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New Electricity Law

New Electricity Law
Energy is considered one of the most important issues that have been raised in Egypt over the past few years due to the severe crisis that the country faced, which led to chronic shortages on several occasions. As a result, many improvements were introduced in the existing stations and other stations have come into operation; at the same time there have been many efforts to change the legislative structure of the electricity sector. In July 2015, a new law was issued to regulate electricity, after it was regulated through a number of different legislation (the "Law").[1] The new Law aims mainly at providing opportunities for investment in the power sector by allowing the private sector to engage in some electricity related activities without limiting these activities to the public sector, while ensuring fair competition between all parties. This Decree also regulates the role of the state and eliminates its monopoly, while retaining its regulatory role. The Law introduced the abolition of a number of legislations that regulated electricity, including, for example, the Institutions of the Electricity Sector Law, and an important paragraph of the Establishment and Management of Thermal Machines and Steam Boilers Law, and also the President's decree to reorganize the Electric Utility and Consumer Protection Regulatory Agency. The new law has also included certain provisions that were stipulated in the revoked legislations, which helps to unify the legislations of this important sector and creates a state of clarity and certainty for investors and citizens. It should be noted that the issuance of the new Law will not affect the prices of electricity, which falls under the jurisdiction of the Electric Utility and Consumer Protection Regulatory Agency (the “Regulatory Agency”). Moreover, allowing the private sector to invest in the electricity sector will not affect the electricity prices to the general public/small consumers as the law clearly specifies their procurement of the service according to the prices determined by the State (through the Regulatory Agency). With regard to large/industrial  consumers (such as factories/plants) which were named in the law as "Qualified Subscribers", the price of electricity will be mutually agreed on between them and the companies that supply the electricity (whether public or private sector companies). Moreover, it is worth mentioning that the new investment law had approved some concessions/privileges to investors in the electricity sector. Article (20) stipulates that "Concessions and additional non-tax incentives can be granted by a decree of the Cabinet of Ministers, upon the submission of the competent minister proposal, to the investment projects operating with heavy labor or those working to deepen the local component in their products, or those investing in generating electricity from conventional or new and renewable energy sources, particularly: 1. Allowing the establishment of private customs outlets for the exports or imports of the investment project upon agreement with the Minister of Finance, 2. Granting the projects price concessions or facilitations in payment of the energy used, 3. Refunding to the investors part of or the full value of delivering the utilities to the land allocated to the investment project after the operation of the project, 4. Part of the cost of the technical training for workers is paid by the State, 5. Full value of both the employee’s and the employer’s share in the social insurance or part of it for a specific term is paid by the State, 6. Disposal of privately state-owned land and property or those owned by public legal persons". The Law regulated a number of topics at length in order to become a complete reference and the main source which regulates the electricity utility. The Law allotted the second section for the regulation of the electricity utility, which includes the “Electric Utility and Consumer Protection Regulatory Agency", as the regulator of all electricity activities. The Law also regulated the necessary licenses and permits needed to conduct electricity activities, in addition to electricity related activities (generation, transmission and distribution).
Electric Utility and Consumer Protection Regulatory Agency
The Law addressed the Regulatory Agency in detail and specified all of its provisions in light of the annulment of the previous presidential decree, which had regulated it. The new Law transforms the Regulatory Agency into a public body independent from the Ministry of Electricity (similar to the case of the National Telecom Regulatory Authority). The new Regulatory Agency is designed to organize, follow-up, supervise, and develop the electricity activities, including setting a tariff for the sale of electric power to subscribers (unqualified), and specifying sound economic rules and fundamentals to calculate the tariff for the sale of electric power and the tariff for the use of the transmission and distribution networks of electric power to unqualified subscribers. The Regulatory Agency also aims to attract and encourage investment in the electricity sector within the framework of legitimate free competition.
The new Law transforms the Electric Utility and Consumer Protection Regulatory Agency into a public body independent from the Ministry of Electricity (similar to the status of the National Telecom Regulatory Authority)
The Regulatory Agency is formed under the chairmanship of the Minister of Electricity with the President of the Egyptian Competition Authority, the President of Consumer Protection Agency, the President of the Federation of Egyptian Industries, the President of the Federation of the Egyptian Chambers of Commerce, and other experts in the electricity sector, as board members. The law stipulates that the Regulatory Agency has to have a chief executive appointed for a period of three years by a Prime Minister’s decree, renewable for only one term in order to reduce the disadvantages of the continuation of one person in the office for a long time. The law has addressed many of the other provisions specific to the Regulatory Agency, for example, its powers, resources, and its Board of Directors meetings among others.
Participation of the Private Sector and Required Permits
One of the most important issues introduced by the new Electricity Law, is allowing the private sector to participate in the generation, distribution or sale of electricity. The Electric Utility and Consumer Protection Regulatory Agency is responsible of granting the permits and licenses required to the private sector to invest in those areas. However, the Law makes an exception for independent power producers who generate electricity for private use, relieving them from the requirement to obtain permits. This is a further step to encourage generation of power for private use, an issue that was heralded in the Stimulating Production of New and Renewable Energy Law adopted in December 2014. The new Law defines the specific procedures required by any Egyptian joint stock company (which is the only kind that is allowed to engage in those activities) in order to obtain the necessary licenses, which must be decided upon within sixty days of the application. The Law prohibits the assignment of licenses to others without obtaining the prior approval of the Regulatory Agency. The license period for any of the mentioned activities is a maximum of twenty-five years, renewable for similar periods. Despite the length of this period, the Law put many constraints, among which is the requirement to obtain an annual certificate proving the continuation of the license validity after the verification of the licensee's commitment to the license terms during that year. This basically means that licensee performance is monitored annually. If the licensee's commitment to the agreed conditions is not verified, the Regulatory Agency may apply the sanctions stipulated by law which include warning, removing the violation, suspending or revoking the license. In spite of the efforts to enable the private sector to engage and invest in the generation, distribution and sale of electricity, the state has not abandoned its role in this sector. The government still supervises and regulates the sector as a whole in addition to solely carrying out the transmission of electricity.
Transmission of Electricity and Operation of the Network
The new Law specifies electricity related activities as: generation, transmission and distribution. The Law addressed the transmission of electricity in more detail than generation and distribution. This may be because while private sector companies are permitted to engage in generation and distribution under the supervision of the Regulatory Agency, The Law only allows one company from the public sector to engage in transmission activity. The Egyptian Electricity Transmission Company (a state-owned joint stock company independent from any of the electric power companies) specializes exclusively in the transmission of electricity. It also regulates the purchase and sale of electricity, implementation of electric interconnection projects, providing the market needs of electric power in addition to setting and amending the trade and settlement rules in coordination with the generation and distribution of electric power companies. It should be noted that the new law prohibits the President, members of the Board of Directors, and staff of the Egyptian Electricity Transmission Company from working in or joining the Board of Directors of any of the parties involved in the electric power sector. While the ban in such circumstances is designed to ensure independence, the Law does not specify a certain period of prohibition. It also did not clarify whether the ban is lifted by resignation or retirement from the transmission company or if it may last indefinitely.
Transitional Period and Separation from the Egyptian Electricity Holding Company
The new Law granted all parties working in this sector a deadline to adapt within six months from the date of issuance of the executive regulations of the Law (which will be issued within six months from the date of issuance). However, the Egyptian Electricity Holding Company and all its subsidiaries are excluded from such rule and are granted instead a period of eight years to adapt to the new Law. This exception is due to the fact that the new Law separated the Egyptian Electricity Transmission Company from the Egyptian Electricity Holding Company, which entails significant changes that require more time. In addition, the Egyptian Electricity Transmission Company will be restructured in a period not exceeding three years. It is worth mentioning that the Law has specified a "transition period" of three years involving the two companies (the Holding and the Transmission) in which they both collaborate in the completion of a number of tasks in spite of their separation.
Penalties
The Law stipulated many deterrent penalties depending on the significance and seriousness of the electric utility, without prejudice to harsher penalties in other laws. Among the most significant sanctions are:
  1. imprisonment for not more than three years and/or a fine not exceeding five hundred thousand pounds for anyone who demolished or damaged an equipment or a facility for the generation, transmission or distribution of electric power or made it unusable.
  1. imprisonment for not less than six months and not more than three years and/or a fine not exceeding one million pounds for anyone engaged in any of the electricity activities without obtaining a license from the Regulatory Authority.
  1. imprisonment for a period not less than three months and/or a fine not exceeding one hundred thousand pounds, for anyone who intentionally disclosed any information obtained by virtue of his position in an establishment operating in the electricity sector if this disclosure led to unfair competition between the different institutions.
Conclusion
The new Electricity Law may be one of the most noteworthy laws that have been adopted in the last period. It came within a legislative spurt focused on energy sources in general and addressed this utility in a comprehensive and structured way. The issuance of this law is considered not only an attempt to temporarily get out of the energy crisis and the chronic power shortages that the country faces, but also to overcome this problem in a systemic way that helps to solve the energy crisis on the medium and long run. Among the advantages of this Law is allowing private sector companies to engage in the generation and distribution activities. In addition and according to the new Electricity Law, the Egyptian Electricity Transmission Company will gradually separate from the Egyptian Electricity Holding Company until the completion of the projects in which the Ministry of Electricity acts as a partner. This separation ensures the impartiality in purchasing electric power generated by power plants owned by the Holding Company or the private sector companies. Finally, the Law emphasized on ensuring transparency, non-manipulation and prevention of monopoly in all of its provisions primarily to guarantee providing the best service to consumers, and the best market to investors.   [1] Presidential Decree-Law No. 87/2015 issuing the Electricity Law, Official Gazette, Issue No. 27 (bis) (c), 8 July 2015.
Energy is considered one of the most important issues that have been raised in Egypt over the past few years due to the severe crisis that the country faced, which led to chronic shortages on several occasions. As a result, many improvements were introduced in the existing stations and other stations have come into operation; at the same time there have been many efforts to change the legislative structure of the electricity sector. In July 2015, a new law was issued to regulate electricity, after it was regulated through a number of different legislation (the "Law").[1] The new Law aims mainly at providing opportunities for investment in the power sector by allowing the private sector to engage in some electricity related activities without limiting these activities to the public sector, while ensuring fair competition between all parties. This Decree also regulates the role of the state and eliminates its monopoly, while retaining its regulatory role. The Law introduced the abolition of a number of legislations that regulated electricity, including, for example, the Institutions of the Electricity Sector Law, and an important paragraph of the Establishment and Management of Thermal Machines and Steam Boilers Law, and also the President's decree to reorganize the Electric Utility and Consumer Protection Regulatory Agency. The new law has also included certain provisions that were stipulated in the revoked legislations, which helps to unify the legislations of this important sector and creates a state of clarity and certainty for investors and citizens. It should be noted that the issuance of the new Law will not affect the prices of electricity, which falls under the jurisdiction of the Electric Utility and Consumer Protection Regulatory Agency (the “Regulatory Agency”). Moreover, allowing the private sector to invest in the electricity sector will not affect the electricity prices to the general public/small consumers as the law clearly specifies their procurement of the service according to the prices determined by the State (through the Regulatory Agency). With regard to large/industrial  consumers (such as factories/plants) which were named in the law as "Qualified Subscribers", the price of electricity will be mutually agreed on between them and the companies that supply the electricity (whether public or private sector companies). Moreover, it is worth mentioning that the new investment law had approved some concessions/privileges to investors in the electricity sector. Article (20) stipulates that "Concessions and additional non-tax incentives can be granted by a decree of the Cabinet of Ministers, upon the submission of the competent minister proposal, to the investment projects operating with heavy labor or those working to deepen the local component in their products, or those investing in generating electricity from conventional or new and renewable energy sources, particularly: 1. Allowing the establishment of private customs outlets for the exports or imports of the investment project upon agreement with the Minister of Finance, 2. Granting the projects price concessions or facilitations in payment of the energy used, 3. Refunding to the investors part of or the full value of delivering the utilities to the land allocated to the investment project after the operation of the project, 4. Part of the cost of the technical training for workers is paid by the State, 5. Full value of both the employee’s and the employer’s share in the social insurance or part of it for a specific term is paid by the State, 6. Disposal of privately state-owned land and property or those owned by public legal persons". The Law regulated a number of topics at length in order to become a complete reference and the main source which regulates the electricity utility. The Law allotted the second section for the regulation of the electricity utility, which includes the “Electric Utility and Consumer Protection Regulatory Agency", as the regulator of all electricity activities. The Law also regulated the necessary licenses and permits needed to conduct electricity activities, in addition to electricity related activities (generation, transmission and distribution).
Electric Utility and Consumer Protection Regulatory Agency
The Law addressed the Regulatory Agency in detail and specified all of its provisions in light of the annulment of the previous presidential decree, which had regulated it. The new Law transforms the Regulatory Agency into a public body independent from the Ministry of Electricity (similar to the case of the National Telecom Regulatory Authority). The new Regulatory Agency is designed to organize, follow-up, supervise, and develop the electricity activities, including setting a tariff for the sale of electric power to subscribers (unqualified), and specifying sound economic rules and fundamentals to calculate the tariff for the sale of electric power and the tariff for the use of the transmission and distribution networks of electric power to unqualified subscribers. The Regulatory Agency also aims to attract and encourage investment in the electricity sector within the framework of legitimate free competition.
The new Law transforms the Electric Utility and Consumer Protection Regulatory Agency into a public body independent from the Ministry of Electricity (similar to the status of the National Telecom Regulatory Authority)
The Regulatory Agency is formed under the chairmanship of the Minister of Electricity with the President of the Egyptian Competition Authority, the President of Consumer Protection Agency, the President of the Federation of Egyptian Industries, the President of the Federation of the Egyptian Chambers of Commerce, and other experts in the electricity sector, as board members. The law stipulates that the Regulatory Agency has to have a chief executive appointed for a period of three years by a Prime Minister’s decree, renewable for only one term in order to reduce the disadvantages of the continuation of one person in the office for a long time. The law has addressed many of the other provisions specific to the Regulatory Agency, for example, its powers, resources, and its Board of Directors meetings among others.
Participation of the Private Sector and Required Permits
One of the most important issues introduced by the new Electricity Law, is allowing the private sector to participate in the generation, distribution or sale of electricity. The Electric Utility and Consumer Protection Regulatory Agency is responsible of granting the permits and licenses required to the private sector to invest in those areas. However, the Law makes an exception for independent power producers who generate electricity for private use, relieving them from the requirement to obtain permits. This is a further step to encourage generation of power for private use, an issue that was heralded in the Stimulating Production of New and Renewable Energy Law adopted in December 2014. The new Law defines the specific procedures required by any Egyptian joint stock company (which is the only kind that is allowed to engage in those activities) in order to obtain the necessary licenses, which must be decided upon within sixty days of the application. The Law prohibits the assignment of licenses to others without obtaining the prior approval of the Regulatory Agency. The license period for any of the mentioned activities is a maximum of twenty-five years, renewable for similar periods. Despite the length of this period, the Law put many constraints, among which is the requirement to obtain an annual certificate proving the continuation of the license validity after the verification of the licensee's commitment to the license terms during that year. This basically means that licensee performance is monitored annually. If the licensee's commitment to the agreed conditions is not verified, the Regulatory Agency may apply the sanctions stipulated by law which include warning, removing the violation, suspending or revoking the license. In spite of the efforts to enable the private sector to engage and invest in the generation, distribution and sale of electricity, the state has not abandoned its role in this sector. The government still supervises and regulates the sector as a whole in addition to solely carrying out the transmission of electricity.
Transmission of Electricity and Operation of the Network
The new Law specifies electricity related activities as: generation, transmission and distribution. The Law addressed the transmission of electricity in more detail than generation and distribution. This may be because while private sector companies are permitted to engage in generation and distribution under the supervision of the Regulatory Agency, The Law only allows one company from the public sector to engage in transmission activity. The Egyptian Electricity Transmission Company (a state-owned joint stock company independent from any of the electric power companies) specializes exclusively in the transmission of electricity. It also regulates the purchase and sale of electricity, implementation of electric interconnection projects, providing the market needs of electric power in addition to setting and amending the trade and settlement rules in coordination with the generation and distribution of electric power companies. It should be noted that the new law prohibits the President, members of the Board of Directors, and staff of the Egyptian Electricity Transmission Company from working in or joining the Board of Directors of any of the parties involved in the electric power sector. While the ban in such circumstances is designed to ensure independence, the Law does not specify a certain period of prohibition. It also did not clarify whether the ban is lifted by resignation or retirement from the transmission company or if it may last indefinitely.
Transitional Period and Separation from the Egyptian Electricity Holding Company
The new Law granted all parties working in this sector a deadline to adapt within six months from the date of issuance of the executive regulations of the Law (which will be issued within six months from the date of issuance). However, the Egyptian Electricity Holding Company and all its subsidiaries are excluded from such rule and are granted instead a period of eight years to adapt to the new Law. This exception is due to the fact that the new Law separated the Egyptian Electricity Transmission Company from the Egyptian Electricity Holding Company, which entails significant changes that require more time. In addition, the Egyptian Electricity Transmission Company will be restructured in a period not exceeding three years. It is worth mentioning that the Law has specified a "transition period" of three years involving the two companies (the Holding and the Transmission) in which they both collaborate in the completion of a number of tasks in spite of their separation.
Penalties
The Law stipulated many deterrent penalties depending on the significance and seriousness of the electric utility, without prejudice to harsher penalties in other laws. Among the most significant sanctions are:
  1. imprisonment for not more than three years and/or a fine not exceeding five hundred thousand pounds for anyone who demolished or damaged an equipment or a facility for the generation, transmission or distribution of electric power or made it unusable.
  1. imprisonment for not less than six months and not more than three years and/or a fine not exceeding one million pounds for anyone engaged in any of the electricity activities without obtaining a license from the Regulatory Authority.
  1. imprisonment for a period not less than three months and/or a fine not exceeding one hundred thousand pounds, for anyone who intentionally disclosed any information obtained by virtue of his position in an establishment operating in the electricity sector if this disclosure led to unfair competition between the different institutions.
Conclusion
The new Electricity Law may be one of the most noteworthy laws that have been adopted in the last period. It came within a legislative spurt focused on energy sources in general and addressed this utility in a comprehensive and structured way. The issuance of this law is considered not only an attempt to temporarily get out of the energy crisis and the chronic power shortages that the country faces, but also to overcome this problem in a systemic way that helps to solve the energy crisis on the medium and long run. Among the advantages of this Law is allowing private sector companies to engage in the generation and distribution activities. In addition and according to the new Electricity Law, the Egyptian Electricity Transmission Company will gradually separate from the Egyptian Electricity Holding Company until the completion of the projects in which the Ministry of Electricity acts as a partner. This separation ensures the impartiality in purchasing electric power generated by power plants owned by the Holding Company or the private sector companies. Finally, the Law emphasized on ensuring transparency, non-manipulation and prevention of monopoly in all of its provisions primarily to guarantee providing the best service to consumers, and the best market to investors.   [1] Presidential Decree-Law No. 87/2015 issuing the Electricity Law, Official Gazette, Issue No. 27 (bis) (c), 8 July 2015.