EgyptERA: How did Egypt regulate its electricity market?
- Sep 18, 2019 4:14 pm GMT
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Electricity towers - CC via Max Pixel CAIRO – 18 September 2019: The electricity sector in Egypt has witnessed reforms over the past years that required transparent regulations, a strategy to support the economic growth, and a consumer friendly policy considering the cost of the service provided.
In 2015, the Egyptian Electric Utility and Consumer Protection Regulatory Agency (EgyptERA) became an autonomous institutional entity in charge of handling and developing electricity activities involving producers, transmission operators, distribution companies and end users.
In order to enhance its capacities to take on the additional responsibilities stipulated in the new law, EgyptERA approached the Association of Mediterranean Energy Regulators (MEDREG) to facilitate and develop regulatory practices that are coherent for the energy market in the country.
In Egypt’s case, EgyptERA asked for MEDREG’s support to reinforce its capacity in Tariff settings, prevention of conflict of interest, consumer disputes, and market competition measures. To take the first step, EgyptERA undertook an assessment of its independence duties and enforcement powers, accountability, transparency, and internal organization.
In September 2015, a peer review, started by MEDREG, resulted in critical recommendations in June 2016. A 2-year implementation phase ensued based on the peer review recommendations, and concluded in 2018.
In 2019, MEDREG regulators and country members, Algeria, Egypt, Israel, Jordan, Morocco and Palestine, are gathering on September 19 in Brussels to share the latest changes and reforms that their respective national energy market witnessed after regulatory cooperation.
EgyptERA will be represented by Shaimaa Abdel Azim, a senior economist and a manager at the Licensing and performance evaluation department at the Egyptian regulatory agency.
In order to understand Egypt’s case and experience in regulating its energy market, Egypt Today interviewed Salma Hussein, the general manager of the Licensing and performance evaluation department at EgyptERA, who spoke about the peer review process, recommendations and the effect of the collaboration with MEDREG on consumer protection.
MEDREG gathers 27 energy regulators from 22 countries, spanning over the European Union (EU), the Balkans and the MENA region and including Albania, Algeria, Bosnia-Herzegovina, Croatia, Cyprus, Egypt, France, Greece, Israel, Italy, Jordan, Lebanon, Libya, Malta, Montenegro, Morocco, the Palestinian Authority, Portugal, Slovenia, Spain, Tunisia and Turkey.
Why are regulators important for consumers?
Ensuring cost-effective and affordable electricity tariffs were among the challenges that Egypt need to overcome seeking best international practices.
MEDREG’s work is explained on its official website as acting as “a collaborative platform for regulators to exchange technical knowledge, while reinforcing their regulatory capacity in accordance with the standards of the Mediterranean community.”
Discussing why collaboration with MEDREG, an EU co-funded association, was important, Salma Hussein explained that regulators are important for consumers for several reasons.
She outlined that they help “set rules and procedures ensuring due protection of consumer rights, and confirm that electric power is securely supplied to consumers, through careful review- in coordination with the authorities of concern.”
According to Hussein, regulators further ensure consumer protection through “a complaint management system, and initiatives aimed at increasing consumer awareness, while setting technical quality principles and other standard measures on the performance of the various electricity services.”
What is the process of Peer review?
As explained by MEDREG, a peer review is an analysis undertaken by fellow energy regulators “peers” of another regulator. An analysis of Egypt’s case was carried out by a team of experts from the EU and non-EU regulators, all members of MEDREG.
For her part, Hussein cited four stages as part of the peer review phase Egypt has witnessed as shown in the figure below.
Egypt's peer review steps with MEDGRE - Photo via Salma Huseein
What did Egypt need from MEDREG?
The analysis and recommendations provided by MEDREG’s peer review activity were meant to support the opening of a competitive Egyptian electricity market for the benefit of the consumers and industry.
Moreover, the collaboration was important “to identify ERA strengths, make ERA legal powers and competences fully effective in order to ensure that fair rules applied to all electricity market players and to receive suggestions through proposed measures to improve regulatory actions,” Hussein said.
Good regulatory principles
MEDREG identified six principles that EgyptERA wanted to comply with, which are:
1- Independence from national and regional government so decisions of regulators cannot be influenced.
2- Competences, where duties and powers constitute a minimum set of competences defining the specific responsibilities of a regulator.
3- Accountability, referring to how the regulator takes on the responsibility and is able to demonstrate outcomes and results of its regulatory action.
4- Transparency, which helps others understand the regulator’s work, and enhances proactive stakeholder engagement.
5- Enforcement, which ensures market participants’ compliance with rules.
6- Internal organization, to have clear decision-making processes.
Hussein said that MEDREG’s recommendations based on the peer review period covered six areas, which are: Tariff Methodology, Prevention of Conflict of Interest, Consumer Protection and Power to Settle Dispute, Ability to Regularly Report to the Government and General Public on Unbundling and Market Competition Measures, Consultation Process, and Establishment of a more Regular, Formal and Rigorous Communication with Consumers, Associations and Press.
In 2018, the Jordanian Energy Regulatory Authority EMRC followed the steps of EgyptERA and initiated a review of its electricity licensing procedure currently being carried out by MEDREG members. The final analysis and recommendations were concluded by the end of the year 2018.
Generally speaking, Hussein said that after the peer review, EgyptERA was able to have a clear assessment of the current situation of energy market in Egypt, and could analyze the gap to define next steps.
EgyptERA effectively became competent in tariff setting, as it started a comprehensive reform of its tariff setting supported by the EU technical assistance program following a first round of reforms that were implemented in 2014.
Effectively able to settle disputes, EgyptERA was helped by Italian and Greek regulators through a twinning project, an EU instrument for institutional cooperation carried out in 2017. The twinning project helped EgyptERA set and design the different market phases and monitoring processes.
MEDREG’S recommendations contributed to the improvement of other regulatory aspects of EgyptERA like defining a clear policy to prevent potential conflicts of interest. EgyptERA is financially independent per law, but the members of the board are appointed by the prime minister and the minister acts as the chairman of the board.
Consumers and other stakeholders were not involved in all phases of the decision-making process through public consultation on draft documents. After peer review, a consultation process was adopted, and conducted on different regulatory issues: preliminary consultations on the market, deep consultations on Renewable Energy FIT projects and other consultations were conducted on industrial tariff.
Salma Hussein said that most of MEDREG’s recommendations were fulfilled, adding that market issues are currently being processed.