On 19th July 2024, the Electricity (Open Access) Regulations 2024 (hereinafter “the Regulations”) came into force. The Regulations aim at promoting non-discriminatory access to the transmission and distribution networks of electricity in Zambia. The Regulations also create a more competitive environment which encourages innovation in renewable energy solutions driving economic growth and sustainable development in Zambia.
The enactment of the Regulations arises from the challenges the Country has faced following the severe drought, and a surge in investment from private investors and Independent Power Producers (IPP’s) in the Country. The Regulations essentially seek to lessen reliance on unsustainable power purchase agreements (PPAs) with entities such as ZESCO Ltd, which has controlled majority of transmission and distribution in the Country, producing about 80% of the electricity consumed.
Salient Features of the Regulations
An open access user is defined under the Regulations as a person who is granted open access to a transmission system or distribution system by a transmission network service provider or distribution network service provider.
Heavy users with more than 1 megawatt now qualify for open access, which is provided for under Regulation 5. The Regulations also provide key guidelines for those who wish to participate in open access in Zambia.
Regulation 4 divides open access into three categories namely long-term open access, medium-term open access and short-term open access. It is worth noting that under the Regulations, priority is given to long-term open access users as set out in Regulation 11(1).
Regulation 5 outlines the criteria to participate in open access which are inclusive of the following:
- A licensee that holds a licence to trade in electricity with a trading capacity of at least 1 megawatt issued by the Energy Regulation Board under the Energy Regulation Act, 2019 or an authorisation issued under any other written law;
- A supplier who has an installed generating capacity of at least 1 megawatt; and
- A system user and/or a consumer who has a consumption of at least 1 megawatt. Applications for open access shall be made to a transmission service provider or distribution network service in line with the guidelines provided for in Regulation 6.
The Regulations also provide for instances in which an application is granted or rejected under Regulation 10. Regulation 9 provides for factors that are to be considered when an application for open access is being reviewed by a system operator, such as the available transmission or distribution capacity on the transmission or distribution system or the qualifying participant’s ability to meet its financial obligations.
Regulation 16 allows an open access user to trade in electricity. This is essential as it assists in the reduction of energy prices and the mitigation of risks, allowing for open access users to secure stable income by selling their resources in advance, shielding themselves from price fluctuations.
Another noteworthy provision can be seen under Regulation 20, which indemnifies a system operator against claims relating to damage of property, legal proceedings, legal fees or any other third-party obligation arising from open access transactions.
Conclusion
Open access represents a direction towards the diversification of Zambia’s electricity sector as it will foster competition and encourage investment also reducing the likelihood of power outages and enhancing grid reliability. It will further provide consumers with a broader selection of energy providers and unburden ZESCO from the demand improving its financial stability. This is a welcome change for potential investors.
