The new Myanmar Electricity Law was enacted by the Myanmar Parliament on October 27 last year, replacing the old Electricity Law of 1984. The old electricity law was enacted during Myanmar’s socialist period and lacked the legal framework to include private sector participation in power projects and independent power producers.
During the transition to Myanmar’s present civil administration the government decided to introduce a new legal framework that would reflect current international standards and encourage foreign and domestic investments in power projects in Myanmar. The Asian Development Bank provided technical assistance to the Myanmar government and the law was passed.
Drafting of the law was begun in 2006 by a committee consisting in part of officials at the Ministry of Electric Power No.1 and Ministry of Electric Power No.2. The two ministries of Electric Power have since been consolidated into one, called simply the Ministry of Electric Power (MOEP). Also on the committee were officials of the Ministry of Industry, which is responsible for the inspection of electrical facilities. The committee was overseen by the Chairman of the State Peace and Development Counsel, the head of government at the time.
The new electricity rules have not been promulgated and the old rules are still in effect, to the extent that they are not in contradiction with the new law. In September 2011 the government asked for the assistance of the Asian Development Bank in drafting the new rules. Work commenced on the rules in March 2014 and is scheduled to be completed in March this year.
One of the main features of the new law is to establish the Electricity Regulatory Commission (ERC) to supervise the monopolistic electric power entities. The new Electricity Law provides a limited grant of regulatory responsibilities to the ERC.
The law gives the MOEP, region and state governments and leading bodies of Self-Administrated Zones (SAZ) and Self-Administrated Divisions (SAD) the power to grant permits to allow persons to engage in electricity related works, including generation, transmission and distribution of electric power.
Generally, Myanmar is administratively divided into states and regions. Under sections 51 and 56 of the Constitution, there are a five SAZ and one SAD, geographic areas applicable to particular ethnic groups. The leading bodies are the groups of individuals that have the administrative authority prescribed in Schedule 3 of the Constitution over the SAZ and SAD. The SAZ and SAD are located within regions and states. Four of the SAZ and the one SAD are located within the geographical boundaries of the Shan state.
The law permits foreigners to invest in power projects of any size in Myanmar. Schedule 1 of the Rules dated January 31, 2013 to the Foreign Investment Law of 2012 (FIL) states that power projects under 10MW are allowed only to Myanmar citizens. Despite this, in practice, because of section 5 of the FIL, such projects may be done as joint ventures between foreigners and locals with the approval of the government.
Under Notification 1 dated January 13, 2013 hydro and coal power plants must be joint ventures with the government as build, operate and transfer projects. Notification 1 was specifically repealed by Notification 49 dated August 14, 2014, which states that any activity not mentioned therein
can be 100 percent foreign owned. Hydro and coal projects are not mentioned in Notification 49, so it may be concluded that they may be 100 percent foreign owned. In this context of change, however, it is still advisable to potential investors for projects of this nature to check with MOEP before proceeding.
Under section 8(b) of the law, MOEP, with the approval of the Union Government, shall have the authority to grant electricity business permits to local and foreign investors for large projects. Section 2(z) of the law defines large projects as those with generating capacity of more than 30MW, whether they are connected to the national grid or not. This means that for projects anticipating more than 30MW of generating capacity, they must be approved by MOEP.
Section 2(x) of the law defines small projects as those up to 10MW and section 2(y) of the Law defines medium projects as more than 10 up to 30MW.
Under section 9(a) of the law, the region or state governments may approve and administer medium and small projects not connected to the national grid. Though the law does not mention which authority is responsible for approving small and medium projects that are connected to the national grid and large projects that are not connected to the national grid, MOEP has recently explained that MOEP would be responsible for the approval of these.
For projects for towns and villages within SAZ or SAD, it appears in section 15 of the Law that the leading bodies in connection with the state or regional governments would have authority to approve and administer these projects. The exact legal mechanism for this is not, however, set forth in the Law. The size of projects within SAZ or SAD that would be subject to such approval is not specified in the Law and plain reading of the Law is that any sized project in an SAZ or SAD would be subject to the relevant approval, in addition to the approvals mentioned above.
Under section 41 of the Law, it is MOEP that sets, with the approval of the cabinet of the Union Government, retail tariffs for the national grid power. Region or State Governments determine, through coordination with MOEP under section 42 of the Law, wholesale and retail tariffs for off-grid power. The Law does not provide what authority shall determine the wholesale tariff for the national grid, though it is likely that this will be done by MOEP. From section 42 it also appears that leading bodies of SAZ and SAD, in coordination with MOEP, may determine tariffs for off-grid power within their respective areas.
As stated above, tariff determinations are vested with MOEP and region or state governments under sections 41 and 42 of the Law. Likewise, where applicable, leading bodies of SAZ and SAD are also involved in this process. Section 5(c) provides that the ERC may only give advice to MOEP and the region and state governments and leading bodies with respect to electricity rates and may not set the rates. The Law, moreover, is silent on other regulatory responsibilities that many countries give to an independent regulatory authority such as the ERC. Examples of these responsibilities are, with respect to licensees and other relevant parties: Implementing standards for investment; reviewing financial capabilities and accounting standards; enforcing performance standards; evaluating consumer complaints; resolving contract disputes; and prescribing fees.
Though the authority to grant approvals is discussed above and overlaps with the following table, the table is used to show the categories of activities that must obtain approvals.
The law uses the term “permit” instead of “licence,” a term used in many countries in connection with government regulation of power projects and those persons permitted to participate in power sectors. In general there are a number of activities for which a specific licence would be required under electricity laws of othe
r countries: generation, transmission, distribution, wholesale power sales, retail power sales, trade, export and import, for example.
Unlike the practice in many other countries, the new law, however, distinguishes permits not by categories of electricity business activities, but by the authorities issuing relevant permits. Using the example discussed above, investors seeking permits for power plants to be connected to the national grid or exceeding 30MW must apply to MOEP for the permit (Law, sections 8(a) and 12). For those seeking permits for plants of less than 30MW in size not to be connected to the grid the permit must be requested from the proper region or state government (Law, sections 9(a) and 13).
The new Electricity Law confirms existing Myanmar practice of tariff determination and permitting. There are several provisions in the law, discussed above, that are different from practices in other countries. We expect, however, that the new rules, which will be issued within 90 days of the enactment of the law, will address many of these issues.
Viacheslav Baksheev is adviser, and James Finch is partner at law firm DFDL, Naypyitaw. The foregoing represent the individual views of the authors and are not intended to represent those of DFDL or any other employee thereof.
Source: Myanmar Business Today