In 2015, Egypt issued its unified Electricity Law no. (87), paving the way for market liberalisation of its power generation and distribution services. A few months on from its introduction, what are some of the key takeaways?
The Electricity Law has promised to reform the electricity market and allow for private sector participation (both locals and foreign entities) by introducing a simple licensing regime. With a transitional timeframe of 8 years granted, the Egyptian Electricity Transmission Company (EETC), which currently exercises market monopoly over power transmission and operation of the grid, is expected to restructure to adopt to a far more competitive environment. The government has obliged EETC to provide equal third-party access to the national grid yet will retain control of network charges.
As part of the reforms, two distinct power markets have been created; a competitive market consisting of wholesale and competitive retail and a regulated retail market. Whilst full market liberalisation is not anticipated at this stage, it is expected that the government will increasingly scale back the scope of the regulated market to eventually achieve full market liberalisation. The law has also unbundled the electricity business chain (i.e. generation, distribution, grid operator, market operator, authorised suppliers and qualified consumers) to provide the private sector with more opportunities to participate in Egypt’s electricity market.
Proactive on Pricing Regulation
The Egyptian Electric Utility & Consumer Protection Agency (ERA) will now be taking a more active role in pricing regulation under revised law. No longer solely a monitoring function, ERA is tasked with defining the appropriate rules and economic basis for the calculation of power tariffs to non-qualified consumers, calculating power exchange prices in the regulated market and determining consideration for the use of transmission and distribution networks.
Transitioning to a Liberalised Market
The Electricity Law has also granted more powers and autonomy to EETC, formalising its natural autonomy and consequently reducing Egyptian Electricity Holding Company’s (EEHC) control over the electricity utility. The law now stipulates that EETC exclusively undertakes grid operation and electricity transmission services and is responsible for defining commerce and settlement in collaboration with other utility participants. Notably, EETC has been tasked with ensuring no preferential arrangements occur between any of the producers or consumers and to promote efficiency and competition in power sale and purchase. EETC will be required to step-up its role in securing the power supply needed for the regulated market by purchasing it from generating companies.
EETC has 8 years to restructure and become compliant with the law and 3 years to conduct necessary grid capacity and expansion studies. With EETC taking a more active and independent role in the future of Egypt’s electricity market, the EEHC will also need to adapt to a more liberalised market. It is unclear at this stage whether EEHC will opt to operate as a private sector corporation or whether existing state-owned generation assets will be privatised.
To read more about Egypt’s Electricity Law, download the full guide: The New Electricity Law Explained