Ewura Director General Haruna Masebu
The government through Water Utility Regulatory Authority (EWURA) is developing new guidelines on review of Power Purchase Agreements.
This follows enactment of Electricity Act of 2009 which among other things allows independent power producers to generate and sell electricity to TANESCO.
The EWURA Director General, Mr Haruna Masebu, said that the first draft guidelines would be out by early next year. Mr Masebu said at a national workshop on ‘power sector planning, procurement and Contracting ,’ in Dar es Salaam on Wednesday that the guidelines would clearly set out how the review will be conducted.
He said the guidelines would also address EWURA’s role in initiating the procurement process of new power projects. “This means that before Tanesco commences procurement of new power generation plants, whether through a competitive process or via unsolicited bid, EWURA must review the proposal.
“The guidelines that we are currently drafting describe how EWURA will conduct the review and what criteria will be applied to make such decisions of the process”, he revealed. This new move is likely to set in a new dispensation in the sector following years of public sentiment against some Power Purchase Agreements, which are viewed as being a burden on the country’s power sector.
“EWURA is currently developing guidelines to clearly set out how the review will be conducted. These guidelines will present the criteria against which Power Purchase agreements will be assessed to ensure that costs are prudently incurred as the Electricity Act stipulates”, he said.
Wednesday’s workshop was aimed at improving the effectiveness of EWURA’s regulation of the electricity sector and discuss ways to improve power sector planning, procurement and contracting.
EWURA has responsibilities as approving the initiation of procurement of power projects, approving power purchase agreements for cost pass-through, issuing licences for electricity generation and regulating the tariffs charged by electricity suppliers to consumers.
But Mr Masebu said EWURA’s responsibility of approving the initiation of procurement and reviewing power purchase agreements were less understood. Section 25(4) of Electricity Act Cap 31 empowers EWURA to review power purchase agreements to determine whether the costs are reasonable.
Recommendations for improving power sector planning, procurement and contracting, will be used to inform the new guidelines.
Addressing the sector stakeholders from Tanzania and Kenya, the Deputy Minister for Energy and Minerals, Mr Adam Malima, also revealed that a new electricity industry structure is to come in place when the energy ministry concludes a strategy it is currently working on.
He said it comes as part of the recommendations from the Joint Energy Sector Review Report released early this year. The report had acknowledged that creating good medium term power sector plans should avoid future emergency power situations in future.
He said credible power sector plans accurately forecast future demand and plan less cost options to meet this demand through generation that is diverse and reliable. The report found that the structure of the power sector matters for results.
It made reference to Tanesco, noting that the government needs to create clear incentives for the utility to perform well. “The Ministry is working towards coming up with a strategy for deciding on the appropriate electricity industry structure, ” he said.
He noted that they had taken time because of the various signals they had received when they wanted to unbundle and privatize the existing power utility. He also said that Tanzania, having been on observer status in the southern Africa power pool all the time, it is now looking ahead playing a more active role in interconnection projects with Zambia and Kenya and other East Africa Community countries.
He said Tanzania was already working towards increasing its internal power transfer capability by upgrading its backbone from 220Kv to 400Kv . He said that with the various electricity generation plans using coal (Mchuchuma 600MW, Ngaka 400Mw), natural gas (Kinyerezi 240Mw, Mtwara 300MW), wind (100MW) and hydro (Ruhudji 358MW and Stigle’s Gorge 2,100MW).
“I believe that with the above principles of procurement of power projects, Tanzania will quickly move from just over 1200Mw with a suppressed demand and lack of reserve margin, to become one with higher consumption and surplus power to sell in the electricity markets surrounding it, ” he said.
By ORTON KIISHWEKO, Tanzania Daily News
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