ESMAP Project Proposal Comparative Regulatory Study Scope of Work 1. A comparative study on the regulatory systems in the UK (price cap), North America (rate of return), and the system in Continent Europe based on market value pricing and implicit regulation. The study would analyze pros and cons of each system in terms of economic efficiency and financial viability for the companies. The regulatory costs and demands for staffing under each system would be included in the analyses. Duties and Powers of the Regulatory Agency 2. The study should define and describe in detail the objectives and specific responsibilities and activities of regulatory agencies in different regulatory systems. Tasks arising at the outset and tasks risen with the growth of the industry in these countries are identified
. 3. The responsibility of the following regulatory tasks would be identified under different regulatory systems: Setting the terms and conditions for competitive award of franchises Ensuring that franchises maintain their systems in good condition Issuing permits authorizing construction and operation of pipelines Preventing anti-competitive and discriminatory behavior Preventing abuse of monopoly Enacting regulations governing technical standards Regulating matters relating to billing, interruption, and reconnection of gas supply Authorizing applications for rights of way, determining the compensation payable, and setting cases of dispute Obtaining technical information from transporters and distributors and conducting inspections of their facilities Monitoring and collecting data on the companies' performances including financial performance When open access is in place, the regulatory requirements would include the regulation of tariffs and other conditions of service for the franchises of openaccess operations. Moreover, the regulatory agency should ensure that anti- competitive and discriminatory behavior is avoided in providing access to the pipeline. 4. The description of each task should include the type of data submitted to the regulatory agency, procedures, frequency of reports and inspections, and deadlines. The work on procedures include penalties, public hearings and appeal possibilities. Finally, the study should discuss when in the development process the need for a certain regulatory task arose, and establish priorities between the tasks. Gas Transmission and Distribution Tariffs 5. The objective of this part of the study is to recommend tariff principles for transmission pipelines and for gas distribution tariffs. In Egypt, gas transmission pipelines are under consideration from the Western Desert and for exports. The transmission company PPC would deliver gas directly to most major customers. 6. The following pricing principles should be discussed: The procedures for setting tariffs under a price cap formula and under a rate of return formula, including: data request from companies frequency between filings regulatory demands and implications for staff requirements in the regulatory agency of the two methods 7. The study should recommend one of the options for the regulation of pipeline rates. Under different options for industry structure to explain the principles for a costbased tariff system: how revenue requirements are established how costs are related to the capacity of the pipeline system classified and allocated on groups of customers how new investments in additional capacity are transformed into the tariffs the use of postage stamp tariffs vs. distance related tariffs for transmission and distribution. Tariff design should be discussed (without constructing actual tariffs): fixed and variable rates - demand charges load factor variables - seasonal - interruptible rates, and - lifeline rates for residential customers 8. If open access is introduced, the regulatory requirements would include regulation of tariffs and other conditions of service for the franchises of open-access operations. Special procedures to achieve this should be discussed.
9. The possibility of introducing a price cap on the costs of gas distribution to small customers should be discussed. The study should include a discussion of pricing formula, procedures, data requirements, and frequency of tariff adjustment. Preliminary Budget 10. As shown in Annex 1, the preliminary budget requirement for this study is US$192.350.
