November 12, 2002 Workshop on Overview of Legal Issues in Regulatory Reforms November 11-15, 2002 - Hyderabad

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“Overview of Legal Issues in Regulatory Reforms in Bhutan”

A Presentation by participants from BHUTAN

1. Karma Tshewang 2. Kuenzang Chhoden 3. Nima Tshering 4. Jambay Yeshi

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Coverage

I. Country ProfileII. An overview of Energy Sector in BhutanIII. History of Energy Regulation in BhutanIV. The Power Sector ReformsV. The current status of Energy RegulationVI. The Legal BasisVII. The future of Energy Regulation in

Bhutan

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Disclaimer

The materials & views expressed in this presentation are mostly of our own and may not necessarily be consistent with that of the Royal Government of Bhutan.

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I. Country profile – Bhutan Location : Southern Asia, between China & India Total area : 47,000 Sq. km Population : 700,000 Pop. growth rate : 3.1% Language : English & Dzongkha (official). Literacy rate : 53% Religion : Buddhist 90%, Hindu 10% National capital : Thimphu PPP : $760 per capita Industries : Hydropower, cement, food products,

wood. Natural resources : Hydropower, gypsum, calcium carbide,

timber. Agriculture : Rice, potatoes, cash crops, timber. Currency : Ngultrum ($1 = Nu. 45)

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II. Energy Sector – An Overview Almost entirely Hydro based power

– Total hydro power potential of 30,000 MW

– Techno-Economically Feasible:16,000 MW

– Total installed capacity is about 445 MW

– Hydro based is 428 MW (1.42% of total potential)

– Mega hydro projects are export oriented

– Power sector contributes about 45 % to the GDP

– Capacity of about 1500 MW by year 2005

– Hydropower Sector is considered as the engine of Economic growth of the country

– Energy demand in the order of 500 MU

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III. History of Energy Regulation Electricity Terms & Conditions was

approved by the Council of Ministers in 1977

Inspection & Arbitration Cell was created in 1983 for dispute resolution between the Govt. & the customers & upgraded to a full Unit in 1996

Power Regulatory Division was created under DOP in May 2000 to look after all the inspection & arbitration, safety issues, etc.

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History of Energy Regulation…..

O rg an o gra m - t ill 2 0 01

P ro je cts P lan n ing& In ves tig a tio n D iv is ion

P ro gra m Im p le m e n ta tionD iv is io n

P o w er R e g u la to ryD iv is io n

O p era tion & M a in te na n ceD iv is io n

D e pa rtm e n t o f P o w er

M in is try o f T rad e & In d u s try

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IV. The Power Sector reforms

DEPARTMENT OF POWER

[DOP]

BHUTAN ELECTRICITY AUTHORITY

[BEA]

BHUTAN POWER CORPORATION

[BPC]

DEPARTMENT OF ENERGY

[DOE]

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DEPARTMENT OF ENERGY

Planning & Coordination Division

Renewable Energy Division

Hydromet ServicesDivision

Chief Executive OfficerBhutan Electricity

Authority

The Reforms…..DoE from July 2002

Regulatory & Standards Division

Tariff & Pricing Division

Licensing & Monitoring Division

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V. Current Status of Energy Regulation

Electricity Act was passed in 2001 with the aim of :

1. Restructuring the electricity supply industry2. The establishment of BEA3. Technical regulation of the electricity supply

industry4. The private sector participation in the

electricity supply industry5. To empower the Government to participate in

the formation of any company for the purpose of carrying out all or any of the purpose of the Act

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The current status .. Functions of the Authority – BEA..

1. To develop regulations, standards, codes, principles and procedures;

2. to process applications and issue, modify and revoke licenses;

3. To monitor the performance of Licensees and their compliance with the provisions of the Electricity Act;

4. To determine, or approve tariffs proposed by the Licensees, and review existing tariffs;

5. To prescribe and collect fees, charges or royalties from Licensees;

6. To impose any fines, sanctions or penalties for any breach of provisions of this Act;

7. To establish dispute resolution process, settle disputes between the Licensees and between Licensees & Customers;

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VI. Legal Structure

MinistryMinistry

Department of Department of PowerPower

DoEDoERegulatorRegulator

BPCBPCtransmission, transmission,

distribution, planning and distribution, planning and system controlsystem control

BPTCBPTCtrader, load trader, load planningplanning

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Legal basis….. Legal basis: As of now, the decisions made by

PRD/Authority is final and can be appealed to the courts in case the deliberations/justice meted out is not proper

The Act gives the customer a right to appeal to the Authority in three different situations:

The Customer’s Right - the right to appeal, The customer’s right to compensation, The right to appeal when Electricity is

disconnected.

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Legal Basis…

Appealing to the Courts:Any dispute, controversy or claim arising out of or

relating to provisions given in this Regulation or the breach, termination or validity thereof that cannot be solved through negotiations in good faith, shall be settled by the Court of Law.

It is expensive to bring appeals to the Courts. As a consequence only resourceful persons (any individuals, firm, company, association, partnership or body of persons) will be able to appeal. This is discriminatory.

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Legal Basis… It takes a lot of resources, time & money, for all the

involved parties to bring appeals to the Courts. It is not very efficient.

Disputes related to the electricity supply industry are often very technical and not suited for handling in the Courts. The time and energy of the judges should be reserved for the important & principal cases.

Handling of appeals by the Authority and the Ministry will raise competence and awareness in relation to the Act and belonging regulations.

Arbitration takes a lot of resources when it comes to disputes under the Act, Therefore, it seems reasonable that the Authority/DOE/the Ministry handle the disputes.

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Legal Basis…“Procedures to settle disputes”

i. The complainant shall approach the System Operator(S.O.) in order to solve the dispute.

ii. Upon receiving such complaint, the S.O. shall promptly make suitable investigations and accordingly inform the complainant while keeping the record of complainant.

iii. Incase of the complainant not being satisfied with the response from the defendant, he may refer it to BEA within 30 days.

iv. Decisions of the BEA may be appealed to the DOE/Ministry within 30 days after receiving the written decision.

v. The parties in a dispute shall be given to present their views within a specified time, not being less than 30 days subject to payment of a fee prescribed by BEA.

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Authority & Constitution of BEA

- Chairman – Minister & a CEO - Not less than three members- Chief Executive Officer as Member Secretary- Appointed by the Minister for a Five year term with a

limit of two consecutive terms

- Is a corporate body with perpetual succession- Shall have an official seal- May sue & be sued in its own name- May acquire, hold and dispose of real and personal

property, and- May do and suffer all acts and things that a body

corporate may do and suffer by law.

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V. The Future of ER… Creation of a separate Ministry for

Energy and Water Resources (expected by 2004)

With the outside assistance, a separate & full fledged BEA formation is in the process.

Provision for establishment of BPTC under the Companies Act 1989To have well framed legal, commercial, and regulatory framework

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End of Presentation

“Thank you for your kind attention”

Any Questions!