Following the CT Power saga, the Government must at the earliest come up with legislation that will oblige CEB to undertake a competitive bidding process before it signs a power purchase agreement with any private firm that generates power for sale to the national electricity grid. A void in Mauritian legislation has allowed the CEB to accept the unsolicited proposal for a 110 MW power plant from CT power whereas such a proposal would have been unacceptable in India, South Africa and many other countries because these countries have a clear and well defined legislation on the procurement of electricity from firms like CT Power and other Independent Power Producers. A review of the legislation on procurement of new generation capacity by the CEB is currently indispensable because according to CEB’s recently published Integrated Electricity Plan two more power plants each with a capacity of 50 MW will have to be built for commissioning in 2017 and 2021 respectively.
The Public Procurement Act 2006 governs all procurement by public bodies like the CEB. This legislation requires that goods, works and services whose value exceeds 100 million rupees must be procured through open advertised international bidding. Furthermore, such procurement must be supervised by the Central Procurement Board. However, as a result of Government Notice No 68 of 2009 which exempts CEB from the provisions of the Act for electricity that it purchases for resale, the CEB did not need to go through open advertised international bidding to buy electricity from CT Power at an annual price of around 3.5 billion rupees over twenty years starting in 2015.
According to information given to Parliament by the Minister of Public Utilities on 15 July 2008, CT Power filed a proposal to the Board of Investment for the setting up of a coal fired plant at Pointe aux Caves. Thereafter, CT Power approached the CEB and the two parties signed a Power Purchase Agreement that formalized the terms under which CEB would buy electricity from CT Power. CEB did not make any effort to find out through open advertised international bidding whether there are other firms who would be willing to provide new generating capacity at a more favourable tariff. In turn this would have enabled the CEB to sell electricity at a lower cost to its consumers.
Procurement of new generation capacity is carried out within the framework of the Electricity Act, 2003 in India and the Electricity Regulation Act, 2006 in South Africa. The Acts require that the procurement must have three stages namely Request for Qualification (RFQ), Request for Proposal (RFP) and negotiations with the preferred bidder. At the start of the process, the utility needing new generation capacity publishes a notice in the local and international press informing all potential bidders about the project and the RFQ. The utility analyses the qualifications of interested bidders, makes a shortlist based on their technical experience and financial capability to undertake the project, and sends a RFP to the shortlisted bidders.
After analysis of the proposals received, the utility designates as the preferred bidder the one who offers the most favourable tariff for the new generation capacity. If negotiations with the preferred bidder are successful, the Power Purchase Agreement is signed or else negotiations are held with the bidder who offers the next best favourable tariff. In India, the utility has to publish on its website and in two national newspapers the details of the tariff offered by the successful bidder and the tariffs quoted by the other bidders.
A comparison of the method used by the CEB and the one used in India and South Africa to procure new generation capacity reveals that CEB’s method lacks competition and transparency. Competition among several firms willing to set up new generation capacity for sale to the CEB will drive down the price of electricity in the country. In turn, this will make the Mauritian economy more competitive because electricity is one of its key inputs. Transparency will send a strong signal to investors that Mauritius is a good place to do business. Their increased willingness to invest will bring further benefits to the Mauritian economy. In view of the foregoing, the law governing procurement of new generation capacity by the CEB should be redesigned to bring it more in line with similar legislation prevailing in India and South Africa.