Theft / Non-Technical Losses (Water and Electricity)
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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. India and Andrah Pradesh Province South Africa Turkey France Algeria Cambodia Colombia
Additional Laws and Regulation
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.
India and Andrah Pradesh Province
World Bank Paper: Electrification and Regulation - Principles and a Model Law (pdf)
World Bank/ PPIAF: Handbook For Evaluating Infrastructure Regulatory Systems (pdf)
Materials discussing Power Purchase Agreements ("PPA"s)
An Analysis of Independent Power Projects in Africa: Understanding Development and Investment Outcomes
SARI: Final Report on Wholesale Electricity Prices in South Asia 2003 (pdf)
NERC: Notice of Proposed Rulemaking PPA for Captive Customers
Sample Laws and Regulations
I. Sample Laws
The Australian electricity market is governed by a relatively complex regime of regulatory instruments, and provides a good example of a more deregulated and market-oriented model of power sector regulation. The electricity networks on the Australia eastern seaboard are operated as a single market and principally regulated through:
Uniform National Electricity Laws and Regulations passed by each of the participating states (see for example National Electricity (South Australia) Act 1996 and National Electricity (South Australia) Regulations).
National Electricity Rules made by a market regulator, Australian Energy Market Commission ("AEMC").
Electricity is supplied and traded in a common, regulated market through a large number of private participants (e.g. generators and retailers) rather than through a centralized government monopoly. The national electricity regulatory regime addresses the following core subject matters: access to the electricity network, market operations, network security and planning, metering and dispute resolution. A separate regulator, Australian Energy Regulator ("AER"), is responsible for enforcement actions under the electricity laws, regulations and rules. While a third regulator, Australian Energy Market Operator ("AEMO") is responsible for operation of the electricity market.
Electricity networks along the western and northern seaboards of Australia are operated as separate markets with their separate regulatory regimes.
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.
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. See China Legal Framework - Energy Laws and Regulations.
Electricity Laws (in Arabic)
The Egyptian Electric Utility and Consumer Protection Regulatory Agency (“EgyptERA”) is an independent government agency established by law, empowered to regulate, supervise and develop electricity generation, consumption, transmission and distribution. Its website has links to production licenses, distribution licenses, and licenses for both production and distribution (in Arabic).
Electricity Law (in Arabic and English) - 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 Sector Regulatory Commission (“ERC”). The website of the Jordanian Ministry of Energy and Mineral Resources has links to other relevant laws and regulations.
Kenya Energy Act 2019 - This Act provides for the establishment of energy sector entities and regulates the production, supply and use of energy. Additionally, it establishes the Energy and Petroleum Regulatory Authority ("EPRA") as the successor to the Energy Regulatory Commission (“ERC”). Like the ERC, the EPRA has explicit authority over imports and exports of electricity. It also has an expanded mandate that includes regulation of upstream petroleum and coal. Relevant regulations for petroleum, electricity and renewable energy can also be found on EPRA’s website.
The Lao power sector regulatory framework is characterized by the highly integrated level of state involvement in the production and supply chain. The primary state-owned utility Eletricité du Laos (or EDL), acts as the monopoly offtaker for the domestic market, as well as the operator of the transmission and distribution infrastructure and owner of the majority of the country’s generation capacity (although EDL’s stake in the generation sector has been partially privatized). The Electricity Law 1997 (as amended) is the principal legislation regulating the energy sector in Laos. Among other things, the Electricity Law sets out:
the requirement for an Electricity Development Plan (which sets out the long term strategy for developing the Laotian energy sector) to be prepared by Eletricité du Laos (the Laotian state owed electric power utility);
the regulatory requirements for electricity generation, transmission and distribution; and
the regulatory scheme for private investments into power projects (which requires a concession from the government).
The Electricity Law is supplemented by a number of policies promulgated by the regulator:
Power Sector Policy, which sets out a number of long term strategic goals, including the promotion of PPPs in hydropower sector and increasing the electrification rate in Laos;
National Socio-Economic Development Plan, which sets out medium term development goals relating to the energy sector;
The Asia Development Bank has also published a roadmap which provides an overview of the regulatory landscape in the Laos energy sector.
Law No. 21/97 concerning production, transport, supply and sale of electric power, and creating the National Council for Electricity (“the 1997 Electricity Law”) (in Portuguese) – this Law establishes the governmental framework for electricity in Mozambique.
Until May 2017, the Ministry of Mineral Resources and Energy (“MIREME”) was the governmental entity responsible for energy policy, planning and regulation. However, the Parliament has since approved the creation of the Energy Regulatory Authority (“ARENE”) to regulate electricity tariffs, competition in the energy sector, licenses and concession contracts. As well as taking over the regulatory functions of MIREME, ARENE will replace the Conselho Nacional de Electricidad (“CNELEC”), a consultative body with considerably narrower powers. However, ARENE is not yet operational.
Government Electricity Act 2000 (repealed) and Electricity Act of 2007 – These Acts establish the Electricity Control Board (“ECB”). The ECB’s core mandate is to exercise control over the electricity supply industry, regulate electricity generation, transmission, distribution, supply, import and export. The ECB’s website has links to rules and regulations and licensing arrangements (including application procedure and licenses issued).
The Philippine power sector underwent significant privatization following the passage of the Electric Power Industry Reform Act of 2001 (“EPIRA”), which now provides the principal regulatory framework for the Philippine electricity industry. It provides a good example of a developing economy whose power sector has transitioned (in the relatively recent past) from a largely state-operated model to a market-oriented model. Among other things, the EPIRA:
organizes the industry into four sectors – generation, transmission, distribution and supply – and sets out the way in which these sectors will be regulated;
adds certain policymaking, planning and monitoring functions to the responsibilities of the Department of Energy (“DOE”);
creates an independent, quasi-judicial regulatory body, the Energy Regulatory Commission (“ERC”), to promote competition, regulate market development and enforce the rules and regulations of the EPIRA;
privatizes significant sections of the National Power Corporation’s business (a state owned utility which operated across the generation, transmission and distribution sectors);
establishes the Wholesale Electricity Spot Market (“WESM”), regulated by an independent market operator; and
promotes rural electrification.
The DOE has also developed a number of supplementary plans and policies, including:
the Power Development Plan 2017-2040, which sets out future plans for development and serves as a guide for industry developers in search of investment opportunities;
the 2018-2027 Distribution Development Plan, which provides the 10-year outlook on demand and supply requirements of distribution utilities, planned capital expenditure and projected energy sales; and
roadmaps setting out short-, medium- and long-term objectives for sectors including electric power and renewable energy.
The Asian Development Bank has also published a roadmap which provides an overview of the regulatory landscape in the Philippines energy sector.
The Energy Market Authority is a statutory board under the Singaporean Ministry of Trade and Industry. Its main roles are to ensure a reliable and secure energy supply, promote effective competition in the energy market and develop a dynamic energy sector in Singapore. The Electricity Legislation and Regulations and Gas Legislation and Regulations can be found on its website.
Spain provides a good example of a developed civil law jurisdiction which has adopted a market-oriented approach to regulating of the power sector. The principal piece of legislation regulating the Spanish electricity sector is Law 24/2013, of 26 December, on the electricity sector (“Law 24/2013”).
The main purpose of Law 24/2013, pursuant to the objectives of European Directive 2009/72/EC is to set out the principles and provisions governing the electricity sector, with the objective of:
guaranteeing a minimum quality in the electricity supply at the lowest cost possible;
ensuring the economic and financial sustainability of the electricity system; and
fostering an effective level of competition in the electricity industry, all in accordance with environmental protection principles.
The principal features of the electricity system in Spain can be outlined as follows:
Generation is a liberalized activity developed by private operators who sell the electricity generated to the pool at market prices or to specific customers by means of bilateral agreements (Power Purchase Agreements or “PPAs”).
Market price is settled through daily and intra-daily auctions carried out in the wholesale / spot market.
System operation, market operation, transmission and distribution activities are regulated activities:
Transmission is carried out under a single TSO scheme. Red Eléctrica de España, S.A. ("REE") is the sole transmission agent and system operator (“TSO”).
OMI-Polo Español S.A. ("OMIE") is the electricity market operator.
The National Commission for Markets and Competition ("CNMC") is the national regulatory authority of the Spanish energy markets according to Law 3/2013.
At State level, and apart from Law 24/2013, the main pieces of implementing legislation are:
Royal Decree 1955/2000, of 1 December, on regulation of transmission, distribution, commercialization, supply and authorization procedure for electricity facilities;
Royal Decree 2019/1997, of 26 December, organizing and regulating the electricity production market; and
Royal Decree 413/2014, of 6 June, on electricity generation by means of renewable, cogeneration and waste facilities.
Most Autonomous Communities have also passed legislation developing several issues of State legislation in relation to the authorization process in their territories.
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.
Electricity Act 2008 – This Act provides for the facilitation and regulation of generation, transmission, transformation, distribution, supply and use of electric energy; cross-border trade in electricity and the planning and regulation of rural electrification.
Additionally, the Act authorizes the Energy and Water Utilities Regulatory Authority (“EWURA”) to award licenses, approve and enforce tariffs and fees, approve licensees’ terms and conditions and approve initiation of the procurement of new electricity supply installations.
The section on regulation of rural electrification authorizes EWURA to:
vary the nature of its regulation depending on the characteristics of the entity performing the electrification; and
delegate regulatory responsibilities to other entities.
EWURA’s website includes links to other regulatory tools and information on licensing and registration.
In January 2020, Written Laws (Miscellaneous Amendments) No 1 Bill 2020 was presented to the Tanzanian Parliament. The Bill proposes that the Electricity Act 2008 shall be amended by establishing a Commissioner for Electricity Affairs who will be appointed by the President and advise the Minister of Energy on specified matters.
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.
One of the key long-term objectives of the Vietnamese government in the power sector is to establish a competitive electricity market. Although this process is already underway, all segments of the sector (generation, transmission and distribution) continue to be dominated by the state utility Vietnam Electricity (EVN) and its subsidiaries. However, PPPs are playing an increasingly important role in introducing private sector participants into the power sector and creating a more competitive electricity market.
The Electricity Law of 2004 (as amended in 2012 and 2018) is the principal legislation regulating the electricity sector in Vietnam. Among other things, the Electricity Law sets out:
the regulatory requirements for electricity development investment and planning;
policies and measures to encourage and accelerate conservation in electricity generation, transmission, distribution and use;
the electricity market including its principles, market participants, and market operation and control;
the conditions and requirements for operating in the electrical sector; and
pricing and licensing rules.
The Electricity Law is supplemented by a number of guiding decrees, decisions, and circulars issued by governmental authorities.
The Asia Development Bank has also published a roadmap which provides an overview of the regulatory landscape in the Vietnam energy sector.
Energy Regulation Act 2019 – This Act repeals and replaces the previous Energy Regulation Act 1995. The Act provides for the licensing of enterprises in the energy sector and redefines the functions of the Energy Regulation Board.
While the Energy Regulation Board continues to have a role in issuing licenses and monitoring competition levels within the energy sector, pursuant to the 2019 Act, it will also have a role in monitoring the efficiency and performance of licensees; imposing administrative penalties when license conditions have been violated; and approving, reviewing and regulating power purchase and supply agreements.
The Energy Regulation Board website has links to a number of standards and guidelines, including other energy legislation, the Zambian Distribution Grid Code and Power Purchase and Supply Agreements Regulatory Review Guidelines.
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)
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:
IREC Guide For Connecting Small Distributed Generators To The Main Grid (pdf) - IREC is at North Carolina State University. For more, please visit IREC.
IREC Model Interconnection Standards and Procedures for Small Generator Facilities (pdf)
Mini-Grids: Standardized Tariff Methodology for sale of Electricity to the Mini-Grids under the standardized ppa for small power producers (2009)
Main Grid: Standardized Tariff Methodology for sale of Electricity to the Main Grid under standardized ppa for small power producers (2009)
- Standardized Small Power Purchase Agreements:
Power Purchase Agreement (PPA) - Example 5 short-form power purchase agreement developed for small scale power projects in Namibia- Standard short-form power purchase agreement developed for small scale power projects in Namibia. This is part of a suite of documents including a fuel supply agreement that can be found on Web site of Namibia Electricity Control Board.
Power Purchase Agreement (PPA) -pdf - Power purchase agreement developed for medium scale wind power projects in Namibia.
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.
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.
Click on the links below to find legislation, regulations, regulatory decisions for each of the following countries:
India - Guajarat Electricity Regulatory Commission (GERC) (English and Guajarati)
Pakistan - National Electric Power Regulatory Authority (NEPRA)
Spain - Comision Nacional de Energia (English and Spanish)
Spain - the Electricity page (Spanish) on the website of the Spanish Ministry for Ecological Transition and Demographic Challenge (Ministerio para la Transición Ecológica y el Reto Demográfico) provides a broad overview on the electricity sector including FAQ sections on a number of topics (renewable energy, access and connection to the grid, self-consumption).
- Laws setting out the basis for delegation of public service functions of water and sewerage services and establishment of CAM Water - Loi No 98-005 du 14 Avril 1998 portant regime de l’Eau (framework)
- 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
- Water Statute 1995
- National Water and Sewerage Corporation Act 1995
- National Water and Sewerage Corporation
- Performance Contract between Government of Uganda and NWSC (pdf)
- Regulator: Ministry of Water and Environment
- Loi n° 2008-59 du 24 septembre 2008 portant organisation du service public de l'eau potable et de l'aissainissement collectif des eaux usees domestiques - Law reorganising public service delivery of potable water and sanitation services and providing for delegation of operations
UK - England and Wales
- Water Act 2003 (pdf)
- Water Industry Act 1991
- Regulators: OFWAT
Central and South America
- Province of Salta - Laws, Regulations and Concession Contract can be found on Ente Regulador's site (Salta's public services utilities regulator)
- General Water and Sanitation Law (Ley General de Servicios Sanitarios) 1988
- Water Code 1981
- Law Amending Water Code (2006)
- Regulator: Superintendencia de Servicios Sanitarios
- Law 142 of 1994 (Ley de Servicios Públicos Domiciliarios) Public Housing Services Law
- Vice Ministry of Water and Sanitation
- Superintendency for Residential Public Services (SSPD) - - other relevant laws can be found on this site
- Superinterdencia de Servicios Publicos (Spanish)
- Comisión de Regulación de Agua Potable y Saneamiento Basico (CRA) (Spanish) - other relevant laws can be found on this site
- National Planning Department
Asia and Pacific
- 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.
- Utilities Regulatory Authority Act 2007 - an Act to establish a regulator for water and electricity services in the island state of Vanuatu. Web site of regulator - URA
- 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.
- Key Topics in the Regulation of Water and Sanitation Services
- Public-Private Partnerships for Urban Water Utilities: A Review of Experiences in Developing Countries. By Philippe Marin (2010).
- Water Theft / Non-Technical Losses - Legislative and Practical Measures
- Improving Water Regulation of Urban Water 2014
- A Governance Guide to the Victorian Water Industry. Melbourne. Victorian Government, Australia, Department of Sustainability and Environment. 2011.
- Improving Water Policy and Governance. New York and Oxford: Routledge.Tortajada, Cecilia, and Asit K. Biswas, eds. 2011.
- Liberalization in the Water Sector: Three Leading Models. 2011 In Handbook of Liberalization, ed. Rolf Kunneke and Matthias Finger. Cheltenham, UK: Elgar. Ménard, Claude, and Aleksandra Peeroo
- Economic Regulation of Urban Water and Sanitation Services: Some Practical Lessons. World Bank 2007. Ehrhardt, David, Eric Groom, Jonathan Halpern, and Seini O’Connor.
- Infrastructure Regulation in Developing Countries: An Exploration of Hybrid and Transitional Models. PPIAF 2007.
- Taking Account of the Poor in Water Sector Regulation. World Bank 2006. Trémolet, and Hunt
- Approaches to Private Participation in Water Services: A Toolkit 2006. World Bank and PPIAF.
- Models of Aggregation for Water and Sanitation Provision. World Bank 2005. ERM, with Stephen Meyers Associates and Hydroconseil, William D. Kingdom
Updated: December 15, 2022