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TANZANIA ELECTRICITY REGULATORY INFORMATION

BOOKLET

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TANZANIA ELECTRICITY REGULATORY INFORMATION

BOOKLET

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FOREWORD

The Energy and Water Utilities Regulatory Authority (EWURA), has published this information booklet for providing requisite information on how to invest in the power sector in Tanzania. This booklet provides basic information and link to specifi c information which one needs to know concerning registration of power projects less than 1MW, licensing of projects from 1MW and above, approval of initiation of procurement of large power project above 10MW, approval of power purchase agreements and tariff settings.

It is our belief that the information provided in this booklet will ease the process of obtaining information required by potential investors (local and foreign) who are interested to invest in the electricity sub-sector in Tanzania Mainland.

………..………………………….Felix Ngamlagosi

Director GeneralEWURA

January, 2017

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CONTENTS

1. INTRODUCTION ..................................................42. REGISTRATION OF POWER PROJECTS .............63. LICENSING OF POWER PROJECTS ...................7 3.1 Licence ..........................................................7 3.2 Provisional Licence ........................................94. LICENSING OF ELECTRICAL INSTALLATION

PERSONNEL .....................................................115. APPOVAL OF INITIATION OF PROCUREMENT

OF POWER PROJECTS ABOVE 10MW .............136. APPROVAL OF POWER PURCHASE

AGREEMENTS (PPA) .........................................15 6.1 Standardized Power Purchase Agreement

(SPPA) for Small Power Projects (SPP) .........16 6.2 Power Purchase Agreements (PPA) for

Large Power Projects (LPP) .........................167. APPROVAL OF TARRIFS ....................................18 7.1 Projects size of up to 10 MW .......................18 7.2 Projects size of above10 MW .......................19 7.3 Retail Tariffs ..................................................20

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LIST OF ACRONYMS

EIA Environmental Impact AssessmentEWURA Energy and Water Utilities Regulatory

AuthorityGoT Government of TanzaniaLPP Large Power ProjectMEM Ministry of Energy and MineralsMoU Memorandum of UnderstandingMW Mega WattsPPA Power Purchase AgreementRR Revenue RequirementSPD Small Power DistributorsSPP Small Power ProjectSPPA Standardized Power Purchase AgreementSPPT Standardized Power Purchase TariffTANESCO Tanzania Electricity Supply CompanyTEDAP Tanzania Energy Development and Access

ProjectTIN Taxpayer Identifi cation NumberVSPP Very Small Power ProjectWGSPD Working Group on Small Power Project

Development

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1. INTRODUCTION The Energy and Water Utilities Regulatory Authority

(EWURA), has broad objectives, including protecting stakeholders’ interests and ensuring service providers’ fi nancial viability is sustained. In achieving these objectives, EWURA, among other things, issues licenses, formulates and enforces quality codes and standards, reviews and determines rates and charges, approves Power Purchase Agreements, ensures security of supply, energy effi ciency, and promotes effective competition and economic effi ciency.

EWURA is mandated to carry out both technical and economic regulation of the electricity sub-sector. This mandate is derived from EWURA Act, Cap. 414 and the Electricity Act, Cap.131. Promotion of least cost and security of supply is among the functions of EWURA stipulated in Section 6 of the Electricity Act, Cap.131. Section 5 of the Electricity Act states the powers of EWURA regarding regulation of electricity sub-sector among which is to award licences to entities undertaking or seeking to undertake a licensed activity, approve and enforce tariffs and fees charged by licensees, approve licensees’ terms and conditions of electricity supply and approve initiation

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of procurement of new electricity supply installation. Section 8 of Cap. 131 states activities that require to be licenced, Section 23 of Cap. 131 states EWURA’s mandates on tariff settings, while Section 25 of Cap. 131 states the mandate given to EWURA when it comes to approval of power purchase agreements.

In implementing its functions, EWURA prepared this booklet to provide handy information to investors in the sub-sector that will enable them to spend less time in acquiring the necessary information required for them to fulfi l the legal and regulatory requirement for their projects.

This Booklet summarises the necessary procedures to be followed by power projects investors to enable them obtain the necessary approvals required from EWURA. The booklet covers issues of procedures for initiation of procurement of power projects, licencing of electricity activities and electrical installations personnel, exemptions from licencing requirement, approvals of Power Purchase Agreements (PPAs), tariffs and charges.

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2. REGISTRATION OF POWER PROJECTS Pursuant to section 18 of Electricity Act Cap 131, and

the Electricity (Development of Small Power Projects) Rules, projects below 1 MW are exempted from obtaining licences. Projects below 1 MW are required to be registered by EWURA in form of Registration Certifi cate after commissioning of the project. The Authority may effect a provisional registration of an SPP or VSPP which fulfi ls the registration requirements at any stage before commissioning of the project by way of a letter. Registration is done by fi lling in the application form (form No.5) which can be downloaded from the EWURA website www.ewura.go.tz and providing the following supporting documents:

(a) a dully fi lled application form; (b) Certifi ed copies of the registration documents

including Memorandum and Articles of Association, Certifi cate of Incorporation and Taxpayer Registration Number (TIN);

(c) Certifi ed copy of Title Deed or Lease Agreement;

(d) Environmental Impact Assessment (EIA) Certifi cate or any environmental clearance from NEMC;

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(e) Water Rights (if applicable) for hydro generation projects;

(f) Business Plan; (g) Generation type and capacity/description of the

generation plant; (h) Number of customers and contracts (if

applicable); (i) Final designs diagram (as built diagram); and (j) Commissioning Report.

3. LICENSING OF POWER PROJECTS

3.1 Licence Pursuant to section 8 of Electricity Act Cap 131, and

the Electricity (Generation Services) Rules, projects from 1 MW and above are required to obtain licences. Licensing is done by fi lling in the application form (form No.100) which can be downloaded from the EWURA website (www.ewura.go.tz) and providing the following supporting documents:

(a) a dully fi lled application form, attested by Commissioner for Oath;

(b) Memorandum and Articles of Association; (c) Certifi cate of Incorporation; (d) Certifi ed copy of taxpayer Registration Number

(TIN);

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(e) Company Profi le; (f) Certifi ed copy of Title Deed or Lease

Agreement (applicable for sale of electricity to off-taker, not needed for own use generation);

(g) Power Purchase Agreement (applicable for generation project);

(h) Support document of the project from the local government;

(i) A letter showing support of the initiative from the Ministry of Energy and Minerals;

(j) Environmental Impact Assessment (EIA) Certifi cate;

(k) Occupational Health and Safety Certifi cate; (l) Proof of availability of electricity for sale

(applicable for distribution project); Applicant may provide PPA, MoU or Letter of Intent;

(m) Right of Way (applicable for distribution project); (n) Water Rights if applicable (for hydro generation

projects); (o) Feasibility Study; (p) Description of the distribution network including

customer base/Supply Agreement, number of transformers and capacities, interconnection point and point of supply (applicable for distribution project);

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(q) Sketch map of the proposed service area (applicable for distribution project);

(r) Technical competency and experience; (s) Proof of fi nancial capability; (t) Business Plan; (u) Generation type and capacity/description of

the generation plant (applicable for generation project);

(v) Site layout; (w) Single line diagram; (x) Future expansion plan; (y) Final designs diagram (as built diagram); (z) Commissioning Report; and (aa) Proof of payment of an appropriate application

fee.

3.2 Provisional Licence One may opt to apply for a provisional licence, which

is a licence issued by EWURA to allow a developer to conduct preparatory activities such as carrying out assessments, studies and other activities necessary for application of a licence. To obtain a provisional licence one must fi ll application form (form No.100) and submit the following supporting documents:

(a) a dully fi lled application form, attested by Commissioner for Oath;

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(b) Memorandum and Articles of Association; (c) Certifi cate of Incorporation; (d) Taxpayer Registration Number (TIN); (e) Company Profi le; (f) Certifi ed copy of Title Deed or Lease

Agreement or proof of land acquisition process (applicable for generation project);

(g) Water Right if applicable (applicable for hydro generation project);

(h) Environmental impact assessment certifi cate or an initiation of the process to acquire the certifi cate;

(i) Power Purchase Agreement or Memorandum of Understanding or Letter of Intent from TANESCO (applicable for sale of electricity to off-taker, not needed for own use generation);

(j) Support document of the project from the local government;

(k) A letter showing support of the initiative from the Ministry of Energy and Minerals;

(l) Right of Way (applicable for distribution project); (m) Pre – Feasibility Study/project write up; (n) Business Plan; (o) Proof of fi nancial capability; (p) Description of the distribution network including

customer base/Supply Agreement, number of

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transformers and capacities, interconnection point and point of supply (applicable for distribution project);

(q) Generation type and capacity/description of the generation plant (applicable for generation project);

(r) Construction schedule; (s) Sketch map of the proposed service area (applicable for distribution project); and (t) Site layout (applicable for generation project).

4. LICENSING OF ELECTRICAL INSTALLATION PERSONNEL

Pursuant to section 8(1) (h) of the Electricity Act, Cap 131 and the Electricity (Electrical Installation Services) Rules, any person carrying out electrical installation activities requires a licence. Furthermore, all electrical installation activities must be carried out only by individuals licensed by the Authority. Electrical installation personnel obtain licences by fi lling in the application form (Form 101), which can be downloaded from the EWURA website (www.ewura.go.tz) and providing supporting documents of their education and experience in electrical engineering.

It is a legal requirement for investors to engage licenced electrical installation personnel who are

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authorised to carry out works in different categories as follows:

(a) Class A which is issued to carry out electrical installation works at all voltage levels except works permitted under Class “L” and “S”.

(b) Class B which is issued to carry out electrical installation works of medium voltage level up to 33,000 Volts except works permitted under Class “L” and “S”.

(c) Class C which is issued to carry out all electrical installation works not exceeding 400 Volts except works permitted under Class “L” and “S”.

(d) Class D which is issued to carry out all electrical installation works not exceeding 220 Volts except works permitted under Class “L” and “S”.

(e) Class S is issued to carry out specialized electrical installation works and it is further classifi ed as;

(f) Class “S1” issued to conduct specialized electrical installation works in all voltages;

(g) Class “S2” issued to conduct specialized electrical installation works up to 33000 Volts;

(h) Class “S3” issued to conduct specialized electrical installation works up to 400 Volts; and

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(i) Class “S4” issued to conduct specialized electrical installation works of up to 220 Volts.

(j) Class “L” issued to carry out maintenance works on live lines;

i. “LI “issued to carryout live line maintenance works up to 400kV, and

ii. “L2” issued to carryout live line maintenance works up to Medium Voltage (33kV).

(k) Class “W” issued to carry out electrical installation works under electrical supervisors who possess licences Class A, B, C or D.

Further information can be obtained from “The

Electricity (Electrical Installation Services) Rules” which is accessible through EWURA website.

5. APPOVAL OF INITIATION OF PROCUREMENT OF POWER PROJECTS ABOVE 10MW

Pursuant to section 5 of the Electricity Act, Cap 131 and the Electricity (Initiation of Power Procurement) Rules, purchasing licensees shall seek EWURA approval to initiate procurement of new power projects by lodging written application which contain:

(a) A summary of the project, including the proposed capacity, site location, generation technology and the predicted project risks;

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(b) A summary of the project rationale, explaining the need for the project, the benefi ts expected from the project, how the project will meet projected demand, and how the project fi ts with the most recent publicly available version of the Power System Master Plan;

(c) For a PPP Project the Government Notice Number specifying such project to be undertaken under PPP arrangement as required by Regulation 4 of the Public Private Partnership Regulations, 2011;

(d) Evidence of the technical and fi nancial capability of the project developer to successfully undertake the project;

(e) All relevant project information that have been prepared prior the date of application including any feasibility studies, environmental and social impact assessments, and site appraisals; and

(f) A summary of the procurement process that will be followed, including:

i. Indicative timeline for the procurement process;

ii. Key staff on negotiation team; and iii. Any agreement signed between the

project developer and the Government of Tanzania in support of this project, including

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memoranda of understanding, letters of support and Government guarantees.

However, the requirement for initiation of procurement of power projects is not applicable to:

(a) The procurement of electricity transmission or distribution infrastructure, unless directly related to the purchase of power;

(b) Small power projects; and (c) Generation projects that are wholly owned and

operated by a purchasing licensee.

6. APPROVAL OF POWER PURCHASE AGREEMENTS (PPA)

Pursuant to section 25 of the Electricity Act, and the Electricity (Approval of Power Purchases) Rules, all power purchase agreements shall have approval of EWURA. However, this does not apply to the electricity sold directly to eligible customers and under the Standardized Power Purchase Agreements including tariffs for small power projects up-to 10 MW which are being governed by the Electricity (Development of Small Power Projects) Rules.

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6.1 Standardized Power Purchase Agreement (SPPA) for Small Power Projects (SPP)

Pursuant to section 17 of EWURA Act Cap 414, EWURA approved the use of Standardized Power Purchase Agreements (SPPA) and Standardized Power Purchase Tariffs (SPPT) for interconnecting and selling power to the Main grid and Mini grids in Tanzania. The SPPA are applicable to projects size of up-to 10 MW. An SPP developer shall conclude an SPPA not later than ninety days after a DNO has delivered a detailed statement of interconnection costs to the SPP developer. The term of an SPPA shall be for a period of twenty-fi ve (25) operating years after reaching Commercial Operation Date.

6.2 Power Purchase Agreements (PPA) for Large Power Projects (LPP)

Pursuant to Section 17 of EWURA Act, Cap 414, EWURA approved the use of Model Power Purchase Agreement for projects size larger than 10 MW for seven technologies which are hydro, oil, solar, wind, natural gas, geothermal, and coal power generation. The purpose of using Model Power Purchase Agreements is to shorten the negotiation period and to speed up the approval process. The specifi c Model Power Purchase Agreements for the

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seven energy technologies mentioned above can be accessed through our website (www.ewura.go.tz).

Pursuant to Section 25 of the Electricity Act, Cap 131, any purchasing licensee who intends to conclude a Power Purchase Agreement with any other party, shall lodge an application to the Authority which shall contain the following:

(a) the initialled Power Purchase Agreement, together with any project agreements;

(b) details of procurement process used to procure new source of supply, supporting evidence of the procurement process, and competitive procurements, report explaining how bids are evaluated and justifying the selection of successful bidder;

(c) the names of a person or fi rm, both domestic and international, paid a commission, gratuity or a fee of not less than fi fty thousand shillings in relation to the procurement or execution of the agreement in the form provided in the First Schedule;

(d) a summary of key terms of the agreement, and a fi lled in risk allocation table in the form provided in the Second Schedule; and

(e) details disclosing the project owners, including

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benefi cial ownership of companies and trusts and any relationship that owners have to ministers, offi cials and staff of purchasing licensee, Ministry or the Authority

7. APPROVAL OF TARRIFS Pursuant to section 23 of the Electricity Act, Cap 131

and section 17 Cap 414 of EWURA Act, EWURA is mandated to review rates and charges either when the application is lodged by the applicant or when EWURA fi nds it necessary to do so.

7.1 Projects size of up to 10 MW Pursuant to the Electricity (Development of Small

Power Projects) Rules, 2016 and the Electricity (Standardized Small Power Projects Tariff) Rules, EWURA has the mandate to set tariffs for small power projects as follows:

(a) For parties with SPPAs that generate electricity

using hydro or biomass from 100 KW up to 10 MW, determination of tariff shall be based on technology costs and feed-in tariff as published by EWURA from time to time.

(b) For parties with SPPAs that generate electricity using solar or wind up-to 1MW, determination

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of tariff shall be based on technology costs and feed-in tariff as published by EWURA from time to time

(c) For parties with SPPAs that generate electricity using solar or wind above 1 MW, determination of tariff shall be as provided during the competitive bidding process.

Any SPP or SPD that sells electricity to retail customers, shall charge a tariff that, at a maximum, shall be limited to the sum of operating costs, depreciation on capital, whether supplied by the SPP or SPD or others, debt payments, reserves to deal with emergency repairs and replacements, taxes, plus a reasonable return on capital provided by the SPP or SPD that refl ects the risks faced by the SPP or SPD.

7.2 Projects size of above10 MW The Authority has the mandate to approve power

purchase price of power projects above 10 MW resulting from PPA negotiations between the purchasing licensee and the developer. The fi nancial model to support approval of the power purchase price normally comprise of the capacity price and the energy price.

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7.3 Retail Tariffs Pursuant to section 45 of the Electricity Act, Cap 131

and the Electricity (Tariff Setting) Rules, EWURA shall, after receipt of the application from regulated supplier evaluate and decide on such application based on the Tariff Application Guidelines, 2009. The regulated supplier’s tariff application must contain:

(a) the ownership structure of the applicant and the other entities in which the regulated supplier has an ownership interest;

(b) the requested regulatory action and the rationale for such action;

(c) a summary table of current and proposed average customer bills by customer class as well as other charges;

(d) the existing annual revenues of the regulated supplier and the projected revenues if the rate or charge were adopted as proposed;

(e) options other than a tariff change considered by the regulated supplier and why each option was not selected;

(f) implementation status of key performance indicators, covering technical, operational and fi nancial indicators of the regulated supplier for the previous year, the current year and for the subsequent three years, assuming the

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proposed rate or charge is adopted; and (g) information regarding the annual subsidies and

grants received within the past three fi nancial years prior to the date of the application as well as forecast of the same during the rate or charge period.

Tariffs set by EWURA shall be published in the Government Gazette to be in use for a period of three years. Furthermore, EWURA may review tariffs before the period of three years where it discovers that major changes have occurred in the electricity supply industry or when any other needs arise.

Further information can be obtained from the Tariff Application Guidelines and the Electricity (Tariff Setting) Rules that can be accessible through EWURA website (www.ewura.go.tz).

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ENERGY AND WATER UTILITIES REGULATORY AUTHORITY (EWURA)

Plot 11&12 Block D, Along New Bagamoyo Road, Opp. Makumbusho Village, Kijitonyama,

7th Floor, LAPF Pensions Fund Towers, P.O. Box 72175, Dar es Salaam - Tanzania.

Tel: +255 (0) 22 292 3513-18Fax: +255 (0) 22 292 35190

E-mail: info@ewura.go.tz

www.ewura.go.tz

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