This is a fact-finding comparative study and analysis of electricity tariffs in ECOWAS Member countries conducted by the ECOWAS Regional Electricity Regulatory Authority (ERERA) with support from the African Development Bank (the Bank) to provide requisite tariff information for stakeholders and a consistent basis for comparing tariffs across the ECOWAS region.
The Bank acknowledges the key role that related issues of tariff levels, underlying drivers of tariffs, and variations of tariffs and tariff frameworks across countries within a region play in regional electricity trade and making investment decisions. Notwithstanding the critical role of tariff information in policy and investment decisions, they are not readily available in the ECOWAS region as well as other regions on the continent.
The study is consistent with the Bank’s comprehensive approach to providing support to Regional Member Countries through the Regional Economic Communities and Regional Regulators to disseminate the requisite sector information and data to facilitate the creation of the enabling environment to attract private sector investments. In addition, it aligns with ERERA’s agenda for harmonization of policy and regulatory frameworks of ECOWAS member countries in which ERERA seeks to make national electricity markets compatible with the functioning regional electricity market through the West African Power Pool (WAPP).
Objective of Study
The objectives of this study are to:
- Assess and compare the electricity market structure, tariff levels, frameworks and methodologies, as well as underlying drivers of tariffs in the 15 member states of ECOWAS;
- Establish a baseline methodology and mechanism/template for regular collection and analysis of data on tariffs in the ECOWAS region and blue print for replication across other regions; and
- Provide requisite tariff data and information to potential investors, policy makers, regulators utilities, consumers and other stakeholders to influence investment and policy decisions, as well as for structured comparison of tariff rates across the sub region and
Scope of Study
This is a fact-finding study, whose objective is to depict and analyze what pertains in each country, rather than to assess performance of a country. It covers tariff related issues across the electricity supply chain (Generation, Transmission, Distribution) in all the 15-member countries of ECOWAS.
The report analyses and compares tariffs along five key areas: Macroeconomic Overview (provided the context for the study and assessed indicators such as GDP, inflation, exchange rates, household income, etc), Tariff Frameworks (assessed market structure, tariff methodologies, tariff indicators, etc. of member countries), Bulk Generation Tariffs (which assessed and compared underlying drivers of BGT such as generation mix, peak demand, import and export, plant availability, fuel efficiency, cost of fuel, electricity imports and exports, etc), Transmission Tariffs (assessed and compared elements of Transmission Tariffs such as network lengths, transformer capacities, voltage levels, losses, etc) and End-User Tariffs (which comparatively analysed final tariffs to consumers taking into account customer categories, taxes, subsidies, affordability index, distribution losses, reliability indices etc).
Summary of Key Findings
Tariff Frameworks (TF): 10 countries in the region have vertically integrated utilities. There is a general trend towards functional separation along the value chain. IPPs are permitted in all countries in the region and Legislation that permit Open Access to Transmission Network exist in 10 out of the 15 countries. Cost based approaches to tariffs are predominant (in 8 out of the 15 countries)
Bulk Generation Tariffs (BGT): Cross border electricity trade/exchanges exist in 10 countries within the region with 3 countries being net exporters while the rest are net importers of electricity. 8.5% of electricity produced in the region are traded across borders (export/import). Thermal generation is predominant in the region as only 4 countries had predominant hydro generation. Estimated BGT in the region ranged between 26 USD/MWh and 153 USD/MWh
Transmission Tariffs (TT): Only 3 countries in the region (Ghana, Nigeria and Togo) had explicit Transmission Tariffs set by the regulator. The estimated TT ranges between $9-18/MWh
End-User Tariffs: A standard consumer representing a single-phase domestic LV consumer is estimated to pay on average 2.6 USDc/kWh (in Guinea) and 38.5 USDc/kWh (in Liberia) including taxes. Share of household income by LV consumer spent on electricity ranges between 2% (Cape Verde) and 5.1% (in Cote d’Ivoire) The most used cross-subsidy mechanism is Value Added Tax/General and Service Tax exemption
Updates of Report and Future Editions
The Bank intends to update this report regularly to keep pace with the changing trends in the tariff landscape of ECOWAS region. The Bank also intends to replicate the study in other regions of Africa and eventually cascade all these regional reports into a continental comparative report. The scope for subsequent studies will be expanded to access how the countries within a region are approaching cost reflective tariffs. The Bank seeks to collaborate with other DFI’s and development partners in this endeavor.
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Source: Africa Energy Portal, AEP
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