Introduction
A new Electricity Code has been recently adopted and promulgated in Côte d’Ivoire. The Law n°2014-132 of March 24, 2014 on the Electricity Code amends and replaces the Law n°85-583 of July 29, 1985 organizing the production and distribution of electricity in Côte d’Ivoire. The Government of Côte d’Ivoire has set goals to double its power production capacity by 2020 to about 3500 MW to meet the rising demand of electricity as the economy strengthens (GDP 8.8% in 2013). In addition, Côte d’Ivoire aims to play a central role in the West African Power Pool (“WAPP”) and increases its electricity export to the regional electricity market.
Currently, about 60% of the electricity is produced by thermal power stations while 40% is generated by hydropower plants. In its strategic plan 2013-2030 for the development of the electricity sector in Côte d’Ivoire, the Government identified 66 projects that will require massive investment from the private sector, including through PPPs with Independent Power Producers (“IPP”), to expand power capacity production and to modernize the transport and distribution of electricity throughout the country. Efforts are underway to increase hydroelectric and thermal electricity generation with construction of new hydroelectric dams (such as a 275-MW hydroelectric plant at Soubre) and thermal power plants as well as expansion projects at the CIRPEL and AZITO thermal power plants. The Government also wants to develop a balanced energy portfolio by encouraging the production of new and renewable energy sources.
Among its strategy to increase power capacity and achieve financial equilibrium of the sector, Côte d’Ivoire is reforming its electricity sector and enacted a new Electricity Code in March 2014. This new law offers i) a comprehensive and well-defined framework for the production, transport, dispatching, distribution, commercialization, import and export of electricity; ii) reinforces the powers and competencies of the regulatory authority for the electricity sector; iii) takes into account new and renewable energies; iv) and includes provisions to fight against fraud and illegal activities that cause many technical and commercial losses in the electricity sector.
Background
Under the Electricity Law of 1985, the production of power was open to the private sector, but the transmission, distribution, import and export activities of electricity remained a State monopoly. However, in accordance with articles 5 and 6 of the Electricity Law of 1985, the State of Côte d’Ivoire granted to a private operator, the “Companie Ivoirienne l’Electricité” (CIE) a concession over the production, transmission, distribution, import and export of electricity. The CIE replaced the former national company “Energie Electrique de Côte d’Ivoire” (EECI) who retained its role in the management of assets and projects, the development of technical studies as well as the technical control of the concession holder. At that time, Côte d’Ivoire was already seen as one of the pioneers in Sub-Saharan Africa in terms of private participation in its power sector.
In the 1990’s, to increase its power production capacity, Côte d’Ivoire concluded several concession agreements with IPPs such as the concession agreement with CINERGY for the development of the AZITO natural gas fired thermal power plant or the concession agreement with CIPREL for the development of a natural gas fired thermal power plant at Vridi near Abidjan. The CIE was the purchaser of the power produced by the IPPs in Côte d’Ivoire. The power plants in Côte d’Ivoire are mainly supplied by local offshore natural gas.
In December 1998, the State undertook a reform of its institutional framework and winded up its national company Energie Electrique de Côte d’Ivoire (CIE) and created two new national companies, the Société de Gestion du Patrimoine du secteur de l’Electricité (“SOGEPE”) which was set up to manage the assets of the State and the financial flows of the sector on behalf of the State and the Société d’Opération Ivoirienne l’Electricité (“SOPIE”) which was created to ensure long term planning of the sector for future electricity capacity. It also created the Autorité Nationale de Régulation du Secteur de l’Electricité (ANARE) which is the National authority for the regulation of the electricity sector in charge of overseeing the compliance by the operators with the legislation, arbitrating disputes between operators or between operators and the State as well as ensuring the protection of the interests of the consumers of electricity. In 2010, Côte d’Ivoire undertook another reform which led to the winding-up of the two national companies, SOGEPE and SOPIE, and the creation of a new national electricity company “Société des Energies de Côte d’Ivoire” - “CI-ENERGIES” having as main activities the management of the electricity supply as well as the management of projects on behalf of the State as grantor of the concession agreements.
Major changes in the electricity sector
The Electricity Code recently adopted introduces some major changes in the electricity sector of Côte d’Ivoire and further liberalizes the power sector by ending the State monopoly on transport, distribution, commercialization, import and export activities of electricity. All those activities may now be operated by one or more private operators pursuant to a convention agreement to conclude with the State. The Electricity Code provides for different legal regimes depending on the activities: a free system, a prior declaration system or a prior authorization system for self-production of electricity depending on the installed power; a regime of convention for production other than self-production, for transport, dispatching, import, export, distribution and commercialization of electricity; and an approval regime for related activities of the electricity sector.
Prior to any production activities, a production convention must be concluded between the IPP and the State. The production convention will namely specify the conditions for the sales of power to the State or a third party. Such convention will also specify all the obligations of the parties and the commitments of the operator in terms of the acquisition or long leasing contract for the site, connection of the produced power to the national grid as well as supply of fuel to the power plant. Transport, distribution or commercialization of electricity can be undertaken by private operators provided that they also enter into a convention with the State. All conventions are concluded by the Minister in charge of Energy and the Minister of Economy and Finance on behalf of the State and enter into force only after having been approved by decree adopted by the Council of Ministers. The terms and conditions of such convention as well as its nature will be specified by future decree or by inter-ministerial decree for the distribution and commercialization activities.
The current authority in charge of regulating the electricity sector is the Autorité Nationale de Régulation du Secteur de l’Electricité (“ANARE”). The Electricity Code gives greater independence and authority to the ANARE by specifically providing that the regulatory authority is an independent legal entity with financial autonomy. The authority is in charge of overseeing the compliance with the laws, regulations and obligations under authorizations and conventions in force in the electricity sector; proposing electricity tariffs to the State as well as the tariffs to access the national grid; protecting users and consumers of the public services and as well as their rights; arbitrating disputes between operators or between operators and the State; and advising and assisting State in regulating the electricity sector. We shall however see how the future decree to be adopted by the Council of Ministers will implement and design the competencies, organization and operation of the regulatory authority.
As in many countries in the region, electricity tariffs in Côte d’Ivoire have been considered as too low and not cost reflective to encourage IPP to invest in the sector. Social tariffs have also been put in place affecting the profitability of the sector and hindered investment plans. According to the IMF, Côte d’Ivoire has designed a new pricing strategy which consists of taking out a large volume of consumers out of the social tariffs, implementing gradual price increases to bridge the generation cost differential and renegotiating export prices. The Electricity Code reflects this pricing strategy by setting the pricing principles for electricity. Electricity pricing should now take into account the financial equilibrium of the electricity sector, the development of the electricity sector, equity and non-discrimination principles for same categories of electricity consumers, the costs, charges and expected profits arising from the obligations of the public service as well as the financial equilibrium of the operator and its return on investment. Electricity tariffs are set and revised by the Minister in charge of Energy.
In order to reduce significant technical and commercial losses for the State, the Electricity Code also includes a range of new criminal sanctions to fight against frauds such as illegal connection to the grid or acts of damages to the electricity network or equipments. The prosecution of any violation to the Electricity Code is also now well- organized.
The entry into force of the Electricity Code does not affect the validity of the conventions concluded before its entry which remain valid for their entire duration. Renewals of such convention will be subject to the provisions of the new Electricity Code. For operators undertaking auto-generation activities at the time of the entry into force of the Electricity Code, they will need to comply with the new law by either filing a prior declaration or obtaining a prior authorization depending on the installed power.
Conclusion
Relying on its long experience of private investments in its power sector, especially with IPPs and its potential for developping domestic natural gas reserves, Côte d’Ivoire is strongly committed to leverage on further private investments to boost its power sector. The power sector of Côte d’Ivoire offers tremendous opportunities for private and foreign investors to finance the expansion of power capacity production and the modernization of the transport and distribution network.
The Electricity Code offers a better legal framework for each segment of the electricity sector and further liberalizes the electricity sector while increasing the independency and powers of its regulatory authority. The reform of the sector still needs to be completed by the adoption of the future Decree on the implementation measures of the Electricity Code.
In addition, to meet its infrastructure gap including in the power sector, Côte d’Ivoire set up in 2011 the National Comity for the promotion and development of Public Private Partnership (“CN-PPP”). A draft law setting a new legal, institutional and regulatory framework for PPP is currently under review. This new PPP legal framework will help Côte d’Ivoire to boost private investment in its power projects.
