Cabinet approves draft law aimed at opening electricity sector

Egypt’s Cabinet on Wednesday approved a draft law that will pave the way for privatization of the country’s electricity sector.

The draft law has now been sent to the State Council for review.

According to a Cabinet statement, the new law aims to move the state toward a regulatory role, and away from directly managing the electricity sector. It calls for the creation of an independent entity to “ensure the preservation of the interests of consumers and providers of the service, and balanced relationship between them.”

Currently, Egypt’s electricity grid is operated entirely by state-owned monopolies. The Egyptian Electric Holding Company, the market’s sole buyer, purchases electricity from producers, while its subsidiary the Egyptian Electricity Transmission Company routes power to major consumers and to regional distribution companies, which in turn transmit and sell power to retail consumers at subsidized prices. 

Due largely to energy subsidies, the EEHC has historically racked up multi-billion pound annual deficits. The company has also been implicated in a corruption scandal in which foreign companies bribed officials to win government contracts.

According to the Cabinet, the new law will introduce rules to allow “free competition” in the production, transfer, distribution and sale of electricity.

In addition, transport, production and distribution of electricity will be separated.

In principal, these changes to the law would allow private companies to transmit and sell electricity directly to consumers, cutting the EEHC out of the process.

The draft law is also intended to facilitate linking Egypt’s grid to neighboring countries, such as an initiative to share electricity between Egypt and Saudi Arabia.

In September, the government approved a feed-in tariff that allows private producers of wind and solar energy to sell electricity to the grid. Although the law was generally viewed as a step in the right direction, it  has been criticized as a move to privatize, rather than decentralize, energy generation in Egypt.