Oil firms out to usurp Ewuras powers By A Joint Report THE EAST AFRICAN Posted Monday, June 8 2009 at 00:00 Tanzanias Energy and Water Utilities Regulatory Authority is facing an orchestrated assault by powerful operators in the government. Senior officials of the Ministry of Energy and Minerals are planning to introduce legislation in parliament to clip Ewuras regulatory powers over oil, gas, water and electricity. Investigations by The EastAfrican reveal that the officials, backed by powerful oil firms, have now proposed amendments to the law so that it takes over some aspects of regulation overseen by Ewura. In defiance of the Prime Minister Mizengo Pindas recent order to allow the regulator to perform its duties without interference and President Jakaya Kikwetes directive on the same, the officials now want to scrap the key powers of the authority to regulate prices. The regulators troubles are understood to stem from its refusal to allow energy firm Songas to increase gas prices in the market. This means that Ewura will be reduced to supervising transmission and distribution aspects in the field of gas and petrol, said a source. The Minister for Energy and Minerals, William Ngeleja, declined to respond to questions raised by The EastAfrican over the new move. The proposed amendment will limit the functions of the Natural Gas Division to the economic regulation of the transmission and distribution pipelines and supply only. Natural gas prices will be liberalised, whereupon the licensees will set prices based on landed cost of high sulphur heavy fuel oil, said the source. The amendments being suggested by the Ministry of Energy and Minerals come barely two months after Premier Pinda underscored the importance of independent regulatory authority and good governance. The EastAfrican has in its possession the new draft law to be sent to the parliament, which begins sitting this Tuesday in Dodoma. Members of Parliament have already been briefed on the amendment, which will be followed by a series of workshops to strategise on the passing of the draft. In addition to the amendments being proposed, the ministry has prepared a Draft Gas Act, which will see it assume a regulatory role over and above its mandate of dealing with policy matters. A source told The EastAfrican that the draft would create turbulence within the government. Even the president is not aware of this; it has been kept secret and that a lot of canvassing is going on to have this Bill passed by parliament, said the source. However, the proposed law (Draft Gas Act, 2009) has shortcomings, said the source, adding It is contrary to the objectives of the National Energy Policy, 2003 separating the regulatory duties and functions of independent regulatory authorities, in this case Ewura, from the policy making and administrative roles of the government ministries. It further empowers the Ministry of Energy and Minerals to carry out safety and technical regulation of the entire sector, right from exploration to the point of use of natural gas. This is one of the main functions of Ewura under the current statutes. In Part II, the draft states, The minister shall perform technical and safety regulatory functions in respect of regulated activities. In broad terms, the minister will be responsible for providing supervision at a policy level, whereas the Authority will perform certain regulatory functions. Another fear is that if the Gas Act, 2009 is enacted as it is, transportation tariffs will be increased. In view of the fact that investors will have more leeway to determine their costs under the proposed Act, the current natural gas prices to power, industrial and compression natural gas customers are likely to go up significantly to reflect changes in well head prices, and increased processing and transportation tariffs once they are deregulated. The move has been necessitated by policy changes and challenges encountered in the regulation of the natural gas sub-sector. With a view toward reflecting these policy changes and avoiding similar challenges in the future, the Act seeks to present a clear vision of which sub-sector activities would be subject to economic regulation and which would be subject to competitive forces, reads the draft. On June 20, 2008, the government, through the Ministry of Energy and Minerals, initialled two-year negotiated agreements on the Songo Songo Gas Processing Expansion Project. On August 6, 2008, the ministry initialled four-year negotiated agreements on the Mtwara Energy Project. Between August and October 2008, Ewura reviewed the initialled agreements and made comments on each of them for the consideration of the parties. Ewura faced resistance from the Ministry of Energy and Minerals on some of the negotiated terms, according to sources. In the proposed amendments to the Ewura Act, the following text has been inserted in Section 50 (3): Neither licences or permits granted, nor contracts entered into, prior to the commencement of the Ewura Act shall be subject to review by the Authority. This effectively bars the Authority from reviewing contracts that were entered into by the government that are skewed in favour of investors.