March 25, 2020

Tanzania update: Electricity Rules of 2019

The Energy and Water Utilities Regulatory Authority (EWURA) recently released new rules to govern various electricity matters. These relate to the development of small power projects (SPPs), generation, transmission and distribution activities along with supply services. The new rules attempt to address some of the challenges contained in the previous (repealed) rules by providing less procedural requirements. In this article, we provide an overview of the recently released Electricity Rules and how this affects businesses in Tanzania.

The DSPP Rules

The DSPP Rules repeal the Electricity (Development of Small Power Projects) Rules (the DSPP 2018 Rules) and govern the regulatory and procedural matters relating to DSPPs in Tanzania.

Key definitions under the DSPP Rules

  • Customer means the end user and includes ''eligible customers''.
  • Eligible customer means a person who is authorised by EWURA to enter into a contract to purchase electricity directly from a person licenced to supply electricity.
  • Ministry means the Ministry responsible for electricity matters which in Tanzania is the Ministry of Energy.
  • Distribution Network Operator (DNO) means a network operator responsible for the operation of a distribution network at 33 kilovolt (Kv) or below and with at least ten thousand (10,000) customers. A DNO can either be a government entity or a private company.
  • Very Small Power Producer (VSPP) means an electricity generator with an installed capacity of:
  1. less than 15 Kilowatt (Kw) at a single site selling power to at least thirty retail customers
  2. between 15kW and 100kW at a single site that either sells power at wholesale to DNOs or at retail directly to a customer

Preliminaries to DSPP

A SPP developer shall not develop a SPP in areas other than those declared to be of strategic nature; or where the proposed total installed capacity of a SPP exceeds the maximum demand of the local distribution network. An area is deemed to be of strategic nature if it offers technical benefits to a DNO. A determination on whether the area is of strategic value or not is made by the DNO on its own motion or upon receipt of a project proposal from a project developer.

Upon receipt of a project proposal from a project developer, a DNO shall make a decision within thirty (30) days from the date of receipt of such request to determine whether the proposed area is strategic or not.  A project developer who is aggrieved by the decision of a DNO may appeal to EWURA for determination. A DNO is also required to publish the list of strategic areas in widely circulated newspapers.

Criteria for development of VSPPs

A VSPP is only developed in a remote area where the Ministry has certified a letter of support that the area is suitable for development. A VSPP developer is prohibited from developing a VSPP without first applying and obtaining a letter of support from the Ministry. The letter of support issued by the Ministry shall be in the prescribed form set out in the Second Schedule to the DSPP Rules. The letter of support issued by the Ministry will cease to have effect if a VSPP developer fails to commence construction of the facility within twelve months (12) from the date of issuance of the said letter.

Procurement of SPPs

Under the DSPP Rules, the procurement of SPPs can be through unsolicited and solicited proposals.

Application procedure for unsolicited proposals

A SPP developer is required to apply to a DNO for a letter of intent by filling in the application form prescribed in the Third Schedule to the DSPP Rules. The application has to be accompanied by:

  1. a certified true copy of the entity's incorporation or registration
  2. a copy of a tittle deed, lease agreement or document evidencing ownership of land or permission to use the land
  3. proof of declaration that the site is strategic
  4. pre-feasibility study report

The list of documents to be attached has been reduced from seven (7), in the Repealed Rules, to four (4) under the DSPP Rules. Other procedures for acknowledgement, notice of decision and the time frame remain as they were in the Repealed Rules.

Application for interconnection

The procedures for application for interconnection remain unchanged. It is the duty of the DNO to bear the cost for interconnector lines for projects that are within ten (10) kilometres from the point of interconnection at the time the SPPA is signed. However, if the DNO is unable to bear such costs, it shall negotiate with a SPP developer with a view to ascertaining the possibility of the latter meeting the said costs subject to the terms and conditions to be agreed upon. A SPP developer shall bear all interconnection costs beyond ten (10) kilometres of the interconnection point.

Procurement of solicited SPPs

A public owned DNO will only procure a solicited power project in accordance with the DSPP Rules. A private DNO may procure a solicited power project using the procedures prescribed under the DSPP Rules or their own procedures. However, the procedures have to be competitive and approved by EWURA.

After a DNO declaring or identifying an area to be strategic, it will issue a Request for Qualification (RFQ) documents inviting SPP developers to submit bids for qualification. The RFQ has to be open for a period of forty five (45) days and any response to the RFQ submitted after the specified deadline will not be accepted. Bids are received by a DNO and evaluated in accordance with the Public Procurement Act No.7 of 2011 (the Procurement Act). Under the DSPP Rules the DNO is to conduct bid evaluations in accordance with the provisions of the Procurement Act. There is no requirement to send them to the Electricity Infrastructure Permanent Committee, as was the case in the Repealed Rules.

Post procurement activities

Part VI of the DSPP Rules provides for post procurement activities. These activities include signing of a SPPA; licensing and registration procedures; commissioning procedures and connection to the main-grid. The term of the SPPA has been reduced from twenty five (25) years to twenty (20) operating years after reaching commercial operation date.

The DSPP Rules have also set a time limit for interconnection certificate and require the DNO to ensure that the interconnection certificate is issued as soon as possible and in any event not more than fourteen (14) days after verification.

The Generation, Transmission and Distribution Activities (GTDA) Rules

The GTDA Rules have repealed the Electricity (Generation, Transmission and Distribution Activities) Rules 2018 (the GTDA 2018 Rules). The application of the new GTDA Rules has been extended to cover cross border trade in electricity activities in Mainland Tanzania. The GTDA Rules also govern the regulatory matters related to eligible customers.

Key definitions under the GTDA Rules

  • Cross-border electricity trade means trading in electricity between two (2) states sharing a common border through an inter-connector power line, or between more than two (2) states not sharing common border, but linked through a power pool, which involves export or import of electric energy between the states
  • Cross-border electricity trade licence means a licence issued by EWURA to a licensee to conduct cross-border electricity trade
  • Eligible customer means a person who is authorised by EWURA by virtue of the GTDA Rules to enter into a contract for the purchase of electricity directly with any person licensed to generate electricity
  • Regulatory financial reports or regulatory financial statements means financial records or reports prepared and submitted to EWURA by a regulated entity as prescribed in the regulatory financial reporting manual
  • Wheeling Agreement means an agreement for transportation of electric energy from a source connected to an electric grid to an electric load within the grid

Licence application

The supporting documents for a licence application for generation, transmission and distribution licences remains as it was in the 2018 Rules. The GTDA Rules list the accompanying documents for a cross-border electricity trade licence. Rule 5(2) (d) provides that an application for cross-border electricity trade licence has to be accompanied by:

  1. power purchase agreement (PPA)
  2. bilateral agreement between states, if any
  3. wheeling agreement where applicable

Rule 7(3) allows a licensee to apply for renewal of the licence upon its expiration in the manner prescribed by EWURA. An application for renewal shall be accompanied by all the information and documents that were used in the initial application for a licence as listed under Rule 5.

Obligations of a cross-border electricity trade activities licensee

Under Rule 21(1), a licensee is required to:

  1. undertake cross border electricity trade in a manner that does not jeopardise the national grid security
  2. notify EWURA of any change to the cross-border agreement that affects the approved tariff
  3. submit to EWURA annually audited financial reports and technical performance
  4. submit to EWURA for approval the PPA, Wheeling Agreement and applicable charges and tariffs

EWURA is also empowered to make guidelines to provide for operations of cross-border electricity trade.

Financial provisions

In addition to submitting to EWURA annually audited financial statements, a licensee is required to submit regulatory financial reports within ninety (90) days from the end of the financial year.

A licensee is also required to submit regulatory financial reports in accordance with the standards specified by EWURA. The regulatory financial reporting standards and frequency of reporting shall be as prescribed in the Regulatory Financial Reporting Manual issued by EWURA. This entails EWURA issuing the Regulatory Financial Reporting Manual, which will provide the standards and frequency of reporting by the licensee.

Designation of eligible customers

For a person to be designated an eligible customer, they must apply to EWURA in a manner prescribed in the Schedule to the GTDA Rules and the application accompanied by:

  1. proof of electric energy consumption capacity
  2. wheeling agreement if any
  3. letter of clearance from the supplying utility that the applicant has no outstanding liability

The following criteria must be met:

  1. the applicant must be supplied at the voltage levels of not less than 33 Kv
  2. the applicant must have a maximum demand of two (2) megawatt or more
  3. in case the applicant is being supplied power by a distribution licensee, they must obtain a letter of clearance from the licensee to prove to EWURA that there are no pending/uncleared obligations

The rights of eligible customer:

  1. to purchase electricity from a generation licensee of its choice
  2. to enter into a PPA with a generation licensee without EWURA's approval
  3. to negotiate electricity tariff based on mutual understanding with the seller

The Supply Services (SS) Rules

The SS Rules repeal the Electricity (Supply Services) Rules of 2017 (the SS 2017 Rules) and govern the regulatory and licensing matters related to electricity supply services in Mainland Tanzania.

Procedure for application of licence

The procedures for licence application remain the same as in the 2017 SS Rules. However, the 2019 SS Rules require more documents, see below

SS 2019 Rules

SS 2017 Rules

  1. Certified copies of registration documents
  2. TIN (new)
  3. Support documents from the local authorities (new)
  4. A letter of support from the Ministry (new)
  5. Proof of availability of electric energy to be supplied e.g. the PPA, import licence/use-of-system agreement
  6. Proof of financial capability for the supply activity
  7. Description of the service area
  8. Proof of environmental clearance
  1. Certified copies of registration documents
  2. Proof of availability of electric energy to be supplied (e.g. the PPA, import licence/use-of-system agreement
  3. Proof of financial capability for the supply activity
  4. Description of the service area
  5. Proof of environmental clearance

Renewal of licence

The procedure for the renewal of a licence has not substantially changed from what was set out in the 2017 SS Rules. The documents to accompany an application for renewal have been reduced from nine (9) to five (5) and the accompanying documents that are no longer required include:

  1. supporting documents from the local government
  2. land title deed or proof of acquisition of land, where applicable
  3. a construction schedule, where applicable
  4. pre-feasibility study or project write-up, where applicable

General penalty

The general penalty for any person who contravenes any provision of the SS Rules for which no specific penalty is prescribed is a fine of three (3) million Tanzanian Shillings (about USD 1,304), while the 2017 SS Rules prescribed a penalty of ten (10) million Tanzanian Shillings (about USD 4,350). In addition, the penalty for continued contravention has been reduced from five (5) million (about USD 2,174) to one (1) million Tanzanian Shillings (USD 434) for each day of the continuing contravention. 

This briefing is prepared for clients and contacts of Clyde & Co Tanzania. We aim to keep our clients abreast of developments in Tanzania as they happen and if you have any questions on the issues raised above please contact us directly.
Further advice should be taken before relying on the contents of this summary. Clyde & Co Tanzania accepts no responsibility for loss occasioned to any person acting or refraining from acting as a result of material contained in this summary. No part of this summary may be used, reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, reading or otherwise without the prior permission of Clyde & Co Tanzania.