The core mandate of the Electricity Control Board (ECB) is to exercise control over the electricity supply industry with the main responsibility of regulating electricity generation, transmission, distribution, supply, import and export in Namibia through setting tariffs and issuance of licenses. The ECB executes its statutory functions through the Technical Secretariat headed by the CEO.

The ECB is a statutory regulatory authority established in 2000 under the Electricity Act 2 of 2000, which has subsequently been repealed by the Electricity Act 4 of 2007, the latter Act having expanded the ECB mandate and core responsibilities. 

The technical secretariat, headed by the CEO, is responsible for the day-to-day management of the affairs of the ECB and the provision of sound technical advice to the board on matters relating to the statutory functions of the ECB (licensing, tariffs, quality of supply, dispute resolution, industry restructuring, etc).

New Era’s head of business and lifestyle Edgar Brandt (EB) recently interviewed the ECB’s acting CEO, Pinehas Mutota (PM), on the current state of affairs, expected tariff increases and how Namibia’s pricing structure compares to other countries. 

EB: How does the socio-economic impact of the Covid-19 pandemic and general state of the domestic economy inform ECB-approved tariff increases?

PM: The Electricity Control Board (ECB) is cognizant of the fact that the economy is affected by impacts of the Covid-19 pandemic, but it is equally dependent on reliable and affordable electricity supply. It is the responsibility of the regulator to ensure a sustainable electricity industry at affordable tariffs. In reviewing the tariff, the ECB considered several factors, including the impact of the tariffs on the Electricity Supply Industry (ESI), consumers and the economy at large, the impact of the Covid-19 pandemic on several industries and the consumers, as well as the current economic climate. The ECB is cognisant that prices of goods and services have been increasing, which are negatively affecting consumers. Any tariff change considered by the regulator must ensure reliable and affordable electricity.

EB: To what extent do Namibian renewable electricity generators contribute to the Southern African Power Pool?

PM: Namibia continues to be a net electricity importer. Currently, all power generated by the renewable Independent Power Producers (IPPs) in Namibia is consumed locally. With the introduction of the Modified Single Buyer Market Framework, which allows IPPs to develop plants for export purposes, the ECB has issued several generation licenses for export. We are expecting that Namibia will become an electricity exporter in the near future.

EB: What strategies has the ECB employed to ensure its financial sustainability in the short, medium and long-term in light of reduced levies as a result of slowing economic activities?

PM: The ECB’s operations are primarily supported by levy income-generated by the sale of electricity units. The decline in economic activity has had a significant impact on ECB levies. To ensure the ECB remains financially sustainable, our short to medium-term strategy is to manage our operational costs by streamlining our business processes and reducing costs on avoidable expenditures.

EB: What progress is being made in the appointment of a substantive CEO at ECB?

PM: The recruitment of the CEO is being dealt with by the board and the Minister of Mines and Energy, taking into consideration the provisions of the Electricity Act and the Public Enterprises Governance Act. The process is ongoing

EB: How many generation and export licenses have already been issued by the ECB?

PM: The ECB issued 73 generation licences (includes standby gensets, representing various technologies, such as renewables (hydro, solar PV, wind and biomass) and Thermal technology (coal, diesel and heavy fuel oil). In total, these licences represent 1 859 66MW installed capacity.

The ECB further issued 7 export licences. There are currently several licences under review, including 12 generation licence applications, representing solar PV and wind plants

We expect to issue seven additional export licences.

EB: How will the envisaged green hydrogen-generated electricity be integrated in the domestic energy mix?

PM: The domestic energy mix is guided by the National Integrated Resource Plan (NIRP), which is a national long-term electricity generation plan for the country. Should electricity from the green hydrogen project be integrated in the domestic energy mix, it will have to be incorporated in accordance with the NIRP, which has an allowance for renewable energy contribution.

EB: What is the consumer cost impact anticipated from the electricity to be produced from planned green hydrogen projects in the country?

PM: Due to economies of scale, it is anticipated that electricity generated by the green hydrogen project will be competitive, and this will have a positive impact on the overall industry.

EB: What are the benefits of the ECBís Modified Single Buyer Framework for local entrepreneurs?

PM: The Modified Single Buyer is intended to promote more private sector investment in the generation of electricity in the country. Local entrepreneurs can participate in the electricity supply industry by engaging potential contestable customers on a bilateral basis, and they do not need to only sell electricity to utilities. It is established that through the MSB, there is approximately 472MW solar PV equivalent that sellers and consumers can transact amongst each other. It is important that the opportunities are not only in becoming an IPP, but the entrepreneurs can participate as contractors, service providers, maintenance/servicing for the industry, finances, insurance, advisors, etc.

EB: What is the ECBís forecast for domestic electricity tariffs for the next five years?

PM: Future tariffs are expected to increase in line with inflation and to cater for new generation as per the National Integrated Resource Plan. However, we must realise that external factors, such as the weather and water flows in the Kunene River, impacting on the operations of Ruacana, foreign exchange fluctuations and other unforeseen circumstances may affect the projected price path; they must be taken into consideration when reviewing future tariff applications.

EB: How do Namibiaís electricity tariffs compare regionally, continentally and globally?

PM: When comparing tariffs, it is important to understand the different tariff regimes and national policies adopted in the comparing countries.

The Southern Africa Development Community (SADC) had tasked its member states to adopt cost reflective tariffs by 2013; the target was revised to 2019. It is recognised that cost reflectivity is a necessary condition for the long-term viability and sustainability of the ESI for all countries in the SADC region. Tariffs that are set at a level that allow utilities to cover their full costs of providing service have many benefits in that they:

• are more likely to attract private sector investment into IPPs;

• lead to more creditworthy and financially viable utilities;

• often increase regional cross-border electricity trade;

• encourage the appropriate and efficient use of scarce resources, and

• facilitate a self-funding power sector that allows governments to reallocate scarce resources to other high priority needs (e.g., education and healthcare).

While several countries have made significant progress in reforming their tariff methodologies, most SADC member countries’ tariffs remain below full-cost reflectivity, or they are impacted by different forms of subsidy payments.

In 2005, Cabinet resolved that (Decision number 21/20 09.05/006) NamPower tariffs should reach and remain cost reflective by the financial period 2010/201 1, revised to the financial period 2011/2012, of which the target is met.

Amongst all SADC Member States, only Namibia, Madagascar and Seychelles have cost-reflective tariffs. 

In comparison, the other countries are either receiving some sort of state subsidies or collecting insufficient revenue to cover operational costs, hence shortages of power in some instances.

It is worth-noting that utilities with non-cost reflective are unable to supply electricity effectively and constantly rely on government subsidies to provide electricity.

At a regional level, the Namibian tariff levels (average of N$2.48/kWh) are almost the same with other countries that do not receive subsidies, and tariffs are cost reflective, i.e. at around N$2.00/kWh to N$2.60/kWh, depending on consumption patterns.

At a continent level, the Namibian tariff levels (average of N$2.48/kWh) are almost the same with other countries that do not receive subsidies, and tariffs are cost reflective, i.e. at around N$2.00/kWh to N$3.95/kWh, depending on consumption patterns.

At an international level, comparing a developed nation to a developing nation might not be ideal, since a developing nation might have different policies: i.e. end user tariffs in Germany can go up to N$5.90/kWh, however the market and the level of economy are not the same as to Namibia. This, in our view, is not comparable.