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Egypt: Electricity law reforms

Bassam Moussa

The Egyptian Electricity Law (law number 87) was issued in July 2015 (Electricity Law). Along with its executive regulation, which is expected to be issued before the end of the year, this law will represent the general legal framework for the electricity sector for decades to come. A long awaited reform, the Electricity Law paved the way to transition from a state monopoly into a free market for electricity.

The law provided for an open market for electricity generation and distribution, while maintaining transmission under state control through the ownership and monopoly of the national electricity transmission grid through the Egyptian Electricity Transmission Company (EETC).

A key ingredient of a free and fair electricity market is an independent and neutral transmission network operator. This is essential both to avoid a conflict of interest between the owner/operator of the network and users of the network, and to ensure the impartial treatment of all players, producers and/or distributors. Hence, the Electricity Law mandated that within three years the EETC would be restructured into a transmission system operator independent of all the related electricity sector parties. The Ministry of Electricity and Energy has taken steps to achieve this in collaboration with the World Bank.

The second pillar of a competitive electricity market is the regulator. The Egyptian Electric Utility and Consumer Protection Regulatory Agency (EgyptERA) was founded in 2000 by virtue of a presidential decree, at which point it assumed the regulatory ruling role. Under the Electricity Law, EgyptERA has been reorganised as an independent government agency established by law empowered to regulate, supervise, and develop all aspects of electricity, from generation to consumption, through transmission and distribution of electricity. Under the Electricity Law, EgyptERA is responsible for ensuring the availability, quality, and stability of the supply of electric power at suitable prices.

A large part of EgyptERA's role is promoting investment and free competition in the electricity sector. To that end, EgyptERA is entrusted with issuing rules and adopting policies that will achieve these goals, and is empowered to take actions against any market player that is involved in any anti-competitive behaviour.

In order for a competitive electricity market to function properly, there must be sufficient, if not a surplus of, electric power supply. In recent years, Egypt has witnessed record shortages of electric power. However, the Ministry of Electricity has adopted an emergency programme for the maintenance and renovation of existing power stations, as well as building new stations, with an aggressive goal of adding a total of 18,000 megawatts of installed capacity from conventional sources by 2018. In parallel, the New and Renewable Energy Authority embarked on an ambitious renewable energy programme aiming to generate 20% of electricity from renewable sources by 2020. Under this programme, a feed-in tariffs scheme has been introduced by law 203/2014, and the first round of developers has been selected with a total capacity of 4300 megawatts expected to come into service by 2017. In addition to this, wind and solar BOO projects with a capacity of 950 megawatts are at various stages of being tendered.

While there is still a long way to go to completely transform the electricity sector into a functioning free and competitive market, there are some positives to be taken. Egypt has initiated the transformation with a fundamentally sound legal framework and is in the process of restructuring the state-owned electricity enterprises, building a framework of concerned authorities, and taking important steps towards securing a reliable and steady supply of electricity.

Bassam Moussa

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