|Visions and Priorities
for the Electricity Control Board of Namibia (ECB)(as
seen by the Chairman of the Board of Directors of the ECB)
VISION OF THE ECB
THE ECB SHOULD MINIMISE THE ELECTRICITY COSTS IN NAMIBIA THROUGH A COMPETITIVE ELECTRICITY MARKET THROUGH PROFESSIONAL, TRANSPARENT AND EFFICIENT REGULATION AND SHOULD PROMOTE ALTERNATIVE AND RENEWABLE ENERGIES
MISSION STATEMENT OF THE ECB
TO CONTROL AND REGULATE AN EFFICIENT NAMIBIAN ELECTRICITY SUPPLY INDUSTRY (E.S.I.) IN A TRANSPARENT AND FAIR MANNER FOR THE BENEFIT OF ALL STAKEHOLDERS
CORE VALUES OF THE ECB
- TRANSPARENCY: To be open in all our dealings with stakeholders
- INTEGRITY: To be impartial in our judgement and treat all stakeholders equally
- PROFESSIONALISM: To maintain the highest standards of technical competency and personal integrity
- EFFICIENCY: To ensure at all times that our regulatory functions add value to the E.S.I.
- SUSTAINABILITY: To ensure that the endowment of energy resources are available to present and future generations and to protect our environment.
MOVING TO A COMPETITIVE ELECTRICITY
MARKET IN NAMIBIA: PRIORITIES
PLAN OF ACTION
- Strategic Planning Exercise:
Integrated Resource Planning: Level the Playing Field:
|- How to proceed from here?
- Generation Oligopoly
|But protect ...
- Electrification Programme
- Cross-subsidisation for the Poor (but more transparent)
- Internally competitive Electricity Prices
- Management, technical and R & D Competencies in ESI
- Security of Supply
- Potential for Demand-Side Management and Energy Efficiency Investments
- National regulatory Oversight and Control
- Globally competitive Business for the African Renaissance.
|Ministry of Mines and Energy: May
1998 White Paper on Energy Policy:
- Give Customers the Right to choose their Electricity Supplier
- Introduce Competition to the Industry, especially the Generation Sector
- Permit open, non-discriminatory Access to the Transmission System
- Encourage Private Sector Participation in the Industry
- Non-conventional Energies on equal footing with Conventional Energies
- NAMPOWER will -maybe- have to be restructured into separate Generation and
- GRN intends to separate Power Stations into a Number of Companies
- GRN will initiate a comprehensive Study on future Market Structures for the Namibian
Electricity Supply Industry.
- NAMPOWER Holding Company will control different Companies from
- Different Generating Companies
- Market will control Supply and Demand by a Power Exchange (Optimal Spot Price will
be achieved through half-hourly Tender Prices due to Demand and Supply)
- ECB will regulate Prices of Transmission Company and REDn to Customersn.
- At the End this System should lead to full Wholesale and Retail Competition.
What NOT to do: DO NOT PRIVATISE OR SELL A STRATEGIC EQUITY STAKE
BEFORE INTRODUCING FULL COMPETITION:
- Allow Entrenched Monopoly
- Poor Incentives for Efficiency in either Investments or Operations
- Higher Prices
- Difficult to regulate
- Bad for Consumers
- Bad for the Economy
- Globally uncompetitive Business
- Bad for the African Renaissance.
- Achieve common Vision between MME, MOF, NAMPOWER and ECB
- Remove -maybe- Transmission from NAMPOWER into a separate publicly owned
- System Operation remains for the Time being with Transmission
- Establish Namibian Power Exchange
- Build on experience elsewhere
- Wholesale Generation Bidding: also Demand Side Bids (including Non-conventional
- Put Design and Establishment for Power Exchange out to Tender
- Parallel financial derivative Private Market
- Establish -maybe- NAMPOWER Holding Company
- Monitor and adjust to create competitive Electricity Market
- Reform constantly regulatory System
- REDs established as soon as possible, Retail Competition later.
The current tariff structure which has to be analysed and optimised by the Comprehensive Tariff Structure (completed: October 2001) and approved by the ECB is pictured in two annexes (Annex 1: NamPower and Mines as well as the Ministry of Regional and Local Government and Housing and Annex 2: Local Authorities in Namibia) at the end of this page.
The new envisaged Namibian Tariff Structure should be led by the following principles:
The Website of the Electricity Control Board (ECB) is: www.ecb.org.na
Electricity Control Board: Points of Priority for the Year 2001Dr. Klaus Dierks
Chairman: Electricity Control Board of Namibia
1. OFF-GRID ELECTRICITY SUPPLY REGULATION
Off-grid electricity supply is not catered for in the Electricity Act, 2000, nor do the proposed licenses take "off-grid-electricity supply" into account. Off-grid electricity supply is primarily a distribution function, and NOT a generation function although small-scale generation is involved (much less than the 500 KVA envisaged by the Electricity Act, 2000). In future, as a result of the "rural Electricity Distribution Master Plan for Namibia", there will be extensive areas that will be served with solar home systems (SHS), or other off-grid technologies. While customer- owned systems do not require regulation (there are around 300 SHS as a result of the Ministry of Mines and Energy's (MME's) "Revolving Fund for SHS" in off-grid areas, plus all those commercial farmers that have their own electricity supply systems), it is envisaged that future large-scale- off-grid electrification will involve a "fee-for-service model", with a responsible co-ordinated "off-grid electricity supply authority" and customers who are charged for the service on a regular basis (similar to the "grid-electricity-model". MME has recently issued a tender for the provision of 450 fee-for-service SHS over a three year period. Such a supply authority must be licensed by the ECB, but it must still be analysed whether such a license should be granted on a geographical or service basis, or as part of a grid distribution license.
A geographical license defines a geographical area for which the license is responsible. Such a license will be overlapping with one or more grid distribution license areas, and as such there can be the possibility of an area of conflict and un-co-ordination between the grid authority and the off-grid authority. There may also be confusion among prospective customers of which authority to approach for electricity supply.
An off-grid service license is not geographically defined, and grants the licensee the right to supply off-grid services in the whole (or parts) of the country. This could mean there could be one off-grid electricity supply authority for Namibia.
Another possibility which has to be analysed is to include off-grid electricity supply services in the distribution license of a distributor whose area includes rural areas, and leave it up to the licensee how to supply prospective customers. Such license must include a very strong obligation to supply so that rural customers are not disadvantaged.
In order to heed the call of the "Energy White Paper" for balancing the two Namibia i.e. to balance grid and off-grid areas, consideration should be given to the obligation to provide cooking and heating services (e.g. with LPGas) as part of the off-grid license.
Furthermore the ECB has to investigate in how a "off-grid- contribution" can be built into the future tariff system for grid customers, including a "green cent" for renewable energies.
2. ENERGY STATISTICS FOR NAMIBIA
No comprehensive and a co-ordinated data base of Namibian energy statistics exists for Namibia as yet. The data are currently fragmented but possibly all available but not from a central institution like the MME or the ECB. Petroleum products energy information is readily available from the MME (although there appears to be some confusion around conversion factors) while electric energy information is readily available only from NamPower. Particular lacking data are detailed biomass energy information and detailed solar/wind energy information, as well as municipal electric energy information per customer category. Also all energy types should be brought onto a common denominator (e.g. a unit like Tonnes of Oil Equivalent), for comparative purposes. Namibian energy statistics would be useful for MME and the ECB as well as investors. The possibility of developing a GIS-based Energy Atlas for Namibia should be strongly considered and pursued by the ECB. Energy statistics should be updated regularly, e.g. every year.
3. BENCHMARKING LICENSEE PERFORMANCE
The ECB should develop a clear benchmarking system according to which distribution licensee's performance as supply authority will be measured. Similar benchmarks could also be developed for generation and transmission, import and export.
4. TECHNICAL STANDARDS
Some years ago Northern Electricity (NE) has commissioned the preparation of technical standards for the networks under their control. These standards are issued to all consultants, contractors and developers that work on NE's networks, thereby ensuring uniformity of networks, operation and maintenance expertise of personnel (who are well trained to work within the parameters of the technical standards and do not encounter different technologies and apply different specifications every time) as well as rational stockholding of spares. NamPower has already expressed an interest to adopt these same standards, and augmented them with their own medium and high voltage technical standards.
The ECB should take the lead to co-ordinate all these commendable efforts and consider the adoption of a national technical electricity standard, based on NE's standard for low voltage (LV) networks and NamPower's standards for medium voltage (MV) and high voltage (HV) networks. This would prevent inferior products entering the Namibian market and compromising the safety and reliability of our networks, and it would provide local consultants, contractors and developers a uniform base to work from. Furthermore, this will enhance the ECB's regulation role as it does not have to evaluate the technical suitability of license applications.
5. SEPARATION OF DISTRIBUTION AND RETAIL
It appears to be an international trend to separate the distribution and retail functions of electricity supply, i.e. separating the "wires" (network operation and maintenance) from the "business" (selling electricity, metering and billing, interaction with customers). The Electricity Act, 2000 (and the proposed license system) does not make full provision for this yet.
The ECB should analyse such trends and, if applicable, should apply them to the Namibian Electricity Supply Industry.
Any comments, proposals and suggestions should be sent to the Chairman of the ECB:
REPORT OF THE CHAIRMAN
It is with a great sense of pride and accomplishment that I write this foreword to the first Annual Report of the Electricity Control Board. We are at a historic milestone in the development of the Namibian Electricity Supply Industry as we mark the first anniversary of the coming into operation of the Electricity Act (Act 2 of 2000). One of the key requirements of the Act is for electricity undertakings to be licensed by the Electricity Control Board. I must admit that it was not an easy task for all parties involved, specifically the Electricity Control Board, the Ministry of Mines & Energy, local authorities, NamPower, and private sector participants in the ESI to put the Act into operation and to meet its exact requirements. This is because we have embarked on a totally new regulatory regime in Namibia that few of us have ever experienced directly.
The primary objective of the new regulatory regime as enacted in the Electricity Act is to move from the vertically integrated industry model with monopolies at all segments of the ESI value chain to an industry model that fosters competition in generation, distribution and supply of electricity. The transmission system is recognised as a natural monopoly and therefore subject to greater regulatory scrutiny, especially regarding a transparent, competitive and minimised tariff regime. Central to competition is the encouragement of private sector participation in what was hitherto a state-sector dominated industry. The Electricity Control Board believes that private capital, technology and management shall be crucial to the future growth and development of the Namibian ESI as postulated in the 1998 Energy Policy White Paper.
The complexity of the Namibian electricity sector in terms of its legal, technical and economic foundations was never fully appreciated in the past and only became apparent when stakeholders, including the ECB, had to scramble to meet and comply with the requirements of the Act. For all involved it was truly a unique and richly rewarding learning experience that puts all of us on a better and firmer footing to move forward towards the type of industry that shall be a model for the rest of the African continent. It is an industry that shall also be at the leading edge of the countrys socio-economic development, providing not only the physical electric power but also spin-offs such as a technically competent workforce, the application of advanced technology and new business models, including private-public partnerships. In this regard positive developments are the emergence of private companies such as Northern Electricity and SELCO, while NamPowers subsidiary Premier Electric is fast becoming a household name in the distribution and technical services businesses.
Today we are seeing the fruition of the goals and objectives of Namibian energy policy as spelt out in the Energy Policy White Paper. The electricity supply industry is at the threshold of a new dispensation that shall entail greater competition in generation and supply, wider customer choice, transparency, a favourable investment climate and strong environmental awareness as top priority. We can be assured that the old monopoly system in the ESI is definitely dead and buried. This was the vision articulated in the Energy White Paper and this vision is being put into effect by all ESI stakeholders. For that the Electricity Control Board can justifiably be proud as the initiator of many of these important initiatives. One of the core activities of the ECB is to analyse and regulate the tariffs in the ESI in order to minimise costs and to have a fair, equitable and transparent tariff structure in place. This is a direct regulatory function of the ECB which naturally will influence the business activities of the ESI.
The Electricity Control Board would be the first to acknowledge that the path we have embarked upon shall not be an easy one. We as an industry will face numerous challenges and maybe even reverses as we go through, what can metaphorically be described as, uncharted waters. New cost reflective tariff systems, ring-fencing of activities, the creation of regional electricity distribution companies, new entrants into the market these are some of the statutory and policy requirements we must all comply with. And for many of the smaller ESI participants it shall not be easy in terms of resources and capacity. That is the reason public-private partnership is so important in the Namibian ESI. If we are to meet the electrification targets set in the National Development Plan-II. Phase as well as expand generating capacity and improve efficiency we must be realistic and recognise the fact the state sector cannot do it on its own. Private capital, expertise and technology must be brought in to form a smart partnership with the state sector in a win-win scenario for the Namibian ESI. In that manner the electricity industry can truly be the engine of growth that powers the Namibian economy.
Dr. Klaus Dierks
Chairman of the Electricity Control Board
|NAMPOWER MAGAZINE: Watts On:
Electricity regulation gets off the ground
NamPower promises tough competition
One of the roles of the newly established Electricity Control Board (ECB) would be to assist the poor by pushing for more development in rural areas as well as off-grid electrical supply through various means including the strong promotion of renewable energy.
ECB Chairman, Dr. Klaus Dierks told Watts On in an interview that the energy regulating body would also ensure that quality and security in the energy sector is guaranteed.
The ECB will regulate the recently deregulated energy sector to allow for more competition. Government, in accordance with the Electricity Act No.2 has created the ECB as a parastatal to regulate the energy sector.
"It is a world-wide trend to deregulate and liberalise to allow for more competition which in turn would allow for efficiency in the sector," Dr. Dierks said. The objective is to decrease electricity prices at the end and to allow for more efficiency in the energy sector. This will be done by means of regulation by the ECB because ECB will determine and approve electricity tariffs in the future.
"The energy sector is a complex, technically and economically involved sector. We want to create a mechanism to improve the energy sector and we should therefore be a highly competent, neutral and highly transparent co-ordinator," he said.
Board members of the ECB were appointed on 15 March 2000 while the ECB started to operate legally on 13 July 2000.
Dr. Dierks said entry into the sector would go through a thorough scrutiny and the ECB would operate on business principles. He said the Board will work according to an energy wisdom formula, which is E x E x B, meaning Energy provision x Ethics x Business. Ethics includes social upliftment of society and a consideration for environmental arguments, said Dr. Dierks.
As regulator, the ECB is responsible for recommending to the Minister of Mines and Energy - which companies or entities involved in power generation, transmission, distribution, supply, export and import - should be granted licences.
"The application system is complicated because of the technical, financial, physical, manpower and economic data involved. We will scrutinise and recommend to the Minister. All existing companies have 12 months grace period to apply for new licences," the Chairman said.
The ECB will scrutinise all the existing and very complex tariffs of electricity. Cross-subsidisation of any kind will not be allowed in the future. Its Board meeting will be open to the public and all licences will be made public.
Asked what the establishment of the ECB would hold for NamPower, Dr. Dierks said that, as a company, NamPower might be discomforted because it has been a monopoly in the country. However, Dr. Dierks said: "We know that NamPower is a world class energy provider which will stand competition." On its part NamPower welcomed the deregulation and the establishment of the ECB.
"Deregulation is a world-wide trend and no country in the region, especially Namibia, can escape it. The opening up to competition will allow for new entries and with competition the customers are well served and protected with regulated prices," said Dr. Leake Hangala, Managing Director of NamPower.
Dr. Hangala also said that competition would create investment opportunities in Namibia and open business opportunities for Namibians.
"NamPower had a de facto monopoly and I think we have used that status with a sense of responsibility. We have served our customers well. We have created mass infrastructure and have been efficient enough but there was no yardstick to compare us with. We welcome competition and we are ready. We will reorganise and prepare ourselves to better serve our customers. We commit ourselves to delivery of better service."
"We also hope that we will be treated equally and fair. We hope we will not be disadvantaged by virtue of ownership, size and capacity," he said.
Dr. Dierks is of the opinion that NamPower will, to some, still maintain monopoly, though regulated, in power transmission. However, transmission would be obliged to take power of companies involved in renewable energy.
This means that NamPower will be responsible for transmitting energy including renewable energy even if produced by an independent power producer.
"The company that is transmitting should see to it that the system is stabilised so that, at the end, quality power is received," Dr. Dierks said.
In general, Dr. Dierks is of the opinion that NamPower would comply with requirements of licensing. "There are many things that we will look at and social upliftment of society is one of these. As far as I know NamPower is already involved in Rural Electrification and is giving unprofitable services to disadvantaged communities. But I think we should leave this to the process. There are many things to be considered in granting the licenses," Dr. Dierks observed.
OF THE RUACANA POWER STATION: OCTOBER 2002
After a five year construction period (since May 1973) the Ruacana Hydro Power Station is commissioned. The power station is situated at the Ruacana Waterfalls in the Kunene River. After a southbound run from Angola, the river makes a right turn to flow directly in the Atlantic Ocean, creating a natural setting for the underground Ruacana hydroelectric scheme. From here, Namibia draws most of its electric power. To accommodate the three 80 Megawatt turbine generators, as well as the transformers, the switchgear, and the entry and discharge tunnels, more than 400 thousand cubic metres of rock had to be removed from the underground caverns. Water from the Kunene River is regulated by a series of dams in Angola, most importantly the Gove Dam on the Angolan highlands approximately 1 000 km northeast of Ruacana, and a diversion weir at Calueque, to channel part of the flow to a surge head bay on top of the mountain. The water drops almost 134 m down vertical shafts into the heart of the mountain, where it drives the three Francis Turbines before rejoining the Kunene River from a tailrace tunnel near the Hippo Pool. When in full operation, the turbines can generate about 240 Megawatts, which is fed into the Namibian power grid at 330 000 Volts. The underground power station consists of three parallel caverns, draft tubes, interconnecting galleries and ducts.
The Ruacana Falls in the Kunene River during the Dry Season in
the Omusati Region, October 2002: With the Calueque Control Weir (in Angola) to Regulate
the Inflow into the Ruacana Power Station in the Background
View from the Top of the Ruacana Power Station (Surge Headbay)
to the West: In the Direction of the Kaokoveld and the Lower Kunene River
Ruacana Power Station: Overview: Situated 130 m Deep inside the
Hill South of the Palmwash Ravine: Southwest of the Ruacana Falls: The Power House
Consists of Three Long Parallel Running Caverns: Turbines/Generator Tunnel; Transformator
Tunnel and Tailrace Tunnel
Ruacana Power Station: Turbines/Generator Tunnel: Three Francis
Turbines: 80 MW Each: Provision is Made for a Fourth One
Ruacana Power Station: Turbine/Generator No. 1: Is Currently
Under Maintenance: October 2002
Aerial View of the Landscape Southeast of Ruacana Town: October
2002: Omusati Region
|Annex 1: Tariffs: NamPower and Big Players|