Transcript Key proposed amendments: THE ELECTRICITY DEVELOPMENT OF SMALL POWER PROJECTS RULES, 2012 Edwin Kidifu and Chris Greacen 18 June 2012

Key proposed amendments:
THE ELECTRICITY DEVELOPMENT
OF SMALL POWER PROJECTS
RULES, 2012
Edwin Kidifu and Chris Greacen
18 June 2012
1
Overview of this Presentation
• Context
• New definitions
• Key proposed amendments
• When ‘big grid’ connects to the ‘little grid’ (Part VII)
• Small Power Distributors (Part VII)
• Tariffs for retail sales (Part VII)
• Tariffs for backup power (Part VIII)
• Very Small Power Producers (VSPPs) (Part IX)
• Provisional license (Part VI)
• Transfer of license, changing name or shareholding
structure, renewal of license (Part VI)
• SPP Working Group (Part VIII)
• Reporting and Compliance (Part XII)
• Next steps
2
Context
SPP Rules approved by EWURA in 2011
Current SPP status (TANESCO data as of June 2012):
• 2 SPPs online totaling 10.5 MW (TANWAT & TPC)
• 3 more SPPs with PPAs, totaling 10.5 MW
• 9 more SPPs with signed LOI totaling 43 MW
+ additional SPPs not selling to TANESCO
Stakeholders Workshop November 2011 (ProTea Courtyard, Dar Es Salaam)
• Stakeholders discussed issues & concerns relating to all aspects of the
current rules.
These proposed amendments
to SPP rules
3
New definitions: hybrid
• “hybrid” means a system of two
or more energy sources used
together to provide increased
system efficiency and lower
costs. A hybrid generator shall
be eligible to sell electricity at
the SPP tariffs if the electric
energy derived from the SPP
facility is produced using no
more than 25% from fossil fuel
or some other non-renewable
source on an annual average
basis;
4
New definitions: small power distributor
• “Small Power Distributor”
(“SPD”) means an entity that
purchases electricity at
wholesale prices from a DNO or
some other bulk supplier and
resells it at retail prices to end
use customers.
5
New definitions: Very Small Power Producer
(VSPP)
• “Very Small Power Producer”
(“VSPP”) means an electricity
generator with an installed
capacity of 100 kW or less that
either sells power at wholesale
to a DNO or at retail directly to
end use customers.
6
Other new definitions
•
•
•
•
•
•
•
•
•
•
•
Bulk supply tariff
Commercially sustainable
Debt Service Coverage Ratio
Distribution margin
Eligible customer
Grid-connected SPP
Interconnection certificate
Isolated Mini-Grid
Load factor
Main Grid
National Uniform Tariff
•
•
•
•
•
•
•
•
•
•
Provisional license
Regional grid
Reseller
Retailer
Retail tariff
SPP developer
SPP guidelines
SPP tariff
SPP tariff methodology
SPP unit
7
Proposed Amendments to SPP Rules
8
When ‘big grid’ connects to the ‘little grid’ (1)
in Part VII: SMALL POWER DISTRIBUTORS AND CONNECTION TO THE MAIN GRID OF
AN SPP THAT WAS PREVIOUSLY CONNECTED TO AN ISOLATED MINI-GRID
Options available to SPP when the ‘big grid’ arrives [Rule 40]
When the main grid arrives, the SPP may apply to operate as:
a)
An SPP selling to a DNO that is connected to the main grid (with
new main-grid PPA);
b) an SPD that purchases electricity in bulk from a DNO for resale to
retail customers; or
c) a combination of an SPP and an SPD.
9
When 'big grid' connects to the 'little grid‘ (2)
Mini-grid SPP transitions to sell to main-grid [Rule 40 (2)]
Mini-Grid requests the EWURA to operate as a SPP selling bulk electricity to
the Main Grid.
•Mini-Grid SPPA terminates and the parties shall conclude a new Main-Grid
SPPA .
•Tariff is now the tariff governing wholesale SPP electricity sales to
TANESCO’s main-grid.
10
Small power distributor (SPD)
in Part VII: SMALL POWER DISTRIBUTORS AND CONNECTION TO THE MAIN GRID OF
AN SPP THAT WAS PREVIOUSLY CONNECTED TO AN ISOLATED MINI-GRID
Process of becoming an SPD [Rule 41]
(1) Entity wishing to operate as SPD submits letter to DNO requesting:
a)
Power availability
b) specify a wholesale tariff for the purchase of electricity by the SPD
from the DNO.
(2) If DNO fails to answer in 30 days, then entity wishing to operate as SPD
may propose its own retail and bulk supply tariff to EWURA.
(3) Tariffs need not be the same as National Uniform Tariff.
Bulk supply tariffs [Rule 42 (1)]
A bulk supplier of electricity to an SPD shall charge a tariff as shall be
approved by EWURA, which shall be computed based on tariffs that similarly
situated customers are charged.
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Retail Tariffs (1)
in Part VIII: TARIFFS
Retail tariffs charged by SPP/SPD must be commercially viable [Rule 44 (a)]
•
covering operating costs and depreciation
… But not excessive [Rule 44 (b)]
•
reasonable return on equity allowed
Tariffs may take into account ability to pay of customers [Rule 44 (c)]
•
For example, charging small residential customers below-market rates
and higher tariffs to commercial customers
12
Retail Tariffs (2)
Sales to eligible customers [Rule 45]
•
(involving a contract of 3 years or more with a business or commercial
customer) do not require approval by Authority.
Retail tariff structure proposed by SPP is not limited to ‘standard’ kWh
tariff types [Rule 46]
•
Flat tariffs, power-tariffs, etc. are allowed. But to be accepted by the
Authority, any tariff must reflect prudently incurred costs and
reasonable efficiency.
13
Retail Tariffs (3)
Project evaluation spreadsheet [Rule 47]
•
an SPP developer may submit proposed tariffs calculated based on a
project evaluation spreadsheet developed initially by REA.
Inputs
Project Inputs
Plant Capacity
Capacity Factor
Annual Generation
# Connections
460
68%
2,740
882
KW
Mwh
Generation Costs
USD 000s TSH Mn
Generation
1,008
1,512
Soft Costs
580
870
Grid Connection
389
584
Grid Extension
596
894
Total Investment
2,573
3,860
REA Grants
441
$662
Investment (excl. grants)$2,132
$3,198
39%
23%
15%
23%
Revenues
Tsh /kwh US
Tanesco
87%
360.0
Business
11%
360.0
Households & Inst.
3%
100.0
Average Tariff
355.8
Carbon Revenues
9.0
Operating Costs USD 000s TSH Mn US
Salaries
30
$45
Maintenance
26
$39
Fuel Costs
0
$0
Other
0
$0
Total
55.7
83.6
24.2%
49.4%
$1,599
$664
Cost recovery Tariff
Capital Investments 5.59
Operating Costs
2.0
Output Per Watt
5.96
Capital Recovery
13.68
Total
15.7
236
Other Inputs
Construction Time
Collection Efficiency
Distribution losses
Tariff inflation
CPI
Terminal value
Exchange Rate
1.5
90%
5%
2.0%
6.0%
0.0
1,500
Cash Flow $ '000s
Investment
Increase in WC
Equity
Debt
1
$1,715
$0
$515
$1,201
2
$858
$26
$257
$600
3
$0
$0
$0
$0
4
$0
$0
$0
$0
5
$0
$0
$0
$0
6
7
8
9
10
11
12
13
Revenue (c/ kwh)
Total Revenues
Operating Costs
Operating Cash flow
24.3
$0
$0
($1,715)
24.8
$453
$39
($444)
25.3
$693
$63
$630
25.8
$706
$66
$640
26.3
$720
$70
$650
26.8
$734
$75
$659
27.3
$748
$79
$669
27.8
$763
$84
$679
28.4
$778
$89
$689
28.9
$793
$94
$699
29.5
$809
$100
$709
30.1
$825
$106
$719
Depreciation
Capital Structure
Equity Share
Required returns
Loan Rate
Loan Grace Period
Loan Term
WACC***
Outputs
Project Returns
Project IRR
Equity IRR
Project NPV
Equity NPV
c/kwh
24.0
24.0
6.7
23.7
0.6
c /kwh
1.09
0.94
0.00
0.00
2.0
Years
times exit FCF
TSH / USD
30%
15%
15%
3
15
11.9%
Equity
REA grant
Loan
USD 000s TSH Mn Schedule
1
331
496
Construction
67%
441
662
Operations
0%
1,801
2,702
Other Assumptions
Depreciation period
20
Corporate Tax rate
30%
Tax holiday
0
$/W
c/ kwh
Kwh / W
c/ kwh
c/ kwh
TSH / kwh
2
33%
67%
http://tinyurl.com/rea-spp
3
0%
100%
4
0%
100%
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15
Residual
Value*
30.7
$841
$112
$729
31.3
$857
$119
$738
31.9
$874
$126
$748
Years
Years
$0
$129
$129
$129
$129
$129
$129
$129
$129
$129
$129
$129
$129
$129
$129
Loan Payments
Interest
Principal
Loan Balance
$0
$0
$0
$1,201
$0
$180
($180)
$1,981
$0
$297
($297)
$2,278
$420
$342
$79
$2,200
$420
$330
$90
$2,109
$420
$316
$104
$2,006
$420
$301
$119
$1,886
$420
$283
$137
$1,749
$420
$262
$158
$1,591
$420
$239
$182
$1,409
$420
$211
$209
$1,200
$420
$180
$240
$960
$420
$144
$276
$683
$420
$102
$318
$365
$420
$55
$365
$0
$0
$0
$0
$0
Effective tax
Equity CF
DSCR
$0
($515)
0.00
$0
$156
0.00
$61
$569
0.00
$51
$169
1.52
$57
$172
1.55
$64
$175
1.57
$72
$177
1.59
$80
$179
1.62
$89
$179
1.64
$100
$179
1.66
$111
$178
1.69
$123
$175
1.71
$137
$171
1.73
$152
$166
1.76
$169
$158
1.78
$0
$0
0.00
49%
* PV at year 15 for revenues from year 16-25
*** WACC = Equity share * ROE + Debt Share * Loan rate * (1- tax rate)
Community notification [Rule 48]
•
Community notification is required about proposed tariff levels – public
meetings, TV, radio, or public notices
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Tariffs for Backup Power
in Part VIII: TARIFFS
Backup power tariff [Rule 49]
If the three most recent consecutive billing period show a load factor of 15%
or less, then the SPP shall be charged a maximum demand charge equal to
50% of the demand charge per kVA that other customers with standby
power tariffs are charged.
15%
Load factor
50%
Demand charge
15
Very Small Power Producers (VSPP) (1)
In Part XI: VERY SMALL POWER PRODUCERS
Exempt from SPP rules [Rule 53]
•
VSPPs are exempt from SPP rules, but may choose to opt-in to avoid risk
of competing claims on resources (e.g. hydro);
wholesale to DNO [Rule 55]
•
LOI needed if VSPP intends to sell electricity at wholesale to a DNO
16
Very Small Power Producers (VSPP) (2)
VSPP Not obligated to apply to EWURA for retail tariff approval [Rule 56]
•
but the EWURA may review the VSPP’s retail tariff upon receipt of a
complaint from any VSPP retail customer.
Wholesale tariff [Rule 57]
•
VSPP wholesale tariff selling to the DNO is same as SPP wholesale tariff.
17
Provisional license
In Part VI: LICENSING REQUIREMENTS
Background: provisional licence is optional. Covers preparatory activities
such as conducting assessments, studies, financial arrangements, land
acquisition, construction, and other activities necessary for applying for a
licence.
Required in application for provisional licence [Rule 28 (2)]:
a)
b)
c)
d)
e)
f)
a concept proposal or a business plan;
prescribed fee;
proof of financial capability a proposed financing plan;
a proposed site layout showing planned location of major facilities;
any document which was submitted to REA and other Government
entity and which is relevant to the project; and
memorandum of understanding or a letter of intent, if any.
18
Transfer of license, changing name or
shareholding structure, renewal of license
•Rules 35-37
Part VI: LICENSING REQUIREMENTS
Application for transfer or assignment of license [Rule 35]
•Requires endorsement by transferror or the assignor
•Notice of application published in two newspapers
•Public comment period 2 weeks
Change name or shareholding structure [Rule 36]
•SPP or SPD submits letter to Authority
•Authoirty may consult Fair Competition Commission or Tanzania
Revenue Authority
Application for Renewal of Licence [Rule 37]
•Submit application not more than 6 months before expiry
19
Reporting and compliance (1)
In Part XII: Reporting and compliance
Annual reports [Rule 58]
•
SPP to submit annual report to EWURA within 90 days of end of SPP’s
financial year
Penalty for false information or refusal to provide information [Rule 59]
•
First time: 3 million shillings
•
Second time: 10 million shillings and license suspended
20
Reporting and compliance (2)
In Part XII: Reporting and compliance
Audits [Rule 60]
•
SPP shall conduct audit when directed by EWURA
•
Audit conducted by independent auditor
•
Audit costs paid by EWURA
•
EWURA may conduct its own audit.
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SPP Working Group
in Part IX: WORKING GROUP ON SMALL POWER DEVELOPMENT
Representation [Rule 50]
•
•
•
•
•
•
One representative from Ministry
Two representatives from EWURA
One two representative from DNO
One representative from academia
One representative from SPP developers
Two representatives from chosen by EWURA
22
SPP Working Group (2)
Responsibities of SPP working group [Rule 51]
•
acting as a representative of the key stakeholders;
•
liaising with advising the Authority on matters related to annual
computations of SPP Tariffs (EWURA does calculations) and other
regulatory matters affecting small power development; and
•
advising EWURA on improvement of SPP rules
23
SPP Working Group (3)
Advice as members [Rule 51 (3)]
•
Members of the Working Group may give advice as individuals in the
absence of a shared Working Group view.
Views available to public [Rule 51 (5)]
•
All written views provided to EWURA by the Working Group, individual
members or other organizations and individuals shall be made public.
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Next Steps
• Following the approval of the EWURA Board, the draft THE ELECTRICITY
DEVELOPMENT OF SMALL POWER PROJECTS RULES, 2012 were released for
stakeholder comment on 8 June, 2012
• Three week comment period ends 30 June, 2012
Please submit written comments to EWURA
• A final version of the Rules will be put to the EWURA Board for approval
• The Rules will be gazetted and will enter into force
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Thank you
Written comments are welcomed via the following channels:
• Post or in person at:
Director General
Energy and Water Utilities Regulatory Authority (EWURA)
P.O. Box 72175
6th Floor, Harbour View Towers
Samora Avenue
Dar es Salaam, Tanzania
• Fax: +255 22 212 3180
• Email: [email protected]
Clarification questions on this presentation:
[email protected]
or
[email protected]
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