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Occasional  Paper 7: Power Sector Reform in Tanzania- Proceedings of a National policy Seminar

Edited by

Mr. Maneno J.J Katyega

Dr. Edward Marandu

Executive Summary

Power sector reforms are taking place in many countries around the world. In Tanzania, there is a strong justification for reforming the power industry. For about 35 years now the power sector has been under ministerial regulation. The integrated and government owned utility has not produced sufficient service benefits. Instead, the utility recorded unsatisfactory technical and financial performance; turning into a loss-maker whose survival, in many ways, largely depended on bailout arrangements. Ways had to be found to turn around this situation in order to achieve economic growth and reduce poverty in Tanzania.

The first National Energy Policy was formulated in 1992. Since then, the energy sub-sector as well as the national economy has gone through structural changes, where the role of the Government is slowly changing; markets have been liberalised and private sector initiatives encouraged. These changes have necessitated the revision of the 1992 policy document in order to reflect the legal, political and economic transformations in the country. The Government, stakeholders and relevant groups have participated in the formulation process of this policy in order to incorporate as many divergent views as possible.

In December 2000, the African Energy Policy Research Network, AFREPREN/FWD, organised a workshop in Dar es Salaam, Tanzania. This gathering brought together 17 participants drawn from the government ministries of Energy and Finance, donors, Local Government, the power utility, TANESCO, the Public Service Reform Commission, Independent Power Producers, academics and a representative from SIDA. The seminar was held to present and deliberate on the research findings regarding the National Energy Policy of Tanzania. The presentations focused on the current major issues of interest in the country on power reform - why, how and when to restructure and privatise the power sector. Based on experiences in developed, developing countries and the other two east African countries in the region, proposals on the type and pace of reform were discussed. These included commercialisation, putting up an enabling legislation, establishing an independent regulator, unbundling and private sector participation involving IPPs, leasing, management contract, selling off of non core assets and outright sale of core assets. Reforms that have already taken place were reviewed.

The seminar analysed the legal and regulatory framework for promoting and ensuring reform. The participants were satisfied with the proposed framework and managed approach to reform the power sector by the Public Service Reform Commission. However, it was stressed that reforms can be successfully carried out in Tanzania if this framework encourages independence from the government, enforceability, compliance, transparency and accountability.

The meeting also deliberated on the impact of reforms on regional co-operation in the energy sector. It was suggested that the three east African countries could benefit from joint demand side management, DSM, if their systems were interconnected whereby large water reservoir capacity in Tanzania can benefit from conjunctive operation optimisation with large capacity run-of-the-river hydro systems in Kenya. Further, cheap and huge untapped energy resources in Tanzania and Uganda could be developed for the benefit of Kenya. Liberalisation of the power sector in the three countries in which the private sector gets involved in marketing and implementing DSM is key to future success of increasing the power sector efficiency. Finally, electricity import limitations and other trade barriers among countries need to be reviewed.


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