Ministerial approval for new Mozambique electricity law pending

3rd April 2019 By: Marleny Arnoldi - Creamer Media Online Writer

Mozambique’s Council of Ministers is expected to review a new proposed Electricity Law during its next Parliamentary session in July or August, law firm CGA chairperson Pedro Couto said on Wednesday.

He noted that the Mozambique government had concluded the necessary public consultation process in February.

The legislation governs the operation of the electric power system and general rules applicable to the production, transmission, distribution and sales activities, including imports and exports, with a view to providing more citizens with access to electricity.

Only about 25% of the country’s citizens have access to electricity and Mozambique aims to achieve universal electricity access by 2030.

Couto explained during a stakeholder event on Wednesday that the new law will make room for private investment in the import and export of electricity, electricity consumption and energy services.

Electricidade de Moçambique (EDM) will not have to be issued with new licences, retaining its government decree as an all-round energy provider, but it will be subject to the new law in the remainder of respects. 

Further, he added that all independent power producer projects have been in a state of delay and that such companies will have 90 days to present a feasible completion plan following the promulgation of the law.

Meanwhile, the Mozambique government, as specified in the new law, will establish a regulatory entity called ARENE, which will replace the current regulatory advisory body, to process tender applications and issue permits.

Couto expected the regulations, which are due to come out in a few months after the new law’s promulgation, to provide clarity on some conflicting issues with the new law.

“Electricity generation is no longer subject to the public domain of the State, regardless of energy source,” he said, adding that the new law allows for all-private deals.

Couto questioned whether it was a wise decision to have the State uninvolved in what could become the majority of energy transactions in the country.

The new law provides for three types of permits – a concession agreement, a licence and a simplified licence.

The legislation states that concessions will be granted only for projects of public initiative, with the involvement of State capital and with reference to certain specific energy sources. The law provides for a direct award of a tender, bypassing a tender bidding process, with certain conditions.

These projects will typically entail more than 500 MW of hydro sources, natural gas destined for the development of the national market and coal requested by the State for power generation purposes.

In the case of a smaller project and without public initiative (request from the State), a licence can be awarded by ARENE, while a simplified licence can be awarded for minigrids – generation projects under 4 MW.

The licences entail generation using any source above 4 MW, energy transmission outside of the grid or energy distribution projects. A licence is valid for 35 years and may be extended for an equal period, pending Ministerial approval.

The simplified licences will be granted for own use and consumption of electricity, while allowing for the sale of excess electricity generation. A simplified licence will also be granted to energy service providers, including financers, installers and operational and maintenance service providers.

Effectively, Couto noted that EDM has to grant energy stakeholders an opportunity to access the grid, either for supplying or distributing energy.

However, ARENE will grant a permit, should it be more viable for an interested party to build its own transmission or distribution networks. The consumer is able to choose its energy provider.

Couto commented that the law looks good on paper, going from a “blocked system” to almost a European Union-style legislation; however, he believed the new law too easily disregarded the entirety of the previous public–private partnership law and that confusion and contradiction would persist for some time in the country.

He noted that the Mozamique government intends to establish a nongovernment body to manage the interconnected power generators, distributors and sellers in the country, but Couto doubted whether this body would be successful in its pursuit.

Couto added that although minigrids, for example, will aid in universal access to electricity and later on regional demand (within the Southern African Power Pool, which, by the way, has its own sets of regulations and requirements independent from the Mozambican law), but without transmission lines and other grid infrastructure in the country and neighbouring countries, there might likely be a surplus of generation, with limited means of distribution.