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Legal and Regulatory Issues Promoting Cross Border Energy Trade in South Asia
Dr. Salim Mahmud
Member, Bangladesh Energy Regulatory Commission
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Continued power shortages hamper growth prospects. Seven of the eight South Asian
countries face a persistent energy shortage and outages that account for a loss of more
than 2 percent of GDP
Regional decision makers now recognize that they lag behind in energy integration.
South Asian Association for Regional Cooperation (SAARC) countries in the 13th summit
agreed on the “energy ring” concept.
Energy Diversification is a key driver. Several countries are spending more than 10% of
their forex spend on fossil fuel imports. This makes a combined, diversified regional
approach to resource use critical to energy security.
Economies of scale. In Western Europe close to 10% of the cost of production of
electricity is saved by regional interconnections.
Regional complementarity. South Asia is endowed with diverse energy resources with
different countries possessing complementary resource to others.
Seasonal Imbalances.
Why cross border energy trade?
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Cross Border Trade- The Beginning and
Development
USA-Canada Interconnection 1901
Germany-Austria Interconnection 1929
European Single Market- Florence and Madrid Forums-
Balancing three dominant models
Common electricity market in USA and Canada- the recent
moves in the US and Canada towards the establishment of a
common electricity market, mainly led by PJM Interconnection
LLC and the Midwest Interconnection Transmission System
Operator Inc.
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Challenges of Cross Border Energy Trade in South Asia
Security of Supply
Transit Issue
Inter-State Cooperation
Legal Issues for Facilitating Cross Border Power Trade
-Intergovernmental Treaty
-Comprehensive Legal Regime
-A Secure and Stable Legal Framework for
Private Investment
-Supportive Policy Framework
-Supportive List of Regulations
-Long term contracts at the beginning
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Creating an Effective Regulatory Regime
Establishment of an Independent Regulatory
Authority Independence Independence
NeutralityNeutrality
QuasiQuasi--Judicial AuthorityJudicial Authority
Basic Features of an Ideal Regulatory Regime : Basic Features of an Ideal Regulatory Regime :
-Legal mandate for Liberalization of the Sector
-Separation of Regulatory Issues from Policy Issues
-Supremacy of the Reforming Law
-Decisions through Public Participation
-Dispute Settlement through ADR6
Issues of Protection of Investment
Legal
Contractual
Regulatory
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Need for a Regional Legal FrameworkEnergy Charter Treaty 1994 (ECT) - A Model Legal Framework for Cross Border Energy Trade
The ECT’s 4 areas of focus
Protection of Foreign Energy Investments
Free Trade In Energy Materials, Energy Products and Energy-
Related Equipment
Energy Transit
Dispute Resolution through Arbitration
Why South Asia should join ECT or develop a legal framework similar to
ECT ?
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Move Towards Regional Regulation
These regional and other international initiatives have resulted in
the formation of various regulatory organizations such as:
• the APEC Energy Regulators Forum
• the Council of European Energy Regulators (CEER) in Europe
• the Energy Regulators Regional Association (ERRA) in
countries of Central and Eastern Europe and the newly
independent states of Eurasia
• the Ibero-American Association of Electricity Regulators (ARIAE)
in Latin America, Spain and Portugal
• the National Association of Regulatory Utility Commissioners
(NARUC) in the US
• the Canadian Association of Members of Public Utility Tribunals
(CAMPUT)
• the Utility Regulators Forum (URF) in Australia and
• the Regional Electricity Regulatory Authority (RERA) in Southern
Africa.
Need for a Regional Regulatory Authority or Forum of Regulatory Authorities
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Harmonizing Legal, Policy and Regulatory
Frameworks
Licencing
Tariff setting
Wheeling
Access to Networks
Market monitoring
Enforcement of codes and standards
Dispute resolution
Issues to be Examined
Legal Mechanism v. Market Mechanism
Zero Sum Game v. Win-Win Situation: Markets at the
End of the Grid v. Markets along the Grid Route
Geopolitics v. Geo-economics: Role of Cross Border
Power and Gas Trade against Geopolitics
Energy Independence v. Energy Inter-dependence
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Thank you all
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