REPORTS

This report is the fifth edition of the Electricity Regulatory Index (ERI). It measures the level of development of electricity sector regulatory frameworks in African countries and the capacity of regulatory authorities to effectively carry out their relevant functions and duties. The report covers 43 of the 45 countries with confirmed regulatory authorities. The ERI is made up of three pillars or sub-indices: the Regulatory
Governance Index (RGI); the Regulatory Substance Index (RSI); and the Regulatory Outcome Index (ROI).  Uganda, which has occupied the top position since the inception of the ERI in 2018, maintained its prime standing in 2022 with an ERI score of 0.846. Other top performers included Egypt (0.785), Senegal (0.710), Ghana (0.709), and Kenya (0.695). The electricity regulatory frameworks in these 5 top countries are relatively well-developed and their utilities respond positively to regulatory instructions and guidelines, whilst their regulators are forward looking and capable of exerting the necessary regulatory authority over the regulated entities. This has been reflected in the outcomes.

The fundamentals of supportive regulatory frameworks, which have been established in the surveyed countries, remain strong and are improving. Thirty countries have either amended their regulatory laws and instruments or have enacted new ones; as a result, they have addressed weaknesses that were identified
through the ERI. Although higher than last year, the average ERI score remains low, at 0.496 compared to 0.456 in 2021. 

The average RGI scores have remained high since 2018, although minor declines in sub-indicators have been observed in some countries. Although the average RGI declined from 0.736 in 2021 to 0.731 in 2022, some countries recorded improvements in RGI scores and movements in performance bands. The RGI is a reflection of the spirit, letter and structure of the primary legislation that established the regulatory authorities. As products of the legislature, primary legislation has long-term effects and would require painstaking legislative processes to change or amend it. Furthermore, changes in primary legislation do not depend on the wishes of the regulator but involve the executive and legislature. Mixed movements have been recorded in RGI scores as a result of both positive and negative actions taken by the regulator or national governments. Overall, 24 countries (up from 21 in 2021) scored above 0.500 in ERI, indicating an improvement in filling the gap between the level of development of the regulatory laws and effectiveness in the implementation and enforcement of the laws on the regulated utilities. The results show that continuous improvement of RGI in some leading countries is more difficult, as it will involve time-consuming legislation change or amendment. Meanwhile, a few countries with initially poor RGI, have caught up with countries with initially high RGI. However, the disparity of RGI across countries persists. The poor performance of a few countries has collectively declined the average RGI from 0.736 in 2021 to 0.731 in 2022. The number of countries in the high and substantial level of regulatory development has increased from 36 to 37; while the number of countries in the low level of development has reduced from 4 to 2 countries; this reflects the regulatory changes undertaken. Eleven countries have either amended or passed new legislation related to RGI, and this has caused movements in country 21 Electricity Regulatory Index for Africa 2022 positions with respect to RGI. Annex 1 highlights the RGI-related measures that have been taken up by countries since 2018, linked to ERI findings and recommendations. Independence has remained the weakest sub-indicator under RGI, as governments and stakeholders continue to exert an influence on regulatory authorities and processes. A change in primary legislation remains the only viable solution in the countries affected.

Historically the overall average performance in RSI has been below the average RGI score, the RSI improved marginally from 0.575 in 2021 to 0.582 in 2022. Eighteen countries have effected regulatory changes since 2018, which have affected RSI (See Annex 1).Twenty-seven countries confirmed that they have conducted a Cost-of-Service Study (CoSS), compared to nine in 2021. The CoSS report has reputedly been implemented within the last 5 years in 17 out of 43 countries. The number of countries without Tariff Methodologies (TMs) reduced from 13 in 2021 to 9 in 2022, as more countries have either developed and published TMs or updated existing TMs. The average RSI score (0.582) is lower than the average RGI score of 0.731 and illustrates the persistent gaps that need to be addressed regarding the regulator’s ability to implement their mandates. Institutional capacity, reflects the knowledge, skills and experience of regulatory staff required for managing the sector, is an important sub-indicator to assess the technical capacity of the regulatory authorities. Improvements in RSI have been recorded over the past year, from an average of 0.575 in 2021 to 0.582 in 2022. This is because regulators have taken steps to exert their regulatory influence on the sector. Consequently, 72% of countries scored above 0.500 in RSI, indicating that regulators are gradually taking control and enforcing their regulatory laws to make the industry move in line with prudent regulatory practice.

The ROI not only reflects the regulatory actions of the regulator but is also influenced by externalities such as government intervention and global movements in fuel prices and pandemics. Indicatively, 65% of countries scored below 0.500 on the Financial Performance and Competitiveness (FPC) sub-indicator. Poor
financial health of the utility is a major driver of the ROI indicator, as it impedes the utility from delivering on its mandate and constrains the regulators from exercising their regulatory mandate. Of the 30 countries that have either enacted or modified regulations between 2018 and 2022, 16 countries passed legislation that has had an impact on ROI. These regulations are mainly distribution-related and involve tariff regulations, quality-of-service regulations, regulations on time-bound utility performance indicators in relation to connection and disconnections, and regulations on mini-grid and stand-alone systems. Improvements that
have been recorded in ROI in 2022 is attributed to actions taken by the regulators and utilities to improve the financial performance of the utilities by focusing on improvements in Tariff Methodologies and utility financial performance. Whilst the regulators have sought to improve tariff methodologies, utilities have taken steps to reduce technical and financial losses, with 40% of the countries reporting loss levels below 20%.
ROI scores above 0.500 were recorded by only 15 (35%) of the surveyed countries in 2022, highlighting deep disparities between the level of development of regulatory frameworks and utility service outcomes. The low performance in ROI continues to affect the overall score of the ERI, despite an improvement in ROI, from an average score of 0.339 in 2021 to 0.396 in 2022.