Alternative Models and Proposed Power Sector Organization

Alternative models for Distribution. Distribution is by Law a licensed activity that can be executed by different companies. Different models for the long term functioning of the Distribution activity were considered:

  • LEC as the National Grid Distribution Company, with transitional grids being managed by Local Companies transitorily until they are connected to the National Grid and transferred to LEC.
  • Regional Distribution Companies. Country being divided into regions with each region awarded to a different regional distribution company. Regional Distribution Companies may operate on decentralized grids or on the National Grid.
  • Local Distribution Companies or Cooperatives. Transitional grids managed by multiple small Local Companies that would remain as independent Distribution Companies even after connected to the National Grid.

Regional Distribution Companies. The Regional Distribution Companies model was selected as it allows for a stronger private sector involvement in the future with a scale that can attract robust private sector companies. LEC model would maintain the more centralized public sector status quo, previous to the new legislation, with a high risk of continued lack of focus on the rural areas and difficulty to implement such a large investment program. The Cooperative model would represent a risk of too many under-capitalized and under-staffed distribution companies without scale or capacity to adequately respond to the challenge of implementing the Master Plan.

Model for Transmission and System Operation: “The National Grid Company or Unit”. The Rural Energy Master Plan does not propose any High Voltage Transmission (>60 kV) investment outside the National Grid. The Electricity Law mandates LEC as the “National Grid Company” and transmission system operator. Therefore, all Transmission in the National Grid – except for CLSG which is owned and operated by TRANSCO CLSG - should be operated by LEC. The Medium Voltage infra-structure will be operated by Regional Distribution Companies and LEC will transfer electricity to Distribution Companies in the future Sub-stations that transform energy from High Voltage to Medium Voltage. Conflict of interest coming from LEC being also a Distribution operator recommends that the Transmission and System Operation be set up as an autonomous unit or even company inside LEC – the National Grid Company or Unit.

Alternative models for wholesale activities of trading and import/export. Electricity trading and import/export of electricity are licensed activities under the new Law and normal activities in developed power markets where generation unit dispatch is decided primarily by the market – meaning arrangements between generators and suppliers or clients. However, the Electricity Law awards the responsibility to dispatch generation units connected to transmission to the Transmission System Operator. Several alternative models are possible:

  • Unique Buyer. Each Grid has a unique Buyer, responsible to procure, dispatch generation in its grid, guarantee all imports and exports and to sell to Distribution at a regulated price. Model can be applied only to National Grid or also to Decentralized Grids.
  • Regulated or Last Resource Buyer. A regulated entity is in charge of off-taking renewable Independent Power Producers, and highly subsidized sources of generation in the Grid and resell them to Distribution Companies at a regulated price. However, Distribution Companies are allowed, under certain limits established by LERC, to procure part of their power either in Liberia or West African Power Pool (WAPP).
  • Multiple Buyers or free market. Each Distribution Company is free to procure its electricity in Liberia or in the West African Power Pool. Each generation unit is free to sell its electricity. Transmission System Operator manages dispatch after receiving information on bilateral agreements.

Regulated Buyer model. The Regulated Buyer model was selected as it offers security for Renewable Independent Power Producers favoring investment, it allows to share the benefits of grants on generation among Distribution Companies and large industrial clients and it mitigates price differences across the country while offering opportunities to progressively start a more competitive market approach. The Unique Buyer model limits private participation dynamics and the Free Market model brings in the current stage of the Liberian Power Sector too much risk to investors in Generation and Distribution.

The National Grid Company or Unit will be the Regulated Buyer in the National Grid. In each Decentralized Grids – until it is connected to the National Grid - a Regional Distribution Company will be awarded the role of Regulated Buyer.

Model for Generation. Each and all generation units will act under the Independent Power Producer model with a Power Purchase Agreement to be celebrated, after approval of LERC, with either a Regulated Buyer, a large industrial client or the trading unit of a Regional Distribution Company. Agreements with Regulated Buyers – except for own generation - require transparent and competitive procurement processes.

Proposed Power Sector organization. The next Figure summarizes the selected models and proposed power sector organization outlining the responsible entities for each Power Sector activity along the value chain according to the type of grid. The proposed system will not apply to off-grid villages and systems where rural cooperatives will be incentivized to promote higher involvement of local communities, more local job creation and to facilitate more fractioned payments.