Tower of power - Simon Griffiths

nfrastructure investor
Power to the regulators
Smunda Mokoena, Chairman of the African Forum of Utility Regulators (AFUR) and
CEO of the National Energy Regulator of South Africa talks tough on tariffs
Business regulation in Africa is a relatively
new concept, and many governments
are still grappling with the intricacies
of how to regulate their largest
and most critical industries. The
African Forum of Utility Regulators
(AFUR) was established in 2002 as a
NEPAD initiative to advocate and support
the establishment of regulatory
bodies in energy, telecommunications,
transport, and water and sanitation industries
across the continent. Today it
is a voluntary forum with 28 members
across 21 African countries.
What has AFUR achieved to date
Q for regulatory progress in Africa
AFUR fits into the broader picture of
creating a conducive environment for
investment. It is involved in information-sharing
across the continent, and
harmonising regulatory practices and
policies. However, regulation on the
continent is relatively new, so we have
had to outline what we are about. Since
2002 when the constitution was formally
signed, we have developed the
Framework for Utility Regulation in Africa,
which articulates the high principles
of regulation, including best practices
like independence, accountability and
transparency. The roles of each of the
major stakeholders – regulator, government,
and operators – must be clearly
defined to avoid a blurring of mandates,
and decisions must always be made in a
manner everyone can participate in.
What are the challenges of establishing
regulatory authorities in
Q
Africa
We need to increase the level of support
for AFUR among international institutions
in Africa. It isn’t an easy thing
to explain to governments what regulation
is all about, so we’re working on
building a stronger relationship with
the African Union (AU) Commission so
when we go to our member states with
proposals for new regulators we have
support.
We were recently sent with a delegation
to assist in establishing a regulator
in Swaziland. There’s barely any regulation
at all there, so of course the first
meetings were with the government, but
in situations like this, if you do not have
some sort of relationship with SADC, or
with the AU, there will be difficulties. We
appreciate we must have recognition at
that level so our formal relationship
with the AU must be strengthened.
South Africa is braced for huge
Q price hikes as a result of power
shortages – is this the reality for
the future
The price of South Africa’s
electricity at the moment is
low. Other energy suppliers
charge in dollars what
we pay here in rand. That
means in other countries
people are paying eight
times what people are
paying here. We recently
indicated tariff
rises were needed
and have just approved
a 27.5% price
rise for the 2008/09 financial year. It is
one of the biggest jumps ever but we’re
projecting we will continue to see price
rises of 20% to 25% each year for the
next three to five years. So yes, price
rises are certainly going to continue.
The problem is that South Africa had
an extended period of excess generation
capacity during which new generation
plants were not built: going forward
the price has to provide for this.
How can South Africa’s poorest
Q citizens be protected from these
huge rises
We took a decision on June 18 to protect
certain categories of customers
from the full price increase. Their prices
will go up by 15.2% instead of 27.5%.
In the long term though, the inclining
block tariff looks the most appropriate
to use. This applies the theory that
the more you consume, the more you
pay for each KwH, because people first
use the electricity that’s the cheapest
to produce, but the more they use, the
more they draw on the power generated
at the most expensive plants, therefore
the more they pay for it.
A lot comes down to power conservation,
however, because it can have a big
impact on the reserve margin. Remember
you can always lower costs and
protect the poor by deferring building
these extra power stations through improving
people’s energy efficiency.
Smunda Mokoena spoke to Alison
Lock
Smunda Mokoena is AFUR’s Chairman as
well as CEO and Regulator Member of the
National Electricity Regulator of South Africa
(NERSA). He was appointed to NERSA
in 2004 and is also currently an executive
member of the SADC Regional Electricity
Regulators Association (RERA). Mokoena
is an electrical engineering graduate from
the University of Natal, South Africa, and a
holder of an MBA degree from De Montfort
University in Leicester in the UK.