DEMOCRATIC REPUBLIC OF TIMOR-LESTE GOVERNMENT

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Decree-Law No.   13/2003

Of 22 July

ESTABLISHING THE BASES FOR THE NATIONAL ELECTRICITY SYSTEM

The 1st Constitutional Government of the Timor-Leste has undertaken, among its goals, to organize and regulate the National Electricity System.

In this sense, on 18 September 2002, the Council of Ministers approved the document entitled: “A Viable Policy Option for the Electricity Sector”, which defined the strategic guidelines for reforming the electricity sector. 

From among the structuring measures for attaining this goal five are pointed out: the drafting of a Basic Law for the National Electricity System; the establishment of a Public Power Company; the drafting of a law approving the Bases for Concessions within the National Electricity System with the aim to launch, in three years’ time, an international open tendering process for selecting an universal service operator from among international companies with recognised experience, through a concession contract under the BOT regime; in the short run, the entry into a management contract for the future Public Power Company with a private operator with recognised experience; finally, the recovery and restructuring of the EDTL system of production.

The present Decree-Law is precisely meant to materialise the first of the aforementioned actions.

The electricity sector contributes, in a fundamental fashion, to the promotion and growth of a country’s economy and the development of its social fabric.

The legislation applicable to this sector should be adapted by promoting a legislative reform in tandem with the present reality of Timor-Leste, whose main objective is, on the one hand, to build and develop infrastructure in the country and, on the other, to provide a range of power supply services to enterprises and the population at large, with quality and at affordable prices; and specific conditions shall be prescribed in order to allow for the feasibility of this operation.

The National Electricity System shall be progressively consolidated and modernised, and it shall be incumbent upon the Government to promote the conditions of access to an ever-increasing number of consumers and, concurrently, intervene in the electricity sector at the co-ordination and supervision level, and to ensure respect for the principles proclaimed herein.

Thus, pursuant to section 115.3 of the Constitution of the Republic, the Government enacts the following that shall have the force of law:

PART I- National Electricity System

CHAPTER I

General Provisions

Section 1

Purpose

The present Decree-Law establishes the bases for organising the National Electricity System (NES) and the principles that will govern the exercise of the activities related to the production, transmission and distribution of electricity.

Section 2

General Principles

1. The present Decree-Law and the legal regime arising therefrom are aimed at ensuring the satisfaction of the basic requirements for supplying electricity to the populations and public and private entities from various activity sectors, through the creation of conditions conducive to the development of services of this nature. 

2. The objective defined in subsection 2.1 shall conform to the following basic principles:

(a) Ensure the existence and availability of a universal service, with adequate quality conditions and at prices that can be afforded by all consumers; (b) Ensure the financial and economic feasibility of the universal service;

(c) Ensure that consumers, under similar circumstances, are given equal treatment in the access to and use of the power supply services;

(d) Use the most appropriate energy sources for the production of electricity;

(e) Promote the rationing and efficiency of the means to be used, ranging from production to transmission, distribution and consumption of electricity, so as to contribute towards the progressive improvement of the technical and economic conditions of their operation;

(f) Attract domestic and foreign investment to NES by putting in place stable, equitable, favourable and transparent conditions for investment.

Section 3

Classification

For the purposes of applying the present Decree-Law, the relevant definitions are given in the attached schedule, which is an integral part hereof.

Section 4

NES Supervision

1. It is incumbent upon the Government to establish the strategic guidelines for the development of NES, and also to monitor the activity by companies providing services related to the production, transmission and distribution of electricity, including those who hold non-binding licences, as provided by law.

2. Other responsibilities of the Government in the area of regulation, supervision and monitoring of NES include: 

(a)  Defining NES general policies and planning and the approval of applicable laws;

(b) Ensuring the existence, availability and quality of a basic electric network that will satisfy the needs of the citizens and of economic and social activities throughout the country, taking into account the requirements for harmonic and balanced socio- economic development;

(c)  Normalising and endorsing electric materials and equipment and defining the conditions for their connection to the electric network;

(d) Ensuring the existence and availability of the universal power supply service;

(e)  Approving the fee and tariff regime for the universal power supply service;

(f)  Granting titles that will allow for the provision of services in the electricity sector;

(g) Monitoring compliance with the legal and regulatory provisions applicable to the electricity sector, and imposing penalties;

(h) Declaring the public utility of expropriations and establishing servitudes required for building infrastructure necessary to operate NES.

(i)  Ensuring proper co-ordination with NES in emergency, crisis or war situations.

3. The Government’s responsibilities shall be fulfilled by the Water and Electricity Regulatory Authority, hereinafter referred to as “Regulatory Authority”.

4. The Government shall define, by Decree-Law, the organic structure, the operating rules and the responsibilities of the Regulatory Authority referred to in the preceding subsection.

Section 5

Obligations of regulated entities

1. Regulated Entities shall comply with the applicable laws, and shall conform to the administrative acts as may be issued thereto by the Regulatory Authority and other competent bodies of the Public Administration. 

3. Regulated Entities shall be responsible for the proper, safe and efficient operation of their facilities and activities.

Section 6

Consultative committee

 The law may provide for the setting up of a consultative committee comprised of state representatives, operators and consumers, the functions of which shall be to monitor and advise the Regulatory Authority on specific matters.

Section 7

Public use

1. Everyone is entitled to use the public power supply services through payment of the corresponding tariffs and fees and insofar as the applicable laws are complied with.

2. The law may define the priority use of the services and establish preferences to the benefit of entities pursuing public interests worthy of special protection. 

3. The supply of electricity intended for public security, both internal and external, and theprotection of human lives, enjoys absolute priority.

Section 8

Infrastructure that comprise NES

1. Infrastructure that comprise NES shall be developed and modernised in line with Regional Planning Schemes, taking into account the requirements for economic development, the cohesion of the national territory and the citizens’ needs in terms of welfare and safety.

2. The establishment, management and operation of each and every infrastructure that comprises NES are the exclusive competency, under the terms of section 11, of the universal service operator, except as otherwise provided in the subsection below.

3. Infrastructure engaged in activities related to the binding production of electricity for NES, carried out through a binding licence regime, as provided in sections 20 to 26, are also part of NES. 

Section 9

Pre-installation of electrical infrastructure

1. Urbanisation schemes and the construction of buildings and urban roads shall include the pre-installation of electrical infrastructure.

2. The installations referred to in the preceding subsection shall be made in accordance with the norms established by the Regulatory Authority.

3. The installations referred to in the preceding subsections shall be subject to monitoring by the universal service operator.

CHAPTER II

On the universal service

Section 10

Universal service

It is incumbent upon the State to ensure the existence and availability of the universal service of production, transmission and distribution of electricity. 

Section 11

Universal service operator

1. The universal service of production, transmission and distribution of electricity within the national territory shall be operated under an exclusivity regime by a universal service operator, in one of the following modalities:

(a)  directly by the State;

(b) by a public corporate body, especially established to that effect by Decree-Law, which will also approve its respective statutes;

(c) by a private corporate body, through a concession contract preceded by tendering, as provided in sections 16 to 19.

2. Excepted from the preceding subsection is the activity related to the production of electricity for NES, carried out through a binding regime licence, as provided in sections 20 to 26.

Section 12

Public utility status

The universal service operator has the following rights:

(a) To use the State’s or local governments’ private or public assets for the establishment or passage of the different parts of the installation or network, as provided by the applicable laws.

(b) To request urgent expropriation, due to public utility, of immovable assets required for establishing installations or networks, as provided by law;

(c) To request the establishment of servitudes on immovable property required for establishing installations or networks, as provided by law. 

Section 13

Duties of the universal service operator

1- The universal service operator has the duty to carry out its activity on a continued and regular basis, as provided by law, and shall only interrupt it following authorisation or instructions from the Regulatory Authority.

2- The duties of the universal service operation include:

(a)  to abide by the applicable laws and administrative acts issued thereto;

(b) To act based on fully transparent procedures in the exercise of its activity;

(c) To allow and facilitate the monitoring of its activity, by competent authorities, providing all information requested;

(d) To pay compensations due in connection with the establishment of servitudes and the expropriation of rights;

Section 14

Street lighting

1.  The universal service operator has also the obligation to illuminate public roads:

(a) under conditions to be defined by ministerial diploma, in the cases provided in paragraphs (a) and (b) of subsection 11.1; (b) in accordance with the conditions stipulated in the concession contract, in the case provided in paragraph (c) of subsection 11.1.

2.  The local administration shall be responsible for paying for the consumption of street lighting of the respective local areas, through a tariff fixed by the Regulatory Authority, after consultation with the universal service operator.

3.  The Government may request that a street lighting network be installed in areas where there is no low voltage distribution network or request a second layout different from that of the existing network, in which case the respective charges shall be borne by the Government.

Section 15

Fee exemption

The universal service operator is exempt from paying fees or any other charges for the implantation of infrastructure linked to the production, transmission and distribution of electricity or for the passage of the different parts of the installation or equipment required for operating the universal electricity supply service.

CHAPTER III

Concessions

Section 16

Concession Contract

The Concession Contract contemplated in paragraph (c) of subsection 11.1 shall define, with the exclusion of the subject matters already covered by law, inter alia, the tariffs, the quality of the service to be provided and other obligations the concessionaire may be required to fulfil. 

Section 17

Bases for a Concession

Within 60 days of approval of this Decree-Law, the Government shall proceed with the approval, by Decree-Law, of the Bases that will govern the concession contract for the services of Production, Transmission and Distribution of electricity for public use.

Section 18

Open Tendering

1. The Government shall announce through the publication of a notice in the Official Gazette, as well as in other periodic publications, its intention of granting such concession by way of an international open tendering process.

2. The Government shall establish the specifications of the contract, including the terms and conditions to be met by all tenderers.

Section 19

Publicity

Decisions concerning the granting of a concession shall be publicised in the Official Gazette.

CHAPTER IV

Binding production of electricity

Section 20

General principle

1. Binding producers means entities holding binding licences for the production of electricity, under the terms of the present Decree-Law.

2. The integration of binding producers into NES shall be conducted in accordance with the needs identified in the Expansion Plan of the NES power-generating system, as endorsed.

Section 21

Consultations for the establishment and operation of new power-generating plants

1. The need to proceed with the integration of a new power-generating plant into NES shall be identified by the Regulatory Authority, and shall be reported by the latter to the universal service operator, for opinion purposes.

2. The Regulatory Authority is responsible for launching and conducting the process with a view to selecting the entity that will establish and operate the power-generating plant.

3. The selection referred to in the preceding subsection shall be the competency of the Regulatory Authority, after consultations with the universal service operator, and shall be materialized through the establishment of a binding contract between the Regulatory Authority, representing the State, and the selected entity. 

4. Excluded from the provision of subsection 21.1 are the following cases:

(a) Occurrence of a needy situation, recognised as such by the Regulatory Authority, which requires the immediate hiring of a binding producer in order to ensure a continued supply of electricity to NES clients, under the terms of the Expansion Plan of the NES power-generating system, as endorsed;

(b) For public interest reasons, through a decision by the Minister of Transport, Communications and Public Works, after consultations with the Regulatory Authority.

Section 22

Business relationship with binding producers

1. Binding producers relate commercially to the universal service operator through the binding contracts referred to in section 21.

2. Each power-generating plant corresponds to one binding contract.

3. The duration of binding contracts shall not be inferior to 15 years, except in duly justified cases.

4. Through binding contracts, binding producers undertake to supply NES with electricity, on an exclusive basis, under the terms of the applicable laws.

5. Remuneration for the supply of electricity to NES shall result from the application of a mixed system based on rates of an essentially fixed nature and on variable rates, reflecting, respectively, potency charges and variable charges for the production of electricity.  

Section 23

Binding licence for the production of electricity

1. An entity selected under the terms of the preceding sections acquires the status of a producer bound to NES following the granting of a binding licence for the production of electricity, under the terms of the present Decree-Law. 

2. The object of a licence is a certain power-generating plant.

3. The granting of a binding license for the production of electricity is the competency of the Regulatory Authority.

4. The annual rate due in connection with the granting of a binding licence for the production of electricity is fixed in the binding contract.

5. The granting of a binding licence is concurrent with the signing of the binding contract, as provided in subsection 21.3.

Section 24

Duration of licences

1. The duration of a binding production licence is established in accordance with the nature of the power-generating plant, with its minimum duration limit being 15 years, except in duly justified cases, and its maximum duration limit being 50 years.

2. Where an entity holds simultaneously two or more binding production licences, somehow interdependent, the respective duration limits may be harmonised, so as to ensure greater co-ordination and rationing of the means in the exercise of the licensed activities.

3. The duration limit of a binding production licence may be extended for periods not exceeding those provided in subsection 24.1 

Section 25

Assignment of licences

The assignment of a licence may be authorised by the Regulatory Authority, provided the pre-conditions that determined the granting thereof are met.

Section 26

Lapse of licences

A licence shall lapse due to expiry or revocation.