Recommendations to the Botswana Energy Regulatory Authority: Processing Applications for Tariff/Rate Changes

As part of its regulatory functions, BERA is responsible for processing applications for tariff changes submitted by utilities such as the Botswana Power Corporation (BPC). The Southern Africa Energy Program (SAEP) has submitted recommendations to BERA for the processing of future applications for tariff changes. The SAEP recommendations are based on lessons learned from the recent application of the BPC for a change in rates. The recommendations fall into two broad categories: filing requirements and process considerations. The filing requirements include the burden of proof, presumption as to existing tariffs, and the information that the entity making the application must provide to the regulator. The SAEP recommends that the burden of proof is upon the utility to justify the reasonableness of tariffs, currently charged or proposed to be charged. The tariffs that are in effect when a new tariff determination proceeding is initiated will not be presumed to be reasonable. The entity making the application must provide a narrative of the financial and operational health of the utility, including its past financial and operational performance and future plans. The SAEP also recommends that the utility provide detailed information on its revenues, costs, and financial performance. This includes the annual revenues under the existing tariffs and under the tariffs which the utility proposes to charge, the number of units of service rendered, the revenue per unit, and the detailed cost of rendering the service. The utility must also provide comparative balance sheets, income statements, and cash flow statements for the three preceding financial years and for the current year through the latest available month. In addition, the SAEP recommends that the utility provide information on its historic tariff prices, historic capital expenditures, historic O&M expenditures, sales, system losses, regulated asset base and depreciation, working capital, future capital expenditures, future O&M expenditures, weighted average cost of capital (WACC), performance incentives, adjustments and reconciliations, cost of service, rate design, and public policy goals. The SAEP also recommends that an application for a change in tariffs will be considered duly-filed when all the above items are filed with BERA. BERA shall state that the application is duly filed by means of a letter sent to the utility. The time available for BERA to process the application begins as of the date that the application is considered duly filed. The SAEP recommendations aim to enhance transparency, regulatory certainty, and the overall quality of applications and analyses. By implementing these recommendations, BERA can ensure that the tariff change application process is more efficient and effective, and that the interests of all stakeholders are protected.