Electricity Supply Industry Reform
Strategy and Roadmap
Prepared by MEMPrepared by MEM
June, 2014June, 2014
OutlineTanzania Development Vision 2025
Drivers for ESI ReformESI Reform ObjectivesESI Reform Strategy &Roadmap
Resources RequirementWay ForwardConclusion
Tanzania Development Vision 2025Tanzania Development Vision 2025
Middle Income Country
Raise GDP per Capita from USD 640 to USD at least USD 3,000;Increase Generation Capacity from 1,583 MW to at least 10,000 MW by 2025; andIncrease electricity connection level from 24% to at least 50% by 2025. Economic growth low cost and
reliable power Investment Gx, Tx and Dx;
Tanzania Development Vision 2025Tanzania Development Vision 2025
Drivers for ESI Reforms Drivers for ESI Reforms
DRIVERS OF ESI REFORMS
Policy and legal requirement: NEP, 2003 and Sec 40 of the Electricity Act, 2008 calls ESI reforms. Financing Requirement: Between 2012 – 2017 about USD 11.4 billion – about USD 1.9 billion per annum required. Security of Supply: Diversify Power Generation and effectively participate in EAPP and SAPPStakeholders’ Expectation: Customers, GoT and business partners
DRIVERS Cont’d
Connection and Access levels to Electricity Supply: Connection level targets: 30% (2015), 50% (2025) and 75% (2033). Demographics &Demand Projections: ◊Electricity demand growth rate: 10% and 15%◊Population to increase from 45 million to 69.5 million. ◊GDP per capita to increase from USD 640 to at least USD 3,000Almost 10,000 MW will be required to propel
the economy.
ESI REFORM OBJECTIVESMain: To improve ESI governance and
performance for quality service Delivery. Specific Objectives:• Create ESI to support the National
Development Agenda Roadmap & Indicative Budget
• Establish efficient ESI in environmentally sound and sustainable manner
• Promote financial and commercial viability of the Sector
• Attract private investment to the sector• Ensure adequate, reliable, affordable and
accessible electricity supply
REFORM STRATEGY
Gradual unbundling of Gx, Tx and Dx
REA current set to be maintained with its functions complementing Semi- autonomous Zonal Offices
REFORM ROADMAP
Guide the implementation of the ESI Reform
Process
REFORM ROADMAP Immediate term (July 2014 –
June 2015) Short term ((July 2015 – June
2018) Medium Term (July 2018 –
June 20121) Long term (July 2021 – June
2025)
Summary of Key Activities of the Reform Roadmap
The Roadmap – Immediate ActionsThe Roadmap – Immediate ActionsJuly 2014 – June 2015July 2014 – June 2015
Major Activities Timeframe Lead
Responsibility Establish a Task Force (MEM) and TCMT at TANESCO Jul 2014 TANESCO
Human Capital Needs Assessment and Capacity Build Programme Prepared
Dec 2014 MEM/TANESCO/EWURA
Carry out MIS review and ring fence TANESCO’s SBUs
Dec 2014 TANESCO
Develop standard template Power Purchase Agreement (PPA) models;
Jul 2014 EWURA
TANESCO Turnaround Strategy Dec 2014 MEM
Designate Grid Control Center as Independent System Operator (ISO);
Dec 2014 EWURA
Reviewing of the Electricity Act, 2008, in particular, Section 41(6)
Dec 2014 TANESCO
Initiate Business process review and TANESCO’s Assets and Liabilities valuation
Dec 2014 MEM
Develop of Grid Codes to guide Tx and Dx operations
Dec 2014 EWURA
The Roadmap – The Roadmap – Short Term (Jul 2015 - Jun 2018)
Major Activities Timeframe Lead Responsibility
Unbundle Gx from Tx and Dx Dec 2017 TANESCO
Generators (IPPs) to sell to bulk off takers Dec 2017 MEM
Establish market information Desk Mar 2015 MEM
Designate Independent Market Operator Dec 2015 TANESCO
Continue with TANESCO turnaround Dec 2016 TANESCO
Decentralize decision making (Procurement, budget implementation an Business Plans management
Dec 2016 TANESCO
The Roadmap – The Roadmap – Medium Term (Jul 2018 - Jun 2021)
Major Activities Timeframe
Lead Responsibility
Unbundle Dx from Tx June 2021 MEM,Zonal Offices’ Performance Assessment
Sept 2020 Dx
Setting up a mechanism and rules for the operation of a retail market
Nov 2018 EWURA
The Roadmap – The Roadmap – Long Term (Jul 2021 – Jun 2025)
Major Activities Timeframe Lead Responsibility
Unbundle Dx segment into Zonal Distribution Companies
June 2025 MEM
Establish ESI service standards Jul 2020 EWURAInvest in human capital and trading system in preparation to retail market operations
Jul 2020 MEM
Introduce Retail Competition Jul 2023 MEMPrepare Gx Company and Dx for listing
Jan 2025 GenCo and DisCos
Reduce losses (technical and non-technical) from 15% to 12% by 2025
Dec 2025 Tx and Dx
Increase electricity connectivity from 36% to 50% by year 2025
Dec 2025 DisCos
The Roadmap – The Roadmap – Long Term (Jul 2021 – Jun 2025)
Major Activities Timeframe Lead Responsibility
Unbundle Dx segment into several Zonal Distribution Companies
Dec 2023 MEM
Establish ESI service standards Jul 2020 EWURAInvest in human capital and trading system in preparation to retail market operations
Jul 2020 MEM
Introduce Retail Competition Jul 2023 MEMPrepare Gx Company and Dx for listing
Jan 2025 GenCo and DisCos
Reduce losses (technical and non-technical) from 15% to 12% by 2025
Dec 2025 Tx and Dx
Increase electricity connectivity from 36% to 50% by year 2025
Dec 2025 DisCos
Electricity Supply Industry Reform Status and Way ForwardElectricity Supply Industry Reform Status and Way Forward
Corp
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ANES
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for P
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1997
2002
2005
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Enac
ted th
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URA
Act
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ct20
05
2001
Enac
ted th
e Elec
tricity
Act
2008
Verti
cal U
nbun
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2014
2016
Unbundling of Generation
from Transmission
and Distribution
2020
2020
Who
lesale
and
Retai
l Co
mpeti
tion
Horizontal Unbundling of Distribution
Regulation/Deregulation/Competition
2003
Nati
onal
Ener
gy P
olicy
Vertically Integrated TANESCO
Unbundle Generation from
Transmission and Distribution
Unbundle Transmission
and Distribution
Complete Vertical
Unbundling
Unbundling of Distribution
from Transmission
2019
Key Risks of ESI ReformsRisk Definition Mitigation
None response from private sector
Necessary condition for effective participation of private sector hence competitive power market
Review the existing legal and regulatory framework
TANESCO turn around not met
Expected benefits to stakeholders may not be realized.
Retire EPPs, constructing new gas infrastructure
Adjusting electricity tariffs
Unbundling Small power system
There is a risky of increasing overhead costs without necessarily improving the quality of services.
Unbundling will take place in 2017 when installed will be at least 3,000MW which is above the acceptable level of 1,000 MW
Resistance to Change Successful implementation of ESI reforms is dependent on stakeholders consensus
Participatory approach to reform
Implement change management programme;
Implement awareness campaign;
Human Capital Needs Inadequate skilled personnel impairs implementation of reform strategies.
Capacity development programme to be instituted ;
Implement contract management strategies;
Nationalization of investment
Private sector fear of their investments being expropriated
Investors’ risks of nationalization are cushioned by Investment Act of 1997.
Non implementation of the Roadmap
Change in direction will negatively affect the Performance and sustainability of ESI.
GoT is committed to ensure that the Roadmap is timely implemented
RESOURCES REQUIREMENTHuman Resource: New Skills to marshal
the reforms implementation will required.
Financial Resource: To implement the reforms USD 1.15 billion will be required to facilitate studies, human capital development and TANESCO Balance Sheet clean up.
◊ New Companies to start with clean balance sheet
◊ Funds is expected to be contributed by GoT and Partners and TANESCO
Conclusion - ExpectationsConclusion - Expectations
WAY FORWARDWAY FORWARD
• Submission to Cabinet Secretariat for comments by 13 June, 2014
• Submission to Permanent Secretaries meeting by 20 June, 2014
• Submission to the Cabinet by 27 June, 2014
Publication of the ESI Strategy and Roadmap by 30 June, 2014
Conclusion - ExpectationsConclusion - Expectations
Reforms is essentially a process rather than a one time event, the Roadmap shall be reviewed from time to time
There is no one size fits all reform model, the proposed reform strategy is tailored to
Tanzanian ESI needs
Concerted efforts from all stakeholders are required to make the reform a success
Conclusion - ExpectationsConclusion - Expectations
THANK YOU!
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