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Today: Fri 22nd October, 2021

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  ECONOMIC REGULATION - Developments in the Regulatory Environment

One of the ERB's key mandates in the electricity industry is to promote increased investment.  To this effect, the ERB is working closely with the government to ensure an enabling environment for increased investment. In order to address the challenges alluded to earlier; the following measures have been initiated;

Open Access Grid Code
The ERB set up a multi stakeholder committee to draft a grid code for the electricity supply industry in Zambia. The draft grid code has been completed and will be approved by the ERB Board this year after further stakeholder consultation. The grid code is designed to enhance competition in the generation and delivery of electricity by facilitating access by other players to the transmission networks currently owned only by ZESCO and CEC. An open access transmission code has been developed as part of the grid code for implementation in 2006.

Cost Reflective tariffs
It has been widely argued that electricity tariffs in Zambia are at uneconomic levels. Presently, a World Bank supported "cost of service study" is being undertaken to help establish the real cost of supplying electricity to different consumer categories. This will help strengthen the tariff design process and move the industry towards cost reflective or economic tariffs. It will in turn provide an incentive for new investment in the industry as investors will be confident of earning a reasonable rate of return on their investments.

Tariff Framework 
The ERB is this year reviewing its tariff setting framework for electricity with the aim of developing a tariff regime that promotes economic efficiency, financial viability and social objectives. This will result in a transition from the basic revenue requirement approach to a more versatile incentive based regulatory regime under a multi year pricing framework. The new framework is also envisaged to set tariffs at different price points, i.e. generation, transmission, distribution and supply. This will further help simulate the positive effects of competition and better target incentives.

Revision of Licenses
The ERB is further reviewing all its electricity licenses (generation, transmission, distribution and supply) so as to streamline and modernise them.

Social Tariffs 
The ERB is also reviewing the current "life line tariff" and considering a more efficient and broader social tariff structure that will cut down on the existing high level of cross subsidisation and be more targeted to the intended beneficiaries. This will help reduce the strain on utilities' revenues.

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