The Council of Ministers recently adopted the Energy Regulation No. 447/2019 (“Energy Regulation”) repealing and replacing the Electricity Operations Regulation No. 49/1999. This follows the amendment of the Energy Proclamation No. 810/2013 in June 2018. In this issue of our legal update, we present the main aspects of the Energy Amendment Proclamation and Energy Regulation with particular emphasis on licensing and tariff regulation. This is particularly informative for private sector energy developers as Ethiopian embarks on a public private partnership (PPP) with power as one of the priority sectors for PPP investments.

  1. Legal Framework

The Energy sector in Ethiopia is regulated by the Energy Proclamation No. 810/2013 (as mended) and the Energy Regulation. On the other hand, the Investment Proclamation No. 769/2012 (as amended) and the Investment Regulation 270/2012 governs foreign direct investment in the generation of energy. While the power generation, both off and on-grid, is generally open for private sector investment, the transmission, distribution, import and export of electrical energy through the integrated national grid system is exclusively reserved for the government of Ethiopia. Independent power developers seeking to enter the Ethiopian power market are therefore subject to these legislations and the regulatory oversight of the Ethiopian Energy Authority (EEA).

  1. Summary of License Regulation
  1. compliance or any failure by the applicant to perform previous and current commercial or statutory obligations and the reasons in case of failure;
  2. confirmation that the applicant was not prosecuted and sentenced in relation to license issued previously for fraud or similar offence.
  1. Hydro and geothermal power generation license – 25 years
  2. Wind, solar, bio-mass, urban waste, thermal and bio-gas – 20 years

The license period starts to count from the date that the EEA confirms commencement of energy operations. Provided that the licensee fulfills the conditions of the Energy Regulation, the above license validity period are eligible for renewal by the EEA.

  1. collect revenues in accordance with approved tariffs;
  2. generate electricity from any energy sources;
  3. connect the generating plant stated in the license and sell electricity to the transmission system or supply network stated in the license;
  4. sell electricity through the spot market, if permitted under the license;
  5. supply energy and charge rates as set out in the approved power purchase agreement;
  1. start activity within the time set and conditions specified in the license;
  2. provide quality electricity for the transmission grid or supply network;
  3. sell electricity only to the entity set out in its license;
  4.  comply with the technical condition of connection to the transmission grid or supply network stated in the license;
  5.  take appropriate measure on environmental effects of its activities under the license;
  6.  generate electricity and provide other important ancillary services based on the demand of the transmission or distribution and sale licensee;
  7.  maintain efficiency and reliability of the generation plant; and protect the public and employee safety
  8.  comply with the relevant grid and performance codes to achieve the targets contained in the grid and performance codes with time lines as may be set in agreement with the EEA
  1. failure to maintain the basic service supply quality standard or safety standard issued by the EEA and inability to rectify the situation with in the time limit given by the EEA;
  2. failure to submit a complete report, submitting false report or failure to maintain proper documentation in accordance with the Energy Regulation
  3. intentionally obstructing or creating obstacle in the regulatory activities of the EEA
  4. transferring license to a third party without the consent of the EEA; or
  5. failure to submit a renewed power purchase agreement in accordance with the terms of the license.
  1. fails to rectify the issues that caused the suspension of the license;
  2. commits another problem for the second time within two years of the first suspension
  3. fails to renew the license within the time period provided under the law.
  4. liquidated or declared bankrupt
  1. Tariff Review and Recommendation
  1. cost of fuel;
  2. cost of power purchase;
  3. the rate of inflation or deflation; and
  4. foreign currency fluctuation.
  1. customers load factor, power factor, voltage;
  2. total consumption of electricity during any specified period; or
  3. the geographical location, the nature of supply and the purpose for which the supply is required.

For more information on this update, please contact Mekdes Mezgebu