Electricity Regulation: Uganda is leading the pack in Africa

East African neighbors Kenya and Tanzania, as well as Namibia and Egypt, are also strong performers.

According to the African Development Bank’s 2021 Electricity Regulatory Index, Uganda’s electricity sector is the best regulated in Africa for the fourth year in a row. East African neighbors Kenya and Tanzania, as well as Namibia and Egypt, are also strong performers.

Nigeria was ranked 23rd, trailing South Africa (10th) and Ghana (23rd) (17).

The 2021 Electricity Regulatory Index, an annual report, assessed the impact of 43 countries on the performance of their electricity sectors, up from 36 in the previous edition. The index included three countries in North Africa, fourteen in West Africa, six in Central Africa, seven in East Africa, and thirteen in Southern Africa.

“The unprecedented participation of so many countries demonstrates the commitment to strengthen the countries’ regulatory environment in order to improve the performance of the respective electricity sectors,” said Kevin Kariuki, Vice President for Power, Energy, Climate, and Green Growth at the African Development Bank.

Regulatory independence is one sub-indicator where African countries have room to improve, according to the 2021 report: governments and stakeholders have influence over regulatory authorities in 93 percent of sampled countries. When compared to best practice, participating countries scored the lowest on the adequacy of their tariff setting and frameworks, as well as licensing frameworks, in terms of regulatory substance.

According to the report, average economic regulation performance has been declining since 2018. A third of the countries polled stated that they lack tariff methodologies; another 40% rely on tariff methodologies that lack key features such as automatic tariff adjustment and tariff indexation mechanisms, as well as a schedule for major tariff reviews.

The African Development Bank’s Director for Energy Financial Solutions, Policy, and Regulation, Wale Shonibare, praised the top-performing country. “The fact that Uganda has topped the rankings for four years in a row comes as no surprise to many, as the regulator spends significant time on consultation and analysis, including regulatory impact assessments of key interventions and follow-through to ensure full implementation,” he said.

Outside stakeholders were also pleased with the report’s findings. “It is interesting that the utilities in most of the top-performing countries in the Electricity Regulatory Index are listed on their national stock exchanges, which requires compliance with transparency in information sharing and good governance practice,” said Abel Didier Tella, Director General of the Association of Power Utilities of Africa.

Since its inception in 2018, the Electricity Regulatory Index has identified areas of electricity regulation in need of reform, identified appropriate areas for intervention, and encouraged stakeholders to be proactive in addressing challenges. Since then, the index has been widely adopted as a benchmark for the regulatory environment as well as ongoing reforms by regulators and other stakeholders across the continent.

Returning Footsteps

The report comes as the Nigerian government faces criticism for its apparent decision to remove the influence of the privately-run Abuja Electricity Distribution Company’s management. The company serves the states of Abuja, Niger, Kogi, and Nasarawa.

According to the power ministry, President Muhammadu Buhari has demanded a new management team for the company, in which the government owns only 40%. For years, the company has been embroiled in an ownership dispute that has had a negative impact on its operations.

Workers at the firm shut down electricity facilities on Monday, causing the federal capital, Abuja, Kogi, Nasarawa, and Niger to go dark. They claimed that the company had failed to pay their pension contributions and other benefits for nearly two years.

Other officials told PREMIUM TIMES that, while the company has been making such deductions from employees’ salaries, it claims it lacks the financial resources to pay them to pension authorities.

The government’s intervention on Monday helped to end the strike, but analysts say the government lacked the authority to remove the management as it had announced.

“The president has no such powers,” Sam Amadi, a former chairman of the Nigerian Electricity Regulatory Commission, said. “Even if the federal government owns a 40% stake in the assets, those shares are held for it by the Bureau of Public Enterprises, which also has a seat on the (firm’s) board.” So the best we can do is use our board membership to influence policy changes.

“And the fact that the federal government has sovereign power does not change the fact that the only way to protect public interest in the sector is through regulation; any other action will appear to be nationalization of those assets.”

The government reversed its earlier announcement on Wednesday, saying that the decision to fire the AEDC’s management was made by the company’s lender, UBA, which disclosed that it had taken over AEDC after the company failed to repay its credit.