Monday, October 19, 2020

Gaolathe rooting for regulatory framework on water, electricity and related sub-sectors

Member of Parliament for Gaborone Bonnington South, Ndaba Gaolathe has noticed to table a motion seeking to establish a regulatory framework for water, electricity and other energy forms.

The regulatory framework for the named utilities was also mentioned last week in the budget response by Leader of Opposition, Duma Boko.

Gaolathe argues that the regulatory framework would stem the loss of money by Government at Botswana Power Corporation and Water Utilities.

He says that any further delays would adversely compromise access for low income families.

This is over and above structurally high cost of production of both power and water 

“The absence of a regulator also creates an unpredictable and opaque environment within the energy and water sector, at the expense of meaningful and/or timely investment in these sectors, investments worth billions of Pula, which Government cannot be expected to match by quantum or effectiveness.  This means thousands of missed job opportunities,” says Gaolathe.

He reckons that delays in establishing such a regulatory framework always mean that Botswana is missing out on an opportunity to be a leader in the energy sector, which leadership position can create potential for significant export revenues, in the tune of billions of Pula.

If the regulator is created, Gaolathe says it will enhance security and adequacy of supply while also lowering cost of production and retail price of energy and water. He says it will also enhance a wider social inclusion and by itself be incentive for direct and indirect investment into these sectors.

“To achieve our objectives, we need to concern ourselves with several regulatory domains, for both power and water sectors. These will handle economic regulation, pricing, regulation of monopolies, service and performance standards, licensing  and entry, facilitate open access and trade and consumer protection.”

On the social sphere Gaolathe is of the view that such regulation will improve access to affordable power and water supply which is consistent with aspiration for social and economic inclusion.

Gaolathe is also of the view that such a regulatory framework will bring about fairness that is rooted on procedure and evidence of facts.

He adds that will improve decision making processes that are appealable at the courts.

Additionally he says such a framework will improve accountability especially for money appropriated by Parliament. 

“Regulation alone is of course not adequate.  Regulation should envisage a progressive sector structure and bring out the best in that sector structure, in order to realise the stated objectives.”

He is of the view that the electricity sector operations, dominated by the public utility, the BPC, is not structured efficiently. “Effectively, BPC is a natural monopoly, poorly run and with a high cost structure. Although Independent Power Producers are allowed, the landscape is too opaque to know how power purchase agreements are negotiated and implemented fairly.  The BPC is involved, but it is conflicted because it is also a power generator,” says Gaolathe.

He says Botswana needs to unbundle vertically ÔÇô separate power generation, power transmission, power distribution, power supply and ancillary services.

“This unbundling is necessary to bring alternative players in some of those spaces. The obvious space that is ripe to accommodate competition is the power generation space, and to some extent the power supply space.  Power transmission is a non-contestable natural monopoly

According to him, the regulator should cover other subsectors such as gas, petroleum and all activities entailed in those sectors.

With specific reference to water, Gaolathe is of the view that Water Utilities Corporation is a natural monopoly and is doing too much to do anything well.

“It is necessary to break up the sector into various components, along the vertical chain ÔÇô identify various parts of the value chain ÔÇô water resources authorities, bulk conveyance, water-services institutions ÔÇô indentify the natural monopoly parts and the contestable parts.  This would bring out the best out of water regulation,” he says.

He adds that even if Water Utilities Corporation remains as is, it still is necessary to regulate price, standards, water, sewerage quality to apply pressure on effectiveness and efficiency.

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