ERB studies South Africa’s energy regulatory framework

PRETORIA, Friday, 30th May, 2014 – MEMBERS of the board of directors of the Energy Regulation Board (ERB) are in South Africa to study that country`s energy regulatory framework as part of the efforts to harmonise Zambia`s electricity and petroleum regulatory structure.

The ERB board members, led by the Chairman, Pastor Geoff Mwape, are in Pretoria on a four-day study visit during which they will hold meetings with the National Energy Regulator of South Africa (NERSA).

Pastor Mwape said on Wednesday when the team paid a courtesy call on Zambia`s High Commissioner to South Africa, Muyeba Chikonde, that the group has so far attended a public hearing for the petroleum sector and would today, (Thursday) attend a full board meeting of the NERSA as observers.

He said ERB wanted to study South Africa`s approach to issues of regulatory framework in the electricity and petroleum sectors which he said would help resolve some of the long-standing conflicts with the mines and other sectors in Zambia.

Pastor Mwape said it was already encouraging to learn that NERSA holds public hearings for the petroleum sector and various other stakeholders in the energy sector in general. He said he would like to see a situation in Zambia where ERB would be able to hold public hearings with independent power suppliers including those in the petroleum sector as well as opening up existing power supply agreements to public scrutiny.

“We are here to look at the best practices that we can identify with the aim of developing our own framework that can work better for Zambia.”

Pastor Mwape bemoaned the long-term power supply agreements which Zesco signed with the mines saying the agreed tariffs were too low and uneconomical to attract other players in the energy sector.

“In line with the agreements and the current Government policy, Zesco owns the entire power transmission infrastructure in the country and all independent power producers are required to sell their power to Zesco who in turn sells it to their consumers. The downside to this is that the tariff rates at which Zesco agreed to sell to the mines was below cost reflective levels, making the sector unattractive to other investors.”

“This has been a thorny issue to us and we are trying hard to resolve these problems. These agreements were signed some time back to give relief to the mines when copper prices were low but the situation now has changed,” Pastor Mwape explained.

He said there was tremendous potential for investment in electricity generation considering that over 40 per cent of the water bodies in the SADC region were located in Zambia. Further, he said apart from the country experiencing a power deficit, it was also geographically well positioned to serve as a hub from which electricity exports could be done to other countries in the region.

And former Zesco Managing Director, Robinson Mwansa, who is ERB board member, said the visit to South Africa was worthwhile as it would show the team how the country has been able to effect tariff changes without uproar from consumers and other stakeholders.

Mr. Mwansa, who worked for South Africa`s electricity public utility, Electricity Supply Commission (ESCOM) before he was appointed to head Zesco in 1991, said South Africa was a good case study as, apart from being a more developed economy, had some similarities with Zambia.

Meanwhile, ERB Director for Infrastructure and Operations Regulations, Mr. Yohane Mukabe, disclosed that two policies were being worked on and that once finalised would help attract and speed-up investment flows into the power sector.

Mr. Mukabe said the Feed-In Tariff Policy, which is one of the policies, will assure investors that an off-taker, such as Zesco, will buy their power and do so at a price they deem economical.

The Open Access Regime will allow investors to negotiate directly with a potential consumer unlike the current scenario which made it mandatory for power producers to only sell to Zesco. In the new arrangement, Zesco will only be used for transmission services.

Mr. Mukabe said these are government policies which will be implemented by the ERB. The two policies are expected to be in place by mid-next year.

High Commissioner Chikonde pointed out that the Mission in Pretoria was overwhelmed by inquiries on investment opportunities in the energy sector in Zambia, particularly in electricity generation, but lamented that most of this has not translated into direct investment due to lack of a predictable power purchase regulation framework.

He said it was, however, pleasing to learn that the Feed-In Policy and other regulatory frameworks were under development adding that this would translate into massive investment in the electricity generation sector considering the huge number of companies that have expressed interest to invest in Zambia.

The High Commissioner called for closer cooperation between ERB and the Mission so as to provide updated information on the energy sector for use whenever there were inquiries.

“Please keep us abreast on what is happening and provide information to us which we will make use of at the Mission or when we are invited to investment fora,” High Commissioner Chikonde said.

Other members of the team included ERB Executive Director, Ms. Langiwe Lungu; Chief Chimbuka of Chinsali; Ms. Chiluba Mumba and Mr. Bradley Mbewe.

Issued by:

Nicky Shabolyo