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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