURA has a medium rating for financial independence in terms of sources and adequacy of its funds. As a regulator, it approves its own budget and charges fees and levies to fund its operations. This enables EWURA to attract, maintain and retain qualified staff.
EWURA rates medium in accountability. The authority reports to the executive (Ministry of Energy and Ministry of Water). Legislation requires the regulator to answer requests or attend hearings from parliamentary committees. The regulator prepares and disseminates annual reports to the public for information purposes only. There is a formal independent mechanism for regulated utilities (or other parties), to contest the regulatory decisions of the authority. This is adjudicated according to Sections 42 and 43 of the Electricity Act of 2008.
Transparency of Decisions
EWURA has a high-level rating for transparency of decision making. In addition to having a well elaborated tariff methodology, EWURA publishes the rationale behind all its decisions and makes them accessible to the public.
EWURA is rated high in terms of predictability. It has a documented tariff methodology, which can only be changed by the regulator in consultation with regulated firms and stakeholders, however it has not been reviewed in over five years. All regulatory documents may be modified in consultation with key stakeholders. The procedures and timelines for acquiring licenses are well elaborated and published.
EWURA is rated high in terms of stakeholder participation. Stakeholder consultation is mandatory under the law. Stakeholder feedback is solicited through public hearings, ad-hoc meetings with stakeholders, and through the submission of written comments. EWURA publishes comments received during consultations as a summary of responses on its website. It considers stakeholders’ responses and overall input during the consultation process and reflects this input in arriving at its final regulatory decisions.
Open Access to Information
EWURA is rated high in terms of open access to information. It has a website www.ewura.go.tz where all regulatory instruments, licensing procedures, annual reports and all other relevant documents are published.
EWURA is rated high in the development of its economic regulation framework. It has developed a tariff methodology, adopted in 2017, that includes a schedule for major and minor tariff reviews and a formula that prescribes how end-user tariff levels are to be set. End-user tariff-setting regulations avoid passing on inefficient costs to consumers. The regulator requires regulated companies to submit financial information according to regulatory accounting standards. There are mechanisms to compensate generators for the provision of ancillary services and utilities are compensated for the costs of stranded assets. The regulator has carried out a recent study on the cost of service and the current tariff level is reported to be cost-reflective. A lifeline block, connection subsidy and capital subsidies from government are tariff mechanisms adopted to make tariffs affordable to support low-income workers, the poor and vulnerable consumers.
Technical Regulation – Quality of Service
EWURA has a high-level rating for the development of the quality-of-service framework. The regulator has developed regulations and codes including the National Transmission Grid Code 2017 and Distribution Grid Code 2017 and time-bound service requirements. Fines are imposed on utilities that fail to meet the quality-of-service standards. The regulator can compel the regulated entities to provide information in accordance with the rules. Performance assessment reports on the regulated utilities are published.
The level of regulatory development of the licensing framework is high. There are frameworks and guidelines that cover procedures for application, format for the license, and schedule of license fees for both grid-connected and off-grid systems. There is also a simplified and light-handed licensing framework and procedure for off-grid and small sized systems.
EWURA has adequate qualified and experienced staff to perform all of its regulatory functions.
Renewable Energy Development
EWURA is rated high in renewable energy development. The Energy Policy of 2015 provides for renewable energy development in Tanzania. A renewable energy assessment has been carried out to inform the commercial development of renewable energy resource. The Ministry of Energy is responsible for the formulation, development and implementation of renewable energy strategy, while the regulator is in charge of renewable energy regulation. The Electricity Act, 2008 and the Electricity (Development of Small Power Projects) Rules, 2019 are the legal, policy and regulatory frameworks that encourage the private sector to participate in grid-connected renewable energy investments. The regulator has developed technology-specific model power purchase agreements for different renewable energy technologies. EWURA has developed different tariffs for different technologies and sizes of generation plants. There are rules (grid code) that guarantee access to the grid for renewable energy and electricity generated from renewable energy sources and based on least cost, is given priority for dispatch.
Mini-Grid and Off-Grid Systems
There is a high level of development of mini-grid regulatory framework in Tanzania. An integrated plan that sets out a least cost electrification pathway and which includes mini-grid and off-grid systems and clearly demarcates areas for each system is being implemented. Regulatory policies also clarify the arrangements for transfer of asset ownership and/or ongoing operation and maintenance when the national grid encompasses a privately owned mini-grid system. Mini-grid energy can be sold into the grid under mechanisms specified under the Electricity (Development of Small Power Projects) Rules, 2020. Duty exemptions, grants and capital subsidies are fiscal incentives available to promote the development of mini grids. Technical standards and connection codes have been developed for connecting mini grids to the national grid. Mini grids of less than 1 MW are exempted from licensing but are subject to registration. The Rural Energy Agency supports access to modern energy services to rural areas including stand-alone systems in mainland Tanzania. Duty exemptions, grants and capital subsidies are available to promote the development of stand-alone systems. There are quality standards for stand-alone systems. Installers of individual/ autonomous home systems are required to be licensed and certified to ensure safety and quality of systems deployed.
Energy Efficiency Development
There is a substantial level of energy efficiency development in Tanzania. The National Energy Policy of 2015 provides for energy efficiency improvement and the scale and scope of adoption. The National Energy Efficiency Action Plan 2019 covering five years (2020 -2025) has specific energy efficiency targets set for the power sector at the national level. Loss reduction from 19% to 12% by 2025 is part of the plan. EWURA is not in charge of energy efficiency regulation, but the Ministry of Energy is responsible for the formulation, development and implementation of the energy efficiency strategy. The government mobilizes funds to finance eligible energy efficiency projects. Although, financial or fiscal incentives for energy efficiency projects and efficient equipment acquisition have not been established, minimum energy performance standards (MEPS) and labelling have been adopted for refrigerators, HVAC, lighting equipment, industrial electric motors and other domestic appliances.
Financial Performance and Competitiveness
From the perspective of the utility, there is a low level of regulatory outcomes on financial performance and competitiveness of the utility and the sector. The regulator is reported to have carried out a cost-of-service study into the operations of the utility within the last five years, but the findings of the study have not been implemented. Current loss level is 16.2% and at this level and a collection rate of more than 90% factored in the tariffs, the utility is not covering its costs. There is no transitional plan or loss target, agreed between the utility and the regulator to attain a cost-reflective tariff over a specified period. The regulatory authority has formulated a procedure for reviewing the end-user tariffs and follows the procedure but a time table has not been formulated yet. The utility has put measures in place to detect theft which include checks on customers’ meters to see if there is tampering, replacement of post-paid meters with pre-paid meters, and smart meters for large customers where power consumption is monitored online by TANESCO. The regulator has not put in place a predictable mechanism to disallow costs considered unreasonable incurred by the utility as a result of non-transparent procurement practices and which could conceivably cause unnecessary tariff increases. PPAs are approved by the regulator before signature but does not recognize price adjustment clauses in PPAs for tariff adjustments as the regulator does not always follow the schedule for tariff review.
Quality of Service Delivery
There is a low level of development of the regulatory framework on quality-of-service delivery in TANESCO. EWURA has developed the Electricity Inspection and Audit Manual (2015 and revised in 2019) for inspection of utility infrastructure. It is a regulatory requirement for the utility to collect and publish its System Average Interruption Frequency Index (SAIFI) and the System Average Interruption Duration Index (SAIDI). SAIFI and SAIDI are however not factored in the tariffs and there are no regulatory sanctions if the ceilings are exceeded, although the tariff order conditions has set terms and conditions regarding the quality-of-service delivery.
Facilitating Electricity Access
There is a substantial level of regulatory development for facilitating electricity access. Electrification is financed from the Rural Energy Fund (REF) which sources its funds from electricity and petroleum levies collected quarterly and managed by the Rural Energy Agency (REA). A regulatory ceiling has been set by regulatory instrument on the number of days within which the utility must provide an electricity connection to a customer after the customer has made payment for the service. This is in the TANESCO Customer Service Charter, available on its website http://www.tanesco.co.tz. Funds for electrification is provided by government and the utility and are considered in the tariffs for recovery.
The regulatory law should be amended, or secondary legislations developed to make provision for the following:
- Prohibition of the appointment of commissioners previously staff of a regulated company
- Parliament to approve the level of the annual regulatory fees and levies charged by the regulator.
- Regulator to report directly to parliament
Develop a network connection policy as part of the tariff methodology or as a separate document to address related issues of commercial access to the grid.
Develop and implement a loss reduction action plan in collaboration with the utility