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Key proposed amendments: THE ELECTRICITY DEVELOPMENT OF SMALL POWER PROJECTS RULES, 2012

Key proposed amendments: THE ELECTRICITY DEVELOPMENT OF SMALL POWER PROJECTS RULES, 2012. Edwin Kidifu and Chris Greacen 18 June 2012. Overview of this Presentation. Context New definitions Key proposed amendments When ‘big grid’ connects to the ‘little grid’ (Part VII)

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Key proposed amendments: THE ELECTRICITY DEVELOPMENT OF SMALL POWER PROJECTS RULES, 2012

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  1. Key proposed amendments: THE ELECTRICITY DEVELOPMENT OF SMALL POWER PROJECTS RULES, 2012 Edwin Kidifu and Chris Greacen 18 June 2012

  2. Overview of this Presentation • Context • New definitions • Key proposed amendments • When ‘big grid’ connects to the ‘little grid’ (Part VII) • Small Power Distributors (Part VII) • Tariffs for retail sales (Part VII) • Tariffs for backup power (Part VIII) • Very Small Power Producers (VSPPs) (Part IX) • Provisional license (Part VI) • Transfer of license, changing name or shareholding structure, renewal of license (Part VI) • SPP Working Group (Part VIII) • Reporting and Compliance (Part XII) • Next steps

  3. Context • SPP Rules approved by EWURA in 2011 • Current SPP status (TANESCO data as of June 2012): • 2 SPPs online totaling 10.5 MW (TANWAT & TPC) • 3 more SPPs with PPAs, totaling 10.5 MW • 9 more SPPs with signed LOI totaling 43 MW • + additional SPPs not selling to TANESCO • Stakeholders Workshop November 2011 (ProTea Courtyard, Dar Es Salaam) • Stakeholders discussed issues & concerns relating to all aspects of the current rules. • These proposed amendments to SPP rules

  4. New definitions: hybrid • “hybrid” means a system of two or more energy sources used together to provide increased system efficiency and lower costs. A hybrid generator shall be eligible to sell electricity at the SPP tariffs if the electric energy derived from the SPP facility is produced using no more than 25% from fossil fuel or some other non-renewable source on an annual average basis;

  5. New definitions: small power distributor • “Small Power Distributor” (“SPD”) means an entity that purchases electricity at wholesale prices from a DNO or some other bulk supplier and resells it at retail prices to end use customers.

  6. New definitions: Very Small Power Producer (VSPP) • “Very Small Power Producer” (“VSPP”) means an electricity generator with an installed capacity of 100 kW or less that either sells power at wholesale to a DNO or at retail directly to end use customers.

  7. Other new definitions • Provisional license • Regional grid • Reseller • Retailer • Retail tariff • SPP developer • SPP guidelines • SPP tariff • SPP tariff methodology • SPP unit • Bulk supply tariff • Commercially sustainable • Debt Service Coverage Ratio • Distribution margin • Eligible customer • Grid-connected SPP • Interconnection certificate • Isolated Mini-Grid • Load factor • Main Grid • National Uniform Tariff

  8. Proposed Amendments to SPP Rules

  9. When ‘big grid’ connects to the ‘little grid’ (1)in Part VII: SMALL POWER DISTRIBUTORS AND CONNECTION TO THE MAIN GRID OF AN SPP THAT WAS PREVIOUSLY CONNECTED TO AN ISOLATED MINI-GRID • Options available to SPP when the ‘big grid’ arrives [Rule 40] • When the main grid arrives, the SPP may apply to operate as: • An SPP selling to a DNO that is connected to the main grid (with new main-grid PPA); • an SPD that purchases electricity in bulk from a DNO for resale to retail customers; or • a combination of an SPP and an SPD.

  10. When 'big grid' connects to the 'little grid‘ (2) • Mini-grid SPP transitions to sell to main-grid [Rule 40 (2)] • Mini-Grid requests the EWURA to operate as a SPP selling bulk electricity to the Main Grid. • Mini-Grid SPPA terminates and the parties shall conclude a new Main-Grid SPPA . • Tariff is now the tariff governing wholesale SPP electricity sales to TANESCO’s main-grid.

  11. Small power distributor (SPD) in Part VII: SMALL POWER DISTRIBUTORS AND CONNECTION TO THE MAIN GRID OF AN SPP THAT WAS PREVIOUSLY CONNECTED TO AN ISOLATED MINI-GRID • Process of becoming an SPD [Rule 41] • (1) Entity wishing to operate as SPD submits letter to DNO requesting: • Power availability • specify a wholesale tariff for the purchase of electricity by the SPD from the DNO. • (2) If DNO fails to answer in 30 days, then entity wishing to operate as SPD may propose its own retail and bulk supply tariff to EWURA. • (3) Tariffs need not be the same as National Uniform Tariff. • Bulk supply tariffs [Rule 42 (1)] • A bulk supplier of electricity to an SPD shall charge a tariff as shall be approved by EWURA, which shall be computed based on tariffs that similarly situated customers are charged.

  12. Retail Tariffs (1)in Part VIII: TARIFFS • Retail tariffs charged by SPP/SPD must be commercially viable [Rule 44 (a)] • covering operating costs and depreciation • … But not excessive [Rule 44 (b)] • reasonable return on equity allowed • Tariffs may take into account ability to pay of customers [Rule 44 (c)] • For example, charging small residential customers below-market rates and higher tariffs to commercial customers

  13. Retail Tariffs (2) • Sales to eligible customers [Rule 45] • (involving a contract of 3 years or more with a business or commercial customer) do not require approval by Authority. • Retail tariff structure proposed by SPP is not limited to ‘standard’ kWh tariff types [Rule 46] • Flat tariffs, power-tariffs, etc. are allowed. But to be accepted by the Authority, any tariff must reflect prudently incurred costs and reasonable efficiency.

  14. Retail Tariffs (3) • Project evaluation spreadsheet [Rule 47] • an SPP developer may submit proposed tariffs calculated based on a project evaluation spreadsheet developed initially by REA. • Community notification [Rule 48] • Community notification is required about proposed tariff levels – public meetings, TV, radio, or public notices http://tinyurl.com/rea-spp

  15. Tariffs for Backup Powerin Part VIII: TARIFFS • Backup power tariff [Rule 49] • If the three most recent consecutive billing period show a load factor of 15% or less, then the SPP shall be charged a maximum demand charge equal to 50% of the demand charge per kVA that other customers with standby power tariffs are charged. Load factor Demand charge

  16. Very Small Power Producers (VSPP) (1)In Part XI: VERY SMALL POWER PRODUCERS • Exempt from SPP rules [Rule 53] • VSPPs are exempt from SPP rules, but may choose to opt-in to avoid risk of competing claims on resources (e.g. hydro); • wholesale to DNO [Rule 55] • LOI needed if VSPP intends to sell electricity at wholesale to a DNO

  17. Very Small Power Producers (VSPP) (2) • VSPP Not obligated to apply to EWURA for retail tariff approval [Rule 56] • but the EWURA may review the VSPP’s retail tariff upon receipt of a complaint from any VSPP retail customer. • Wholesale tariff [Rule 57] • VSPP wholesale tariff selling to the DNO is same as SPP wholesale tariff.

  18. Provisional license In Part VI: LICENSING REQUIREMENTS • Background: provisional licence is optional. Covers preparatory activities such as conducting assessments, studies, financial arrangements, land acquisition, construction, and other activities necessary for applying for a licence. • Required in application for provisional licence [Rule 28 (2)]: • a concept proposal or a business plan; • prescribed fee; • proof of financial capability a proposed financing plan; • a proposed site layout showing planned location of major facilities; • any document which was submitted to REA and other Government entity and which is relevant to the project; and • memorandum of understanding or a letter of intent, if any.

  19. Transfer of license, changing name or shareholding structure, renewal of license Part VI: LICENSING REQUIREMENTS • Rules 35-37 • Application for transfer or assignment of license [Rule 35] • Requires endorsement by transferror or the assignor • Notice of application published in two newspapers • Public comment period 2 weeks • Change name or shareholding structure [Rule 36] • SPP or SPD submits letter to Authority • Authoirty may consult Fair Competition Commission or Tanzania Revenue Authority • Application for Renewal of Licence [Rule 37] • Submit application not more than 6 months before expiry

  20. Reporting and compliance (1)In Part XII: Reporting and compliance • Annual reports [Rule 58] • SPP to submit annual report to EWURA within 90 days of end of SPP’s financial year • Penalty for false information or refusal to provide information [Rule 59] • First time: 3 million shillings • Second time: 10 million shillings and license suspended

  21. Reporting and compliance (2)In Part XII: Reporting and compliance • Audits [Rule 60] • SPP shall conduct audit when directed by EWURA • Audit conducted by independent auditor • Audit costs paid by EWURA • EWURA may conduct its own audit.

  22. SPP Working Groupin Part IX: WORKING GROUP ON SMALL POWER DEVELOPMENT • Representation [Rule 50] • One representative from Ministry • Two representatives from EWURA • Onetwo representative from DNO • One representative from academia • One representative from SPP developers • Two representatives from chosen by EWURA

  23. SPP Working Group (2) • Responsibities of SPP working group [Rule 51] • acting as a representative of the key stakeholders; • liaisingwithadvising the Authority on matters related to annual computations of SPP Tariffs (EWURA does calculations) and other regulatory matters affecting small power development; and • advising EWURA on improvement of SPP rules

  24. SPP Working Group (3) • Advice as members [Rule 51 (3)] • Members of the Working Group may give advice as individuals in the absence of a shared Working Group view. • Views available to public [Rule 51 (5)] • All written views provided to EWURA by the Working Group, individual members or other organizations and individuals shall be made public.

  25. Next Steps • Following the approval of the EWURA Board, the draft THE ELECTRICITY DEVELOPMENT OF SMALL POWER PROJECTS RULES, 2012 were released for stakeholder comment on 8 June, 2012 • Three week comment period ends 30 June, 2012 Please submit written comments to EWURA • A final version of the Rules will be put to the EWURA Board for approval • The Rules will be gazetted and will enter into force

  26. Thank you Written comments are welcomed via the following channels: • Post or in person at: Director General Energy and Water Utilities Regulatory Authority (EWURA) P.O. Box 72175 6th Floor, Harbour View Towers Samora Avenue Dar es Salaam, Tanzania • Fax: +255 22 212 3180 • Email: info@ewura.go.tz Clarification questions on this presentation: chrisgreacen@gmail.com or kidiffu@ewura.go.tz

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