Theft / Non-Technical Losses (Water and Electricity)

Photo Credit: Image by alcangel144 from Pixabay 

Legislation and Practical Measures

Perhaps one of the greatest challenges in successfully operating a PPP related to utility services is to effectively deal with “non-technical losses” – a euphemism for theft – of utility services. These are due primarily to illegal connections to existing networks, tampering or bypassing with metering equipment or refusal to pay for service. Depending on the sector and the country, the rate of non technical losses can be over 50% of output, which causes a significant challenge to the viability of a PPP project and hinders development of infrastructure to extend services to under-served areas and improve services to existing customers. 

Ultimately, the burden of these losses is carried by paying customers with higher tariffs, the tax payer through subsidies and/ or the poor with deficient, if at all existent, service.

Below are some examples, by no means exhaustive, of innovative initiatives to address non-technical losses by sector:

In response, various countries have taken a combination of legal and practical measures to address the problem. Given the essential nature of some utility services and the rampant extent of the problem, traditional courts may be reluctant to enforce the theft of utility services as a common theft offense. Some have enacted legislation specifically recognizing the theft of utility services as a separate criminal offense and in some cases establishing special administrative courts and judicial measures to enforce these new laws. Others have worked actively with consumers and community leaders through town halls and public relations campaigns to address concerns of inadequate service, employ local laborers for improvement projects and improve metering equipment.

Electricity

India and Andrah Pradesh Province

  • Reforming the Power Sector - This note gives a general background of the main initiatives for controlling electricity theft and improving revenue in the Andrah Pradesh region launched in January 2000. These included primarily: the enactment of legislation making electricity theft a separate offence, creating separate enforcement mechanisms, streamlining anticorruption efforts of utilities and reengineering business processes to improve service. Published by Bhavna Bhatia and Mohinder Gulati on September 2004.
  • The Electricity Act of 2003 (Federal), as amended in 2007 – Indian federal law which codifies electricity theft as a separate offence. Sections 135 through 139 illustrate the various electricity theft offenses and Sections 153 to 157 deal with the establishment, by state governments, of "Special Courts" for the administration of prosecutions for these specific offenses. This Act enables officers of the utility company to search for illegal connections, gather evidence and seize instruments and devices used for the illegal connections, so long as it is done in compliance with protections under the criminal code, and prepare a complaint to be given to a magistrate for prosecution. It also makes theft of electricity a cognizable offense punishable by up to three years in prison, which enables the police to make an arrest without a warrant.
  • Andhra Pradesh Electricity Regulatory Commission (Electricity Supply Code) Regulation No.5 of 2004 - specify conditions for disconnection of service due to non-payment in Section 4.8. and procedures and consequences for tampering, distress or damage to electrical plant, lines or meter under Section 7.
  • General Terms and Conditions of Supply of the Distribution and Retail Supply Licensees within the State of Andhra Pradesh – guidelines proposed by the electricity distribution companies and approved by the regulatory body that specify the procedures to monitor and enforce electricity theft, as described in Clause 10.

South Africa

  • South African Revenue Protection Association (SARPA) - In South Africa, utilities involved in the supply of electricity, water, communication and related services as well as contractors, manufacturers, and consultants involved in the field of revenue protection have formed a not-for-profit association dedicated to promoting "the exchange of information and finding of solutions in the field of protecting the income and assets of utilities against pilfering, misallocation and misappropriation”. Related papers and presentations on this topic are posted.

Turkey

  • Turkey – Criminal Code (unofficial English translation) – Turkey has focused on industrial and large scale consumers. In its Section 184, it provides for a period of imprisonment, from 1 to 5 years, for anyone who illegally constructs or continues to operate a building with an illegal electrical connection

France

  • France French had originally sought to rely on the general provisions of the Constitution regarding protection of property but, as the jurisprudence was not clear on the issue, a specific offence was created under the Code Penale – Article 311-2

Algeria

  • Code Penal Art. 350 - A new article 350 was introduced into the Code Penale in 2006 (by loi no.06.23 du 20 decembre 2006) to include fraudulent extraction of water, electricity and gas as theft, punishable from 1 to 5 years in prison and fines from 500 to 20.000 dinars.

Water

  • While water is deemed an essential resource, there has been an increasing appreciation of properly treated water as a resource that has both value and cost. In order to ensure a safe water supply and to protect such supply, some countries have enacted provisions prohibiting the tapping of water works and diversion of treated water.

Cambodia

Colombia

  • Cartagena, Colombia Case Study – Through the creation of a Public-Private Partnership, AGUACAR, the water and sanitation utility in the city of Cartagena, Colombia, significantly reduced nontechnical losses. The initiatives of the company were geared towards engaging the local community. AGUACAR began immediate service to those not connected to the system by establishing a system of water truck deliveries to serve low-income communities and hired local laborers to work on improvement works. The financing for these came in part from a restructuring of the tariff system, to incorporate cross-subsidies, under which more affluent customers helped subsidize the water rates to lower income families.

Additional Laws and Regulation

General Materials

Materials discussing Power Purchase Agreements ("PPA"s):

Sample Laws and Regulations

I. Sample Laws

Brazil

Legislação Básica Do Setor Elétrico Brasileiro (pdf) (Basic Law of Brazilian Energy Sector) - This guide reviews relevant Energy Legislation in Brazil. It is a recent comprehensive document published by Brazil's National Energy Agency "Agência Nacional de Energia Elétrica – ANEEL" Published June 2010, in Portuguese.

Egypt

Electricity Laws and Decrees - This Web site of the Egyptian Electricity Regulator also has links to Licences (in English and in Arabic).

Jordan

Electricity Law (EN and Arabic) - This legislation is designed to foster the development of independent power producer IPP projects in Jordan, with a view to the eventual establishment of a competitive power market, subject to regulation by an independent Electricity Sector Regulatory Commission. This legislation was issued by the government in 2002 as a "Temporary Law", pending approval by the Jordanian Parliament. This approval has not yet been given, although the Parliament did debate the law in March 2008, before sending it to the Parliament's Energy Committee for further study. However, notwithstanding this 'temporary' status, the law has been in full legal force since 2003, and it governs the operation of the power generation and distribution companies in Jordan, as well as the Jordanian Electricity Regulatory Commission (the Jordanian ERC Web site includes licences and performance standards in English and in Arabic).

Kenya

Kenya Energy Act 2006 - This law converts an advisory regulator, the Energy Regulatory Board, into a decision making regulator, the Energy Regulatory Commission. The law also gives the new commission explicit authority over imports and exports of electricity. It is important that it be defined more clearly because many new power projects envisioned for Africa will involve major imports and exports of power and the nature of the regulatory review can affect the success or failure of these projects. The act and regulations can be found on the Kenya Energy Regulation Commission (ERC) Web site.

Mozambique

Minister of Energy's July 2006 directive (Non-official translation of the original directive in Portuguese)

The existing law in Mozambique requires that the regulator be an advisory regulator rather than a regulator with final decision making authority. In this directive, the Minister has decided to create a "strong" advisory regulator. The directive emphasizes the need for transparency and public hearings by the advisory regulator. Another unusual feature is that the Minister has directed that the regulator be responsible for monitoring the performance contract that was established between the government and EdM, the state owned electricity enterprise. This may be the first time that an African regulator has been given this responsibility.

Namibia

Government Electricity Act 2000 and Namibia Electricity Act 2007 (PDF) - to establish the Electricity Control Board and provide for its powers and functions; to provide for the requirements and conditions for obtaining licences for the provision of electricity; to provide for the powers and obligations of licensees; and to provide for incidental matters. The Web site of the Electricity Control Board has links ot the laws and regulations and the licensing arrangements, including application forms for licenses.

South Africa

Electricity Regulation Act 2006 - An act to establish a national regulatory framework for the electricity supply industry; to make the National Energy Regulator NERSA the custodian and enforcer of the national electricity regulatory framework; to provide for licences and registration as the manner in which generation, transmission, distribution, trading and the import and export of electricity are regulated.

Singapore

Energy Market Authority - Electricity Laws and Regulations, Gas Laws and Regulations.

Tanzania

Tanzania Electricity Act 2008 - An act to provide for the facilitation and regulation of generation, transmission, transformation, distribution, supply and use of electric energy, to provide for cross-border trade in electricity and the planning and regulation of rural electrification and to provide for related matters. The section on regulation of rural electrification authorizes EWURA, the national electricity regulator to:

  1. Vary the nature of its regulation depending on the characteristics of the entity performing the electrification;
  2. Delegate regulatory responsibilities to other entities.

The EWURA Web site includes links to regulations and standards and licenses and license application forms. Compare this with the Tanzania Draft Electricity Bill (2006, the original draft of the act).

Uganda

Electricity Act 1999 - An act to provide for the establishment of the Electricity Regulatory Authority; to provide for its functions, powers and administration; to provide for the generation, transmission, distribution, sale and use of electricity; to provide for the licensing and control of activities in the electricity sector; to provide for plant and equipment and for matters relating to safety; to liberalize and introduce competition in the electricity sector; to repeal the Electricity Act, Cap 135 and the Uganda Electricity Board (Special provisions) Act, Cap. 136; to provide for a successor Company to the Uganda Electricity Board, and for connected purposes. The Electricity Regulatory Authority Web site includes links to licenses and application forms as well as regulations and standards and a Uganda proforma power purchase agreement (PDF).

See also Uganda's PPP Act in relation to the power sector.

Zambia

Energy Regulation Act 1995 (PDF) - An act to establish an Energy Regulation Board and to define its functions and powers; to provide for the licensing of undertakings for the production of energy or the production or handling of certain fuels; to repeal the National Energy Council Act and the Zambia Electricity Supply Act. The Energy Regulation Board of Zambia Web site has links to a number of standards, including a Grid Code. Other Energy Legislations.

II. Regulations

Regulation in Practice - Evaluation of Regulatory Systems

Regulatory systems often do not operate as planned because frequently there is a big gap between what is written in the law and what is implemented in practice. In situations where the regulatory system is not operating well, the World Bank often recommends independent and public evaluations of the system.

Such evaluations have now been performed several countries or regions (Mongolia, Brazil, the Eastern Caribbean and India). A roadmap for performing such evaluations can be found in the World Bank/ PPIAF Handbook For Evaluating Infrastructure Regulatory Systems (pdf)

Sample Evaluations:

USAID Evaluation of the Mongolian electricity regulator (2006) (pdf)

Evaluation of ANEEL, the Brazilian electricity regulator

Evaluation of the Jamaican regulatory system

Small Grid and Off-Grid Connected Renewable Generators

Please find below some useful documents and links:

Tanzania

Namibia

Bangladesh

Policy Guidelines for Small Power Plant in Private Sector (pdf)

Rural Electrification Funds

To generate solutions for rural electrification in Africa, an innovative program, the Africa Electrification Initiative (AEI), seeks to create and sustain a living body of practical knowledge and a network of practitioners in the area of design and implementation of rural, peri-urban and urban on-grid and off-grid electrification programs. Find sample practical operational documents from around the globe and more here.

China Legal Framework

In China, the legal environment for PPP energy projects has rapidly progressed. The legal framework is a sophisticated system with distinctive hierarchies.

There are national laws, ministerial regulations, guiding opinions, measures and procedures, local rules and regulations, self-regulation rules of the industry and internal governance rules for each of the state-owned power companies and grid companies. Interestingly, use is also made of the concept of 'trial' rules and procedures, whereby new concepts are introduced for stakeholder comment, before becoming fully effective. Find more.

Theft of Electricity / Non-Technical Losses

Perhaps one of the greatest challenges in successfully operating a PPP related to utility services is to effectively deal with “non-technical losses” – a euphemism for theft – of utility services. These are due primarily to illegal connections to existing networks, tampering or bypassing with metering equipment or refusal to pay for service. Depending on the sector and the country, the rate of non technical losses can be over 50% of output, which causes a significant challenge to the viability of a PPP project and hinders development of infrastructure to extend services to under-served areas and improve services to existing customers. Find legislation and practical measures here.

Useful Links

Click on the links below to find legislation, regulations, regulatory decisions for each of the following countries:

Africa

Cameroon

Kenya

  • Kenya Water Act 2002 - The Act provides for the decentralisation of powers from the national to the regional and local level; the separation of water resources management from water and sanitation service delivery, as well as the institutional separation of policy, regulatory, asset holding and operational functions. Following the provisions of the Act, the transfer of asset ownership from the Water Ministry and the National Water Corporation to seven regional Water Services Boards (WSBs), and most local governments have handed over their assets to the WSBs. While the WSBs are in charge of asset development and bear overall WSS service responsibility within their areas of jurisdiction, they appoint Water Services Providers (WSPs) to actually provide the service. In urban areas WSPs are mostly local authority-owned utilities that have been established as commercialized, publicly owned companies. In rural areas community-managed projects are being transformed into formally recognized WSPs. The Water Services Regulatory Board has been created to supervise water services provision.
  • Performance Contract between Government of Kenya and Water Services Regulatory Board setting out service obligations required from the Kenyan water regulator by the Government of Kenya.
  • PPIAF - Gridlines article - Helping a new breed of private water operators access infrastructure finance

Uganda

Senegal

South Africa

Europe

UK - England and Wales

Central and South America

Argentina

  • Province of Salta - Laws, Regulations and Concession Contract can be found on Ente Regulador's site (Salta's public services utilities regulator)

Chile

Colombia

Honduras

Asia and Pacific

Australia: Tasmania

  • Tasmania Water and Sewerage Industry Act 2008 - An Act to provide for the establishment of an economic regulatory framework for the water and sewerage industry, including the establishment of a licensing regime and providing for the regulation of prices, customer service standards and performance monitoring of that industry and for related matters.

Vanuatu

Vietnam

  • Vietnam Decree on Clean Water Production, Supply and Consumption 117/2007._ A decree to facilitate the role of private sector in the delivery of water supply in urban areas, rural areas, industrial parks, export processing zones, hi-tech parks and economic zones by providing a legal and institutional basis for undertaking water supply contracts with water providers. The decree delineates the various roles of key institutional players in water supply planning and investment; espouses competition in contracting the services in the delivery of water supply services; encourages cost recovery, provision of investment incentives and ensures the participatory approach in drawing up water supply services contracts.

Further Reading

Download Page as PDF

Updated: December 2, 2020

Related Content

Related Resources