POLICY & REGULATION Emerging market energy regulators exchange ideas The Regional Electricity Regulators Association of Southern Africa (RERA) was formed in 2012, and in March 2014 hosted a meeting of similar bodies from emerging markets around the world to exchange ideas. T his took the form of a high level indaba in Johannesburg, the second of its kind following an inaugural meeting between such bodies hosted in Istanbul, Turkey, during 2013. Apart from RERA, other regulatory groupings exist which are relevant to emerging markets. One of these is the Energy Regulators Regional Association (ERRA), a voluntary organisation of independent energy regulatory bodies primarily from the central European and Eurasian regions, with affiliates from Africa, Asia, the Middle East and the Americas. Alparslan Bayraktar, from Turkey, the acting chairman of ERRA, says that regulation of the electricity sector is a long term process, and in most parts of the world, apart from the USA, national electricity regulators are fairly new entities. “It began in the European Union in the 1990s, and by the start of 2000 most countries in that region had national energy regulatory authorities.” In other parts of the world, the establishment of national electricity regulators is more recent. Bayraktar says, “Somehow regulators have to comply with energy policy that is not in their hands, but in those of elected politicians. In gaining authority regulators have to show good examples of applications in the market and have to be accountable to all stakeholders For energy regulators to fulfil their role they have to improve themselves in terms of institutional capacity.” His point is just how long an evolutionary process the regulatory one is, and how ongoing a process it is. Probably what is the world’s most famous regulator, the USA’s Federal Reserve, which regulates financial markets in the US, has seen its roles and policies Chair of RERA, and CEO of the National Energy Regulator of South Africa (Nersa) Phindile Baleni. questioned. The position and capacity of the fairly newly established energy regulators around the developing world should be considered in that light. Using Turkey as an example of how an energy regulator sets out its stall, Bayraktar says, in that country it is all about the performance of the regulator in strengthening the market. “In Turkey, government decided not to be involved in daily operations of the energy market. The private sector comes in to make investments and our role is to provide a predictable playing field. We have to show that we can withstand political pressure and are an autonomous regulator that is accountable. If we attract The regulator must do its job in a way that does not create additional risks. ESI AFRICA ISSUE 1 2014 investment, we eliminate risks, and that limits political interventions. The regulator must do its job in a way that does not create additional risks.” One of the burning issues energy regulators in emerging markets face is the question of regulatory independence in the face of political interference. Chair of RERA and CEO of the National Energy Regulator of South Africa (Nersa) Phindile Baleni says that different countries have different interpretations of independence and autonomy but it is understood that for regulators to secure their autonomy they must build up a track record of good quality and effective regulation. While much of the world has progressed towards private sector investment and freer markets, South and southern Africa have largely lingered with state owned monopolistic structures. Twelve of the fifteen Southern African Development Community (SADC) members have electricity regulators, though, and ten of those are members of RERA. The body sees its role as to facilitate the harmonisation of regulatory policies, legislation, standards and practices and to be a platform for effective cooperation among energy regulators within the SADC region. Only Namibia has implemented cost reflective electricity tariffs, and overall the most liberalised country in terms of its energy sector in the SADC is Zambia which has private generators and a privatised transmission company. There are two independent power producers in Mozambique, but that country’s electricity sector is not liberalised. That the region trails most others in terms of electricity market structures is apparent, but unlike the developed world, the most urgent need is for regulators to incentivise electricity infrastructure expansion in the light of extremely constrained electricity supply situations and transmission constraints. To that end 49