Uganda once against leads the African Development Bank’s annual Electricity Regulatory Index Report.
According to the index, Uganda, along with other top performers Namibia (2), Tanzania (3), Zambia (4) and Kenya (5), have regulators with the authority to exert the necessary oversight on the sector. However, the overall electricity regulatory frameworks of African countries is poorly developed and most countries experience major regulatory weaknesses.
A flagship report of the AfDB, the Electricity Regulatory Index Report is a composite index which measures the level of development of electricity sector regulatory frameworks in African countries against international standards and practices.
The ERI 2020 covers 36 countries, having started with 15 countries three years ago. This year it recorded significant improvement in key regulatory indicators in some countries such as improvement in licensing frameworks and provision of transparent processes for investors’ entry into the electricity sectors in certain countries.
Notably, Angola advanced from 33rd position out of 34 countries in 2019 to 9th out of 36 countries in 2020. The country significantly improved its regulatory framework, especially in institutional capacity, its framework for renewable energy and off-grid systems (mini-grid and standalone).
Importance of regulatory framework emphasised
Dr Kevin Kariuki, AfDB vice president Power, Energy, Climate and Green Growth: “The African Development Bank has been at the forefront of efforts to mainstream electricity sector regulation issues in Africa within the broader sector discourse, recognising the importance of establishing robust legal and regulatory frameworks to support the financial sustainability of the sector and attract private investment.”
This third edition of the ERI report was launched at an African Energy Forum session during the Digital Energy Festival at the beginning of November. The event brought together more than 70 stakeholders in the energy sector, regulators, international organisations and development finance institutions such as Africa50 and the World. Bank.
During the session, Koffi Klousseh, Africa50 director of project development, praised the ERI as a great tool for assessing the readiness of the electricity sector for private sector investment.
AfDB director for energy financial solutions, policy and regulation, Wale Shonibare, said COVID-19 related restrictions had increased residential electricity demand and decreased industrial demand. This had created shortfalls in project revenues of utilities.
“To address these challenges, regulators will be required to play an even more critical and central role post-COVID, to ensure that the sector recovers with minimal and controlled impact on consumers and utilities,” said Shonibare.
Key findings from Electricity Regulatory Index Report
The report noted that 69% of the countries surveyed had regulatory mechanisms in place to facilitate electricity access. However, in 21 of the 36 countries survived, the utility was not involved in funding rural electrification which was done directly by government, NGOs or consumers.
In 90% of the countries surveyed, the executive holds the power to appoint board members and heads of regulator institutions who report to them. This removes core decision-making independent from regulators, who are then subject or direct political pressure. This skews key regulator decisions towards the political inclination of the government in power.
Foibe Namene, Namibia Electricity Control Board CEO: “Regulatory independent is a balancing act between multiple stakeholders while mainting high level of integrity in the regulatory processes and actions.”
Most the countries have legislation to deal with conflict of interest among commissions and heads of regulatory institutions while in office. But, few of these are adequate to regulate conflict of interest and other ethical issues, affecting the integrity of regulatory decisions.
Political authorities were found to have a significant influence on the finances of regulatory institutions. In some instances, laws establishing regulator institutions did not clearly indicate the source of funding for the institution.
Read AfDB’s third annual Electricity Regulatory Index Report.