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Review of the Fiji National Energy Policy

Legislative Gap Analysis

October 2013

Submitted to GIZ Secretariat of the Pacific Community by:

Economic Consulting Associates SMEC (New Zealand)

Economic Consulting Associates Limited 41 LonsdaleRoad, London NW6 6RA, UK

tel: +44 20 7604 45464546, fax: +44 20 7604 4547

www.eca-uk.com

Contents

Executive summary                                                                                                               1

1                   Introduction                                                                                                              3

2                   Review of legislation                                                                                              4

2.1              Identification of relevant legislation                                                                      4

2.2              Summary of relevant legislation                                                                          18

2.3              Focus on key legislation                                                                                        25

3                   Analysis of legislative gaps                                                                                 30

3.1              Lack of coordination in energy sector planning and policy development    30

3.2              Outdated and incomplete Electricity Act                                                           31

3.3              Lack of incentives for private investors                                                              32

4                   Recommended legislative changes                                                                    33

4.1              Initial changes                                                                                                         33

4.2              Longer-term legislative changes                                                                          37

4.3              Summary of recommendations                                                                            39

Abbreviations and Acronyms

Executive summary

This report is part of the National Energy Policy review and supplements the draft National Energy Policy (NEP) document and Strategic Action Plan (SAP). The purpose of this legislative gap analysis is to identify what new legislation is needed and which existing legislation needs to be amended to assist effective implementation of the NEP.

Our approach

Implementing new legislation, primary legislation in particular, takes time. This is particularly so where it involves creating new agencies or expanding the powers of existing agencies which, inevitably, will lead to concerns among existing agencies who fear losing out. In making our recommendations on how to address legislative gaps we have been conscious of this risk and the need to avoid making implementation of the NEP as a whole dependent on the passage of new legislation which may be subject to many delays.

We have, therefore, adopted a two-step process in our recommendations:

• Initially, the NEP will be implemented as far as possible through the existing legal powers of the concerned agencies. Primary legislative activity is limited to the most urgent amendments to existing legislation without which key parts of the NEP would fail.

• The institutional and legal reforms needed to fully implement the NEP will be embedded through new primary legislation at a later stage, with adequate time allowed for this to be enacted. Implementation of the NEP is not dependent on the passage of this legislation. However, it is necessary to ensure that measures under the NEP are sustained and to remove the risk of rapid reversal or change which would introduce uncertainty and risk private investment in particular.

As well as supporting the rapid implementation of the NEP, this two-step process has the advantage that it allows time to build consensus around the institutional reforms required and to pilot aspects of the NEP with the resulting lessons learned incorporated into the final legislation.

Recommended initial changes

Our recommended initial changes to implement the NEP include the following:

• Issue a new Cabinet Decision or Decree to establish the NECC and empower DoE – No new primary legislation is needed to establish the National Energy Coordination Committee (NECC), as the membership of NECC only includes already existing institutions. Therefore, a Cabinet Decision or Decree is sufficient to establish NECC, and provides for its mandates, functions and operations as well as empower the Department of Energy (DoE) as the NECC secretariat.

• Revise the Electricity Act – This is the only amendments to existing legislation that is required immediately. This should include specifying that: (1) Technical regulatory functions should be removed from Fiji Electricity Authority (FEA) and transferred to a new agency or unit under DoE. This includes the issuance of licences to operate electrical installation that is currently FEA’s responsibility. (2) The Commerce Commission will remain responsible for economic regulation; however it should be given powers to implement these responsibilities through a multi-year regulatory contract or similar instrument. (3) Allow DoE to enact secondary legislation (regulations) to cover specific topics in relation to the implementation of the NEP. (4) Give DoE the authority for developing an IPP framework, with FEA as the main implementing agency.

• Enact new secondary legislation/regulations – Including an IPP framework regulation, feed-in tariffs and net metering regulation, electrification fund regulation, renewable energy technology standards, Energy Service Company (ESCO) regulation, vehicle fuel efficiency standards and labelling regulation, and petroleum and alternative fuel data release regulation.

• Change existing policy documents and regulations – Including changes to the Department of Transport’s land and maritime policies, the Commerce

Commission’s fuel pricing template, the Fiji Tax and Customs Incentives Brochure, the Public Health (National Building Code) Regulation.

Recommended longer-term changes

The initial changes that we recommended above are vulnerable to subsequent change. New over-arching primary legislation will be needed to ‘lock-in’ these changes and reduce the risk of radical revisions of policy in future. Therefore towards the end of the NEP period (2014-2020) this legislative gap analysis should be updated and a comprehensive Energy Act be prepared.

Provisions that the Energy Act should include the establishment of NECC, specific mandates for DoE, reporting & monitoring requirements to be followed by DoE, establishment of the National Energy Consultative Forum (NECF), clear allocation of the regulatory functions in the electricity sector, IPP framework, provisions for rural electrification and allocation of responsibility to DoE, provisions for renewable energy sources inventory and allocation of the responsibility to update and maintain this inventory to DoE, provisions for energy efficient transport policies, provisions for data collection on petroleum products, confirming the Commerce Commission’s responsibility of regulating fuel prices, provisions for biofuel research activities and the regulation of the usage and sale of biofuel products, and provisions for energy efficiency measures undertaken by DoE.

1          Introduction

This report is part of the National Energy Policy review and supplements the National Energy Policy (NEP) document and Strategic Action Plan (SAP).

Objective and scope of the legislative gap analysis

The Terms of Reference (TOR) requires a gap analysis of existing energy related legislation in relation to the needs of the revised energy policy. The purpose of the legislative gap analysis is to identify, if and what, new legislation is needed and which existing legislation needs to be amended to assist effective implement the National Energy Policy and Strategic Action Plan.

This gap analysis reviews legislation that is related to the energy sector. Focus is given to legislation that is directly related to the energy sector and an in-depth analysis is done.

Where other legislation is relevant to the implementation of the proposed energy policy, it is identified and reviewed to ensure consistency with the new energy policy. This analysis is also mostly focused primary legislation. Relevant secondary legislation such as regulations and Cabinet Orders, has been identified and where possible reviewed and analyse.

Approach to the legislative gap analysis

The approach taken to review the relevant legislation is as follows:

• Identify primary legislation directly relevant to the energy sector and to the implementation of the proposed energy policy – Section 2.1

• Review of other legislation that are relevant and will be affected by the implementation of the energy policy. This is summarised in Section 2.2

• In-depth analysis of key legislation that has the greatest impact on the implementation of the proposed energy policy – Section 2.3

• Identify and analyse any significant gaps in the legislation that could affect the implementation of the policy – Section 3

• Recommend actions to be taken to ensure that the legislative framework can accommodate the implementation of the proposed energy policies – Section 4

In developing the recommendations, focus is given to changes that can be enacted rapidly in order to take advantage of the momentum to implement the energy policy sooner rather than later. Currently planned (and known) changes are also taken into account. These changes to existing legislation will enable the enactment of the energy policy without having to go through the lengthy process of enacting a new primary legislation. However, these changes will assist in setting up the scene and will support the enactment of a more comprehensive Energy Act, which will consolidate these changes, address other institutional issues and provide a solid basis for wider programmes incorporating lessons from initial implementation of the energy policy.

2          Review of legislation

There are a vast number of laws that are relevant to the energy sector. Therefore, this section starts by identifying key legislation that will be affected by or have an impact on the NEP, by policy area.

Once identified, each of the relevant legislation is then summarised, listing all the relevant clauses and how these may be affected by or have an impact on each of the policy areas.

Through this process, the key legislation that has direct impact on the implementation of the proposed energy policy is identified and discussed in more detailed.

2.1                  Identification of relevant legislation

For each of the policy areas in the NEP, related existing legislation is identified and summarised in Table 1 below. The governance and institutional arrangements detailed in the NEP are also considered a ‘policy area’.

Improve coordination and direction

Improve planning and                                                                                                                                     

policy development

Improve stakeholder consultation

Improve reporting, monitoring and evaluation

Increase private sector investment in large-scale electricity generation

Increase private sector investment in small-scale grid-connected renewable generation 

Conduct further investigation into geothermal energy resources as a matter of priority

Promote and improve guidelines and technical standards for renewable energy technologies

Work with industry associations to identify and remove barriers

Promote the fuel efficiency                                                                                              

of imported motor vehicles

Investigate the potential and                                                                                                                                                 

cost-effectiveness of energy

efficiently solutions for sea vessels

Policy Area I: Governance and institutional arrangements

The proposed energy policy recommends the establishment of a National Energy Coordination Committee (NECC). The NECC should be chaired by the Minister or Permanent Secretary responsible for the energy sector and its membership should include representatives of the relevant government ministries and agencies.

The main function of NECC is to coordinate energy planning and monitor policy development in the energy sector, including coordinating and monitoring the implementation of the National Energy Policy. This includes the aligning of policies and activities of all stakeholders with the overall energy policy, reviewing and approving planning and policy proposals prepared by the Department of Energy (DoE) and resolving any inter-ministry or inter-agency conflicts that may emerge. The NECC would meet at least two times annually with DoE being the secretariat.

There is a need to have a central agency that will be responsible for the implementation and the administering of the National Energy Policy. The Department of Energy (DoE) is best place to take on this responsibility, and most stakeholders agree with this assessment.

In the short term, no new primary legislation is needed to establish NECC. All relevant government ministries and agencies can continue to perform their roles and functions as per the existing laws. For example, Land Transport Authority may continue to perform its functions and duties as per the Land Transport Act, while the Department of Environment can continue to perform its functions and duties as per the Environmental Management Act. The role of NECC is to coordinate these functions and facilitate coherence within the energy sector.

A Cabinet Decree can be enacted to establish NECC and provide DoE with the mandate to oversee and coordinate the implementation of the National Energy Policy. The Decree, in conjunction with the revised Electricity Act, can also re-allocate the non-tariff regulation of the electricity sector from FEA to DoE. This should be sufficient to provide DoE with mandate it needed to perform the proposed functions of planning and policy development, non-tariff regulation, and monitoring and reporting envisaged in the National Energy Policy.

In the longer term, a new Energy Act can consolidate all energy sector legislation and provide a stronger mandate for NECC and DoE.

If DoE is strengthened through the recruitment of new staff members, the recruitment process needs to be consistent with that outlined in the State Services Decree 2009.

Policy Area II: Grid-based power supply

The most relevant legislation for this policy area is listed below:

• Electricity Act – this is the most important item of legislation. It establishes the Fiji Electricity Authority and provides its mandates in terms of power generation, operation of transmission and distribution lines, and its regulatory functions.

• Commerce Act – this legislation has been superseded by the Commerce Commission Decree, which establishes the Commerce Commission and outlines its functions, which includes regulating prices of monopolistic industries (including electricity and fuel), and reviewing access agreements for infrastructure facilities.

• Public Enterprise Act – this legislation governs the operations, including reporting and accountability, employment and finance, of Government Statutory Authorities (GSAs) and Government Commercial Companies (GCCs). FEA is a GSA; therefore it is also governed by the provisions of this Act.

• Environmental Management Act – this legislation is relevant in that it requires consideration for the environment in any infrastructure projects and may require an Environmental Impact Assessment for large infrastructure projects, which include some electricity generation projects.

• Land Conservation and Improvement Act, Native Land Trust Act, and State Acquisition Act – these acts govern the use of land in Fiji, and outline the procedure to obtain clearance for building infrastructure facilities in Fiji. The State Acquisition Act provides that the Government has the right to acquire any land in Fiji for public purposes, which include the provision of electricitysupply.

• Revenue and Customs Authority Act and Foreign Investment Act – these acts are relevant for private investment in electricity generation in Fiji. The Foreign Investment Act outlines how a foreign company can invest in Fiji, while the Revenue and Customs Authority Act establishes the Fiji Islands Revenue and Customs Authority that is responsible for administering the Customs Act, Customs Tariffs Act, Income Tax Act, Tax Administration Decree and Value Added Tax Decree, all of which are relevant to any private investors in Fiji.

• Statistics Act – this act allows coordination between the Fiji Bureau of Statistics and other government department in terms of data collection. In this case, the grid-based electricity statistics can be recorded and published by the Fiji Bureau of Statistics to improve transparency in the sector.

Policy Area III: Rural electrification

The Rural Electrification Policy was accepted in 1993 and a Cabinet Decision was published to implement this policy. The policy establishes the Rural Electrification Unit under the Ministry, and gave it the responsibility to administer and control the rural electrification program. FEA is also given some responsibility under the policy to undertake rural electrification programs.

There is currently no co-ordinated national plan to complete the electrification programme and no comprehensive assessment of the least-cost means of doing so. While grid expansion by FEA has traditionally been the main form of electrification, there are also a number of diesel-based mini-grids operated by the Public Works Department or community cooperatives, and solar home systems maintained by private contractors who receive a subsidy from DoE.

In the existing legislative framework, the most relevant legislation is the Electricity Act, in that it governs the responsibility and functions of FEA, which include managing and operating all transmission grids and supplying electricity to customer within the grid areas.

Other relevant legislation include the Commerce Commission Decree, as the Commerce Commission has the function to regulate electricity tariffs proposed by FEA (including in rural areas), the Public Enterprise Act, as it requires FEA as a GSA to develop a corporate plan and business plan that should include grid extension plans, and the Statistics Act as it allows coordination with Fiji Bureau of Statistics in recording and publishing electrification rate in rural areas.

Policy Area IV: Renewable energy

The Electricity Act was developed and enacted at the time when renewable energy was not a major issue and therefore does not have any specific clauses or even mention electricity generation using renewable energy sources. As it is currently being reviewed, the revised Electricity Act should include clauses concerning electricity generation using renewable sources.

The Environmental Management Act is also relevant, in that it requires the Department of Environment to have a Resource Management Unit, whose function includes the formulation of a Natural Resource Inventory, which includes renewable energy sources.

However, geothermal resources are governed by the Mineral (Exploration and Exploitation) Act, and are currently managed by the Mineral Resource Department under the Ministry of Lands and Mineral Resources. There is a plan to amend this Act and in the future develop a Geothermal Decree and Regulation1.

The Land Conservation and Improvement Act, Native Land Trust Act governs the use of land in Fiji, which include the use of land for electricity generation using renewable sources. The State Acquisition Act provides that the Government has the right to acquire any land in Fiji for public purposes, which include the provision of electricity supply.

In addition, in the Climate Change Policy rests the responsibility of implementing the policy and in coordinating climate change related projects to the Climate Change Unit, which are currently under the Ministry of Foreign Affairs. The Climate Change Policy includes public awareness and education programs in relation to climate change issues, and has provisions for climate change mitigation programs, which includes renewable energy for electricity generation and other industrial uses.

Similar to that of promoting private investment in grid-based power supply, in terms of promoting private investment in renewable energy generation, the Revenue and Customs Authority Act and Foreign Investment Act are relevant.

The Statistics Act is also relevant in that the Fiji Bureau of Statistics can collect and publish information on potential renewable energy sources.

1 http://www.lands.gov.fj/mrd/download/RoadMap/LegalReformRoadmap.pdf

Policy Area V: Transport

The Ministry of Works, Transport and Public Utilities is currently in the evaluation process of selecting consultants to develop the Land and Maritime Transport Policies which is expected to be completed in 2014.

For land transport, the most relevant legislation is the 1998 Land Transport Act, which establishes the Land Transport Authority (LTA), and outlines the responsibilities and functions of LTA, which include recording and managing the vehicle registration, and regulates vehicle standards and set greenhouse gas (GHG) emission standards for land vehicles. The 1998 Act is currently being reviewed in consultation with the Office of the Solicitor General. Other regulations in relation to land transport are the responsibilities of LTA under this Act.

For maritime transport, the Maritime Transport Decree 2013 (MTD) and the Ship Registration Decree 2013 (SRD) has superseded the 1986 Marine Act and establishes the Maritime Safety Authority of Fiji. The MTD outlines the regulation of the safety aspect of vessels/ship and protection of the marine environment from any unlawful discharge that emanates from ships pipelines and off shore installations. The SRD outlines the regulation of vessel registrations and licencing.

Vehicle importation standards are regulated by Ministry of Industry and Trade, although there is no specific legislation allocating this responsibility. The Ministry of Industry and Trade issues standards for vehicle imports and issue import certification. The Revenue and Customs Authority Act also applies to vehicle importation.

Policy Area VI: Petroleum and substitute fuels

In terms of petroleum exploration and production, the governing legislation is the Petroleum (Exploration and Exploitation) Act. However, this act does not govern the importation of petroleum or other fuel products. Petroleum import prices are monitored by the Reserve Bank of Fiji. As with any other good imported into Fiji, the importation of petroleum and other fuel products are also governed by the Revenue and Customs Authority Act.

Under the Trade Standards and Quality Control Decree, the Ministry of Industry and Trade publishes and monitors the quality standards of imported fuels, while the wholesale and retail prices of petroleum and other fuels are regulated by the Commerce Commission under the Commerce Commission Decree.

The Biofuel Development Unit under the DoE has the responsibility to ensure timely implementation of biofuel industry in Fiji. However, the national biofuel and ethanol standards are governed under the Trade Standards and Quality Control Decree.

The use of biofuel for electricity generation and land transport, once developed, will have relevance to the Electricity Act and Land Transport Act, as both acts can provide incentives for the use of biofuel.

The Fiji Bureau of Statistics collects information on the consumption of petroleum and fuel products under the Statistics Act.

Policy Area VII: Energy efficiency

There is no specific legislation for energy efficiency; most energy efficiency related issues are included in sector legislation. For example, in relation to transport, the LTA collects information and register vehicles based on their fuel types.

The use of energy efficient appliances, such as refrigerators, are encourages, and the standards for these appliances are govern under the Trade Standards and Quality Control Decree along with the Minimum Energy Performance Standards and Labelling Program, with the Department of Energy being responsible for regulating the labelling of energy efficient appliances. The Revenue and Customs Authority Act provides for customs and tax incentives for the importation of energy efficient appliances.

The Fiji National Building Code is set out as part of the Public Health (National Building Code) Regulation 2004, and currently does not have specific clauses for energy efficient building requirements.

The Environmental Management Act has some relevance in that the functions of the Department of Environment include improving public awareness and education on environmental matters.

2.2                  Summary of relevant legislation

The table below summarises the legislation that we have identified is relevant to Fiji’s energy sector.

2.3                  Focus on key legislation

In this section we give a detailed review of five pieces of legislation that we have identified as being most critical to governance of the energy sector and has the most relevance to the implementation of the NEP:

• The Electricity Act

• The Land Transport Act

• The Environmental Management Act

• Commerce Commission Decree (repeals the Commerce Act)

• Minerals (Exploration and Exploitation) Bill

Other relevant legislation has been summarised in Table 2, and although they are relevant to the implementation of the new National Energy Policy, they do not have immediate impact on the implementation of the National Energy Policy. These legislation have been identified in order to provide a wide view of the legislative framework concerning the energy sector.

Furthermore, the identified relevant legislation will not impede and some will even assists in the implementation of the National Energy Policy.

Electricity Act

The main purpose of the Electricity Act is to establish the Fiji Electricity Authority (FEA). Under this Act, the board members of FEA are appointed by the Minister responsible for energy2 and the terms are also determined by the Minister. The board then appoints a General Manager and a Secretary with the approval of the Minister. Other staff members of FEA can be recruited from the market based on qualifications and experience and FEA may develop its own regulations in terms of staff recruitment and remunerations.

The functions and duties of FEA are outlined in Articles 13, 15, 28, and 66 of the Electricity Act. Based on these articles, the functions and duties of FEA can be categorised and summarised as follows:

• Manage and operate all electrical installations transferred from the Government – FEA has the right to generate, transmit, transform and distribute electricity, and operate and manage the assets involved in theseactivities

• Supply electricity to consumers – FEA is required to enter into a supply contract with individuals or companies to sell electricity as per the terms and conditions of the contract. FEA is not allowed to supply electricity to an area licenced to be supplied by a licencee

2 Formerly the Minister for Lands, Energy and Mineral Resources, now the Minister for Works, Transport and Public Utilities (Energy and Water)

• Issue and grant licences for the supply and operation of an electrical installation3 – FEA has the right to determine the amount of licence fee, the licence conditions, and licence term (with a maximum of 21 years). Licences must include a map of the supply area and declare the voltage permitted and its allowable variations. FEA has the right to cancel licences if any of the conditions are breached. The Electricity Act does not explicitly include grounds on which FEA can refuse to grant a licence. However, the Act allows FEA to make regulations on the conditions to be met by licence applicants, and the conditions for suspension, extension and revocation of licences. In addition to licences, FEA also grants certificate of registration of all new electrical installations and charges a registration fee.

• Technical regulation – For the electricity sector, FEA may make regulations and develop technical standards and specifications, determine duties inspectors and procedures for inspections, develop and determine public enquiries and notice procedures, and develop and determine payments and collection methods.

• Tariff setting – Since the Electricity Act was enacted prior to the enactment of the Commerce Commission Decree, some of its provisions regarding tariff setting may be outdated and in need of revision to ensure consistency with the Commerce Commission Decree. According to the existing Electricity Act, FEA may make regulations in relation to the charges made for supplied electricity and charges to cover the cost connecting a customer to the distribution line. FEA may also set the maximum tariff that can be charged tocustomers.

It is important to note that Article 14 of the Electricity Act allows for the Minister responsible for energy to give directives to FEA in relation to its functions and duties. This gives the Minister the ability to provide policy direction and targets that FEA has to meet in performing its duties and functions.

The Electricity Act provides for the financial management of FEA in Article 18-25, in that FEA may charge fees in order to finance its operations, may borrow from financial institutions, and may invest its revenues. FEA is also required to submit an annual report, which includes audited financial statements, to the Minister. A copy of the annual report will also be laid before Parliament.

Another Article worth noting is Article 33, which gives FEA the right to require licensees of selected power stations to supply electricity to the grid. In doing so, FEA may require the licencee to upgrade and modify its systems in order to supply FEA with the amount of electricity required. The price for electricity supplied in this case should be determined by arbitration. The Electricity Act does not specify who should be the arbitrator, and currently this function is performed by the Commerce Commission.

The Electricity Act also provides for FEA’s rights to acquire land and/or property needed to provide electricity supply and rights to enter property or land for inspections. It also defines types of offences and their respective penalties and FEA’s rights to penalise offenders.

3 Installation is defined in the Act as “whole of any plant or apparatus designed for the supply or use or both of energy”. This includes installations that are used to generate and transport electricity.

Other aspects covered by the Electricity Act include the use or joint use of transmission lines, disconnections for maintenance purposes, procedures to investigate accidents, and some dispute resolution mechanism.

Land Transport Act

The Land Transport Act was enacted to establish the Land Transport Authority, to regulate the registration and use of vehicles, the licencing of drivers of vehicles and the enforcement of traffic laws.

The Land Transport Authority (LTA) is responsible for the registration of land transport vehicles, licencing of drivers licence for land transport vehicles, to develop and implement traffic management strategies and practices, and develop and implement enforcement strategies in consultation with the Commissioner of Police consistent with road safety and road infrastructure protection objectives.

The Land Transport Act provides that the Minister, after consultation with the LTA may make regulations under the Act, which will be implemented and monitored by LTA. In relation to energy and to the proposed energy policies, these regulations under LTA include:

• Minimum vehicle standards relative to road safety and the environment

• Standards for the construction, dimension and weights of vehicles and the environmental and safety standards to be met by vehicles

• The type and standards of fuel and fuel systems to be used by motor vehicles and emission standards for motor vehicles

• The safety of hazardous materials, including petroleum products, gases, chemicals and explosives, being transported by road.

As part of the vehicle registration process, LTA collects information on registered vehicles such as fuel type, year of make, and other information that can be used to determine vehicles’ energy efficiency.

Environmental Management Act

The Environmental Management Act was enacted for the protection of the natural resources and for the control and management of developments, waste management and pollution control, and for the establishment of a National Environment Council.

The National Environmental Council has the functions of approving the National State of the Environment Report (National Report) and the National Environmental Strategy, monitoring the implementation of the National Environmental Strategy, advice the Government on international and regional environmental commitments and treaties, and in general facilitates discussions on environmental matters.

The Environmental Management Act allows the Council to require the Department of Environment to become the coordinating department in terms of matters relating to the environment. The Department is required to create several units with distinct functions:

• Resource Management Unit – responsible for the formulation and review of the National Resource Inventory and the Natural Resource Management Plan, maintaining a natural resource information database and in general all matters relating to natural resources in Fiji.

• Environmental Impact Assessment Unit – responsible for examining and processing development proposals, and for implementing the EIA procedures

• Waste Management and Pollution Control Unit – responsible for the formulation of the National Solid Waste Management Strategy and in general all matters relating to the waste management and pollutioncontrol.

The Environmental Management Act requires the formulation and development of a Natural Resource Inventory, which includes inventory of all Fiji’s natural resources classified into six categories: freshwater resources, marine resources, land resources, agriculture resources, energy resources and mineral resources. The formulation of the Natural Resource Inventory should be followed by the formulation of the National Resource Management Plan. Later on both of these documents should inform and be the basis for the National Environmental Strategy.

The first Natural Resource Inventory for Fiji was published in 2011 containing six volumes, one for each of the resource categories. Volume 5 (Energy Resources) of the Natural Resource Inventory includes solar, hydro and wind energy resources, while Volume 6 (Mineral Resources) includes geothermal energy sources.

The National Resource Management Plan and the National Environmental Strategy have not been published at the time this report was written.

Commerce Commission Decree

The Commerce Commission Decree repeals the Commerce Act, and provides a more up to date and comprehensive law concerning regulated industries and provides for consumer protection. As with the Commerce Act, the Commerce Commission Decree establishes the Commerce Commission, and outlines its functions and duties, which can be categorised as follows

• Access agreements – the Commerce Commission provides advice to the Minister for Industry and Trade about proposed access agreements, maintains a register of access agreements, facilitates negotiations about access to infrastructure or services under access regimes, and arbitrates disputes over access to infrastructure or services under access regimes

• Control of Prices – the Commerce Commission may fix and declare maximum prices, and where need be, quantities, for goods and services and rents. The Commerce Commission Decree empowers the Commission to recommend to the Minister to make a statutory order to control prices in the industries where competition is limited or is likely to be lessened and where it is necessary or desirable that the price of this good or service be controlled in the interests of users, consumers or suppliers. Where a statutory order is enforced, the Commission is empowered to set the new prices.

• Consumer protection – the Commerce Commission has the responsibility to promote the interests of consumers, to collect, examine and disseminate information in respects of matters affecting consumers, to receive and consider complaints from consumers, to provide advice to consumers and manufactures or suppliers, and to investigate fraudulent or deceptive practices in relation to matters that affects consumerinterests.

Under the Commerce (Control of Prices for Supply of Electricity and Ancillary Services) Order 2012, the Commerce Commission is empowered to control and/or regulate the prices for electricity and ancillary services in Fiji. This includes the control of prices for the supply of electricity in all quantities, qualities and grades or classes, which entails that the Commerce Commission can also set the minimum price FEA may offer to Independent Power Producers (IPPs). In December 2012, the minimum IPP tariff rate was set to 25.65 Fijian cents.

The Commerce Commission Decree also gives powers to the Commerce Commission, with the Minister for Industry and Trade’s approval, to make Petroleum Price Control Order.

Under the Commerce (Price Control) (Petroleum Prices) Order, the Commerce Commission determines the maximum prices for the sale of petroleum products, including motor spirits (unleaded), gasoil (diesoline), pre-mixed outboard fuel, kerosene for household use, and liquid petroleum gas (LPG).

Mineral (Exploration and Exploitation) Bill

The Mineral (Exploration and Exploitation) Bill states that all mineral resources, including geothermal resources, in or under any land in Fiji are and deemed to be the property of the State, and no person are allowed to carry out any activities involving the prospecting, exploration and development of minerals without a relevant licence.

There are different types of licences prescribed by the Bill:

• Prospector’s rights – gives a person the right to prospect for minerals and mark out areas of proposed mininglease

• Exploration licence – gives the holder the right to explore the area specified in the licence and mark out and apply for development licence or mining lease

• Development licence – gives the holder the right to develop the area specified in the licence and apply for mining lease or to retain the mineral resources within the area specified in the licence

• Mining lease – allows the holder to perform mining activities within the area specified in the lease.

For each of these types of licences, the Mineral Bill outlines the application process, criteria for granting the licence, and the terms, conditions and statutory requirements attached to the licences.

The Bill also include provisions for compensations paid for land, cultural and external disruptions, royalty payments to the government from development licence holders and mining lease holders, and health and safety requirements for any mining activities.

3          Analysis of legislative gaps

Based on our review of relevant legislation in the previous section, the gaps in existing legislation that can impede the implementation of the proposed National Energy Policy are identified and discussed below.

3.1                  Lack of coordination in energy sector planning and policy development

None of the relevant laws provide for a central policy-making and planning entity for the energy sector or other means of coordination. Different legislation allocates responsibilities related to the energy sector to different government departments and/or other institutions, as summarised in Table 3. This lack of coordination contributes to a disjointed policy making process and unreliable implementation of policies.

The table above also shows that currently the Department of Energy does not have a legal mandate to implement the policies and programs entrusted in them.

3.2                  Outdated and incomplete Electricity Act

The main legislative gap with respect to grid-based power supply, rural electrification, and renewable energy is the Electricity Act; more specifically:

• Inappropriate regulatory framework in the electricity sector– in the current arrangement under the Electricity Act, FEA is performing the regulatory function as well as being the service provider. This creates obvious potential for conflicts of interest, particularly as the National Energy Policy calls for the opening up of the power sector to greater involvement from entities other than FEA.

• Outdated provisions regarding tariff setting –the Commerce Commission is currently performing some of the economic regulation functions, such as tariff reviews. The existing Electricity Act does not require FEA to sign a multi-year regulatory contract with the Commerce Commission, nor does it require FEA to comply with regulations made by the Commerce Commission.

• Unclear arrangement for supply into the electricity grid – although there are provisions for the sale of electricity to FEA, there are no specific requirement for this arrangement. For example, there are no requirements for FEA and the licenced supplier to enter into a supply contract or power purchase agreements (PPAs).

• No provisions for rural electrification – the existing Electricity Act does not specifically address rural electrification. It also does not have clear provisions for off-grid electricity supply. This may hinder, for example, the proposed introduction of new rural electrification providers and a subsidy mechanism and efforts to make FEA comply with the proposed national electrification plan.

• No provisions for renewable energy development - although FEA are actively pursuing renewable energy development, in the existing Electricity Act there is a lack of obligations on FEA to promote and support renewable energy including, for example, obligations to connect to and purchase from qualifying facilities.

3.3                  Lack of incentives for private investors

In terms of encouraging private sector investment in the electricity sector, the existing legislation, including Revenue and Customs Authority Act and Foreign Investment Act, are adequate and no changes are needed. However, there is a lack of clarity on how the electricity sector, in particular tariff setting and contracting, is regulated. This lack of clarity is a major constraint in increasing private investment in the electricity sector.

In addition, there is currently no one-stop-shop to assist investors. Investment Fiji has made a good start in developing and providing guidelines on energy related investments in Fiji. However, the procedure for investing in energy projects in Fiji is still very complicated, with many different institutions to seek approvals from. The situation as regards land access permits is particularly complex. The Land Conservation and Improvement Act and the Native Land Trust Act both govern the use of land for infrastructure projects. It is very difficult for private investors, especially foreign private investors, to work through the various pieces of legislation, as has been reported by several private sector participants to the National Energy Forum.

While this does not necessitate new primary legislation, it does suggest that coordination between DoE, with the lead planning role in the sector and the responsibility for housing all energy related information, and Investment Fiji, with a role as a one-stop shop, could drastically support private investment in the energy (and other) sectors.

4          Recommended legislative changes

Implementing new primary legislation takes time. This is particularly so where it involves creating new agencies or expanding the powers of existing agencies which, inevitably, will lead to concerns among existing agencies who fear losing out. In making our recommendations on how to address legislative gaps we have been conscious of this risk and the need to avoid making implementation of the NEP as a whole dependent on the passage of new legislation which may be subject to many delays.

We have, therefore, adopted a two-step process in our recommendations:

• Initially, the NEP will be implemented as far as possible through the existing legal powers of the concerned agencies. Primary legislative activity is limited to the most urgent amendments to existing legislation without which key parts of the NEP would fail.

• The institutional and legal reforms needed to fully implement the NEP will be embedded at a later stage through new primary legislation, with adequate time allowed for this to be enacted. Implementation of the NEP is not dependent on the passage of this legislation. However, it is necessary to ensure that measures under the NEP are sustained and to remove the risk of rapid reversal or change which would introduce uncertainty and risk private investment in particular.

Primary legislation requires the approval of the parliament, while secondary legislation such as regulations and cabinet orders can be enacted by the executive branch of Government. In general, the process to enact primary legislation can be lengthy and is prone to delays due to political issues. Therefore, when time is an important factor, the enactment of secondary legislation is preferred and can be a starting point to further enactment of primary legislation.

As well as supporting the rapid implementation of the NEP, this two-step process has the advantages that it allows time to build consensus around the institutional reforms required and to pilot aspects of the NEP with the resulting lessons learned incorporated into the final legislation.

4.1                  Initial changes

Below we identify four types of initial legislative changes to be undertaken:

• A new Cabinet Decision or Decree to establish the NECC and empower DoE.

• The revision of the Electricity Act.

• Enactment of secondary legislation/regulations.

• Changes to existing policy documents and regulations.

These are discussed in detail below.

New Cabinet Decision or Decree to establish the NECC and empower DoE

No new primary legislation is needed to establish NECC, as the membership of NECC only includes already existing institutions, as shown in Figure 1 below. Therefore, a Cabinet Decision or Decree is sufficient to establish NECC, and provides for its mandates, functions and operations. The Cabinet Order should also specify which relevant government ministries and agencies should be members of NECC, while the Secretariat of NECC should be under the Department of Energy.

At a minimum, the institutions/departments identified in Table 3 as being responsible for various areas of the energy sector should be represented in NECC.

Source: Fiji National Energy Policy, October 2013

As the Secretariat of NECC, DoE’s mandate to perform its functions as described in the new National Energy Policy can be included in the Cabinet Order. This will strengthened DoE’s position as the main department responsible for the implementation of the new energy policy.

Revision of the Electricity Act

It is acknowledged that there is on-going work in reviewing and revising the existing Electricity Act. As we do not have a copy of the proposed revision of the Electricity Act, it is advised that the changes and revision proposed in this section should be made in conjunction with the on-going work.

To accommodate the implementation of the new energy policy, additional changes to the Electricity Act can be made to allow for:

• Removal of conflicts of interest in regulation – Technical regulatory functions should be removed from FEA and transferred to a new agency or unit under DoE. This includes the issuance of licences to operate electrical installation that is currently FEA’s responsibility.
• Put in place provisions for a regulatory contract – The Commerce Commission will remain responsible for economic regulation. However, it should be given powers to implement these responsibilities through a multi-year regulatory contract or similar instrument.

• Define planning responsibilities - DoE will be responsible for the rural electrification and national electrification master plans, and the power development and asset management plans prepared by FEA will be expected to comply with these. The amended Act should also allow DoE to enact secondary legislation (regulations) to cover specific topics in relation to the implementation of the NEP

• Development and implementation of IPP framework – DoE will be responsible for developing the IPP framework, with FEA as the main implementing agency. The IPP framework will include competitive procurement process that FEA has to follow.

In the short term, we propose that these changes are enacted in the form of amendments to that Act rather than as a new Act. The required legislation would, therefore, amend specific sections of the Electricity Act or add new or delete existing sections

Enactment of new secondary legislation/regulations

Secondary legislation or regulations can be enacted to accompany and supplement the revised Electricity Act in the implementation of the National Energy Policy. DoE will be responsible for developing and publishing (following the approval from NECC) the following regulations:

• IPP framework regulation – this regulation will provide guidelines on competitive procurement process for IPPs and principles to be applied in all power purchase agreements. The regulation should require FEA to follow the competitive procurement process, and have the negotiated power purchase agreement approved by DoE and the Commerce Commission.

• Feed-in tariffs and net metering regulation – this regulation will built on the current feed-in tariff mechanisms set by the Commerce Commission, and will distinguish between technologies or size of generation. The regulation will outline the feed-in tariff calculations and procedures for the implementation of net metering schemes.

• Electrification fund regulation –This will open up opportunities for new providers in rural electrification and improving the certainty of cost-recovery for rural electrification by replacing the current budgetary allocations with a rural electrification fund able to commit to multi-year support.

• Renewable energy technology standards – outlines the renewable energy technology standards in use or likely to be used in Fiji.

• Energy Service Company (ESCO) regulation – his regulation should govern the establishment of ESCOs and how arrangements should be made to share energy

savings between projects and ESCOs. This regulation should be based on pilot or public sector demonstration project.

In the transport sector, the Land Transport Authority, with the approval from NECC, should develop and publish:

• Vehicle fuel efficiency standards and labelling regulation – this regulation will provide standards for vehicle fuel efficiency standards for imported vehicles, and provide for the procedure and application of labelling of imported vehicles in terms of fuel efficiency.

In terms of petroleum and alternative fuel regulation, DoE should coordinate with the relevant department in the Ministry of Industry and Trade, to develop and publish (with NECC approval):

• Petroleum and alternative fuel data release regulation – this regulation will require suppliers and retailers of petroleum products to provide information to the DoE with regards to fuel quality. The regulation should also refer to the fuel quality standards, be it petroleum standards or biofuel and ethanol quality standards, and that all supplier and retailers must comply with the relevant standards.

Changes to existing policy documents and regulations

In addition to the changes in existing legislation, there are other government issued documents and regulations that will need to be amended to accommodate the implementation of the NEP, including:

• Department of Transport’s land and maritime policies – the land and maritime policies will need to be reviewed and updated to incorporate the new targets set out in NEP. A national Transport Policy should be developed in accordance with the NEP, which should include the promotions of public transport, cycling and cycle paths, and energy aspects of town planning.

• Commerce Commission’s fuel pricing template – this should include a more transparent calculation process to determine retail fuel prices.

• Fiji Tax and Customs Incentive Brochure – this brochure, published by the Fiji Revenue and Custom Authority, need to be updated to include any tax and customs incentives for energy efficient vehicles or appliances, or any renewable energy technologies.

• Public Health (National Building Code) Regulation -this regulation should be reviewed and amended to include provisions for energy efficiency measures in buildings.

4.2                  Longer-term legislative changes

In the longer term, we recommend that a new and comprehensive Energy Act be enacted. It will act as an overarching primary legislation that governs the energy sector with the main objectives of:

• Consolidating the various legislation in the energy sector.

• Expanding the functions and responsibilities of DoE.

• Providing primary legislative background to energy sector coordination.

• Confirming and providing primary legislative background to the actions that are already being undertaken as part of the initial changes.

The Energy Act should cover all policy areas in the NEP, including, at a minimum, the following provisions:

• The establishment of NECC, its objectives, functions, memberships and operating procedures such as bi-annual meetings and quorum

• Specific mandates for DoE, such as its responsibilities as the Secretariat of NECC, its planning and policy development functions as proposed in the new National Energy Policy

• Reporting, monitoring and evaluation requirements to be followed by DoE, and any other relevant key actors in relation to the implementation of the NEP

• Establishment of the National Energy Consultative Forum (NECF), its objectives, functions, memberships and operating procedures

• Clear allocation of the regulatory functions in the electricity sector, with DoE responsible for technical regulation and the Commerce Commission responsible for tariff regulation

• IPP framework, based on the experience of implementing the IPP framework regulation, allocating the responsibility of procuring IPPs to FEA, the approvals of PPAs by DoE and Commerce Commission

• Provisions for rural electrification and allocation of responsibility to DoE, who will have the power to enact regulation concerning rural electrification, such as feed-in tariffs and net metering, with the approval from NECC. DoE may also set rural electrification targets and whether this should be met through grid- extension or other systems.

• Provisions for renewable energy sources inventory and allocation of the responsibility to update and maintain this inventory to DoE. DoE will have the power to enact regulation on renewable energy technology standards and be responsible to monitor compliance with the standards.
• Provisions for energy efficient transport policies, which include references to relevant Acts, such as the Land Transport Act, Maritime Transport Act and Ship Registration Act, and allocate responsibilities to the Land Transport Authority for the development and enactment of energy efficient and fuel efficient vehicle standards. The Energy Act should also clearly allocate the responsibility of developing and monitoring a national transport policy to the Department of Transport.

• Provisions for data collection on petroleum product quality, usage, and prices, and confirming the Commerce Commission’s responsibility of regulating fuel prices. The Energy Act should require all suppliers and retailers to provide information to DoE according to the Petroleum and Alternative Fuel Data ReleaseRegulation.

• Provisions for biofuel research activities and the regulation of the usage and sale of biofuel products, and allocate the responsibility of biofuel development to DoE, which include the development and monitoring of biofuel and ethanol quality standards

• Provisions for energy efficiency measures and allocate responsibility of the development and monitoring of energy efficiency measures to DoE. This may include the development of energy efficiency standards and labelling for appliances, revision of the National Building Code, and the establishment of ESCOs.

o          Reference other relevant legislation and other relevant government documents.

The enactment of the Energy Act does not necessary mean that the Electricity Act should be repealed. The changes recommended for the Electricity Act are in general in accordance to the provisions in the Energy Act, and therefore the two acts can be complementary. This also applies to other existing legislation relevant to the energy sector, such as the Land Transport Act, Environmental Management Act and others discussed previously. The Energy Act should make clear references to existing legislation.

We recommend that this legislative gap analysis be reviewed and updated towards the end of this NEP period (2014-2020), with the objective of further defining the content of the Energy Act, based on progress made with respect to the recommended initial legislative changes.

4.3                  Summary of recommendations

Table 4 below summarises our recommended initial and longer-term legislative changes, as well as listings the existing legislation and the lead agencies relevant to each policy area.