Regulation of the Gambian Electricity Sector

M.L Sompo Ceesay.Snr. Engr. (Electricity)

Presentation PURA StructureDaily business

Electricity Market Structure Tariff Setting& Structure Recommendations

PURA Structure

Source of FundingBudgetLicences

PURA Multi-sector Regulator

Est.PURA Act 2001 Electricity/Water/Telcoms

Transport, Broadcasting, Postal Services

Board of Commissioners Director General & 30

Staff Quality of Service Tariff Regulation

Electricity efficiency Apply & Set Performance

Standards

OrganogramBoard of Commissioners ( ex officio, non-executive, executive, secretary )

DG

HR & Admin

Admin/ HRSupport Services

Economic Reg.

Tariffs and Market Reg. Fin. Analysis

Ex.Com.Technical

Telecoms Energy & Water

Spectrum Managment

DG's OfficeLegal / PR

Consumer Affairs

ComplaintsConsumer outreach

Funding of the Authority According PURA Act The funds of the Authority shall include –

funds appropriated to it by the National Assembly; loans granted to the Authority;monies accruing by way of licence fees and charges and other fees and charges; and any grants and gifts made to the Authority, provided that the terms and conditions attached to a

grant or gift are not inconsistent with the functions of the Authority.

Source of Funding

0

5

10

15

20

25

30

35

40

45

50

2005 2006 2007 2008 2009 2010

Inco

me

Mill

ions

Years

Other Income

Investment Income

Interest on Loan Repayment

Interest Earned

Application Fees

Regulatory fees

Government (Subvention)

Distribution of Income Source 2005 -2006

Budgeting

Budget Process Staff develop workplans Management makes a

proposal to the Board Board approves the

budget. Regulatory fees are

charged based on this figure to all operators

Budget implementation Projects and programmes

approved by the DG Budget surplus are rolled

over

However Arrears in regulatory

fees Mostly from State

companies Privet licensed

operators usually pay

General:Licensing Framework

Application for a Licence PURA Act ( Section 22) An application for a licence

shall be made to the Authority; in a form approved for the

purpose by the Authority; and accompanied by such fee

and documents as the Authority may determine.

Approval of Licences The appropriate person shall, on the

advice of the Authority, issue a licence on an application made under Section 22, if the Authority is satisfied that –

having regard to the purposes of this Act, it is in the interest of the public to do so;

the applicant has adequate facilities (including financial facilities) and experience to provide the regulated public service in a satisfactory manner.

the applicant has complied with the conditions of a

previous licence issued to it under this Act or any other legislation, to provide a regulated public service and it appears to the Authority that the applicant would also comply with the conditions of a new licence if one were to be issued to the applicant; and

Specifics: Electricity Act

Conditions for issuance of licencesSection 7. (1) The Authority shall advice the Secretary of

State to issue a licence only to a person who (a) has established competence to operate within the electricity sub-sector; (b) is able to satisfy the service obligations under this Act and the conditions to be included in the licence; and (c) has satisfied the other requirements of the Regulatory

Authority Act (PURA Act).

Regulatory Instruments

Licensing ICT Act 2009 Electricity Act 2005

Generation Transmission Distribution Dispatch

EIA, GIEPA, Feas.Study,FinancialResources etc

Application Form Standards

Enforcement Enforcement

Regulations 2009 Electricity (Interim

Licences Regulations) 2006

Electricity Tariff Filing Guidelines

HSE GuidelinesMin. Quality (AFUR) of

Services Guidelines

Energy Efficiency

Energy Efficiency Awareness CampaignOn Newspapers & Radio ProgrammesPresentations and Demonstrations

2008 CFL Pilot Project Installed 2000 bulbs in Kanifing South

Switched for free /incandescent bulbs Reduce domestic consumption Saving for consumers Improvement in voltage levels

Community Wind Project

MoU: Dept. of Water Resources Monitoring of domestic

Water quality WHO drinking water quality

Very quarter national water sampling

Outsource Lab. Analysis Annual Disbursement to

Abuko Lab D150,000/ (US $5,000) yr

Lab equipment, reagents,

D35,000 ($1,200) quarterly Monitoring and sample

collection

Consultation

Internal Professional Staff Meetings

Discuss urgent issues

Directorate Meetings

Management Meeting

Board Meeting Quarterly

External Consumer Parliament Public Hearings

Each time there is a Tariff increase Feb 2011

Bantaba’sPublications

Mainly Newspapers

The Market Structure

Type of Market StructurePre-2005 2006 – 2011 ????

Own Generation

Consumers

IPP

T & D

Generation

& Transmission

& Distribution

Consumers

T

IPP

Consumers

IPP IPP IPP

Consumers

WholesaleMarket

D D

MonopolyModel

Single BuyerModel

Wholesale CompetitionModel

IPP

157million kWhD700 million revenue

225 million kWhD1.3bn revenue

Long Term Analysis

0

50

100

150

200

250

1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

Annu

al P

rodu

ctio

n/ G

Wh

Years

Historic Production of Electricity

GWh

18MW KPS

25MW BK.IPP

6.4MW KPS

3.4MW KPS

Consumption by Customer Class

78 GWh was consumed through Prepayment

113 GWh was consumed through Credit metering

37%

6%

46%

0%4% 7%

2010 Electricity Consumption(113 GWh Credit only)

Domestic

Commercial

Major Consumers

Agriculture

Local Govt.

Central Govt.

Contribution of losses

0%

20%

40%

60%

80%

100%

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Perc

enta

ge S

hare

Years

Energy Consumption by Sector including Losses

Residential Commercial /Institutional Other Losses

National Electrification

Network more developed along the coast Rural Urban Migration

Further increasing pressure on inadequate services!!

National Electrification

GBOS/NAWEC

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Greater Banjul Area

Western Region Upper River Region

Lower River Region

Central Region North River Region

Rat

e of

Ele

ctrif

icat

ion

Regions in The Gambia

Electrification Rates by Region 2008-2010

Electrification Rate 08

Electrification Rate 10

IPP Experience Global Energy Group25MW

65% of Gen.Almost 20hrs

electricityBenchmarking

More eff. than KotuReview of Contract

Can be improved

Unsolicited offers Investors set terms for

government Thames Energy (6yrs negotiation), FRAMA S.A, NOVONO Ltd. Etc Malaysian Group

Effectiveness Pressure to bypass statutory

institutions like PURA

A lot of Agreements but no nothing on the ground No concrete action

Tariff Setting

Electricity Act: Section Section 18. The Authority may,

determine, review, approve, modify or refuse the tariffs .

Section 22. A tariff shall, if approved by the Authority Come in effect 90 days after submission

Section 19.The Authority shall, in determining tariffs for electricity power services under section 18,, take into account the need to – protect consumers against monopolistic prices; provide licensees with an opportunity to recover-

the efficient costs of providing services, including prudently incurred capacity, transmission, fuel, operating, and maintenance costs, the principal and interest on money borrowed for prudent investments and working capital, and a just and reasonable profit on invested equity, sufficient to attract financing for capital improvements and new construction;

reflect cost and other appropriate differences between classes of customers and type of service, subject to applicable direct subsidies; and

provide for costs to be recovered from each customer class in proportion to the costs of serving that class.

Procedures Manual

PURA Tariff Guidelines for applications Data requirements etc

Annual filings:

Pass throughs Reviews of fuel costs, and PURA decisions about whether deviations of

actual fuel costs relative to expected values require an adjustment to prevailing tariffs,

shall be conducted twice a year Evidence of variation during last 6 months

True – ups reconciliation process focused on analyzing the extent to which actual

costs incurred by NAWEC deviated from forecasts embodied within the associated revenue requirement computations

Conducted annually submit actual and previously estimated values for all data elements

Annual ApplicationACTIVITY DATE

NAWEC submission of tariff proposal, with supportingdocumentation, to PURA October 1

Presentations to PURA, with stakeholder representatives,including designated consumer groups, allowed to observe October 8

Stakeholder requests for information and clarification fromNAWEC submitted to PURA for review October 22

PURA delivers to NAWEC questions and identification ofadditional information required October 29

NAWEC submits responses to PURA November 12

Public hearings where stakeholders appear before thePURA, with NAWEC personnel present, and NAWECmakes final presentations to PURA

November 19, 20

Decision of PURA December 10Publication of the tariff by the utility December 17Tariff takes effect January 1

Pass ThroughsACTIVITY DATE

Conducted Twice in the Year

NAWEC submission to PURA of data, withsupporting documentation, on differencesbetween fuel cost expectations incorporatedwithin revenue requirement and actual costsincurred throughout the second half of theprevious calendar year, and alsorecommendation on appropriate adjustment, ifany to current revenue requirement

February 1 / august 1

Presentations to PURA February 8 / august 8

Decision of PURA on appropriate tariffadjustment, if any, to take effect on March 1 February 15 / august 15

The Basic Methodology

Cost of Service vs. RPI-X

We use Cost of ServiceThe central construct within the traditional

cost of service (COS) framework for utility pricing is the annual revenue requirement. This provides the basis for the tariff development.

Rate Base Accounting Principles

Plant & Equipment

Shareholder equity

Long term debt

Work in Progress

Accumulated Depreciation

Rate Base Re-arranging:

D + E = PE - AD + WIP + CA -CL - CC

Rate Base = NET Asset Value + Construction Work in Progress + Work in Capital – Customer Contribution

RR = RB x AR + Exp.

Average Price per unit of Service

Tariff = Revenue Requirement DExpected Sales kWh or m3)

(a kWh of electricity or a cubic meter of water or sewage)

PURA Tariff ModelData Input 2010 (2011)

Electricity RR & Avg Price

Water RR & Avg Price

Data Input

Sewerage RR and Avg Price

Intermediate Computations

Revenue Requirement and Average Prices

Retail Tariff Proposed Retail Tariff

Incentive(s)

True-ups

Incentives in-built in the Model

What are we paying for in each kWh?

Generation Costs. Including from the IPP

Dal

asi/k

Wh

6

7

Transmission &Distribution Costs

(about 8%)Subsidies for theProvincial operations

Network Losses

Domestic Industrial

Policy Interventions

Tariff Constraints Lack of Audited AccountsLack of Fixed Assets Register

Transfer of Assets from GG to NAWEC Should customers pay for free Assets?

Lack of Subsidiary loan agreements with GG

Lack of Regulatory AccountsWater/Electricity etc

Lack of Loss Control StrategyAnnual targets

Regional Benchmarking

0

5

10

15

20

25

30

35

NAW

EC

Sene

gal

Gha

na

S.Af

rica

US

$ c/

kW

h

ECOWAS + S.Africa

Regional Electricity Prices 2011

Domestic

Industrial

Tariff Related Issues

Network Expansion Current Policy

NAWEC benefits from people financing their expansion

Counter productive No incentive for People to

invest Leads to disputes

148 complaints

Meters Cost of Meters too high

More transparency Should meter be paid

upfront?

Meters should be capitalised in included in Rate Base Like all long term assets Customers get it for Free

Understanding Energy Balance

Industrial

Cashpower

Residential

Commercial

Government & AgricultureUn-metered Energy

57,200 MWh (26.5%)

77% of KPS output

Brikama Power Station (GEG)

142,500 MWh

Kotu Power Station NAWEC

74,000 MWh

Commercial Losses

27.04%

4.86%

5%-10%

6.75%

37.98%

26.34%

Transfer Energy 7,500 MWh

216,500 MWh Injected 150,000 MWh Billed

Acceptable Technical(10-12%)

Non Technical Losses (14%) Commercial(5%)

Recommendations

Recommendation

Introduce Policies to promote competition Divestiture of State interestMore room for private participation

Unbundling of NAWEC Diversify fuel sourcesPromote Renewables

Interconnect with Senegalese system