Capacity Building of Electricity Regulatory Authority (ERA), Bhutan on Tariff Determination Methodology
The capacity-building workshop from December 16-19, 2024, organized by USAID’s South Asia Regional Energy Partnership (SAREP) program, focused on enhancing the technical expertise of the Electricity Regulatory Authority (ERA) of Bhutan in tariff determination methodologies.
The sessions provided participants with insights into critical concepts such as the true-up process, power purchase adjustments mechanism, and strategies for retail tariff setting. Key discussions centered around essential cost components for electricity tariff determination, including capital investment, operation and maintenance expenses, return on equity, interest on loans, and depreciation. Additionally, the workshop covered methods for verifying asset capitalization practices, principles related to demand charges, and techniques for demand forecasting, equipping participants with a comprehensive understanding of tariff-setting frameworks. By integrating these practices with real-world applications, the workshop provided a comprehensive understanding of how to design tariffs that are both cost-reflective and equitable. The workshop also incorporated activities such as short tests to reinforce participants’ learning and ensure a deeper understanding of the concepts covered. This hands-on training was tailored to help ERA navigate the complexities of balancing financial sustainability with consumer affordability in Bhutan’s energy landscape.
Beyond technical training, the workshop fostered collaborative discussions, enabling participants to share insights and explore global best practices in regulatory frameworks. Experts emphasized the importance of transparency and efficiency in tariff structures while addressing Bhutan’s unique challenges in energy generation and distribution. By combining practical training, global insights, and collaborative discussions, the workshop equipped participants with the tools to design transparent and cost-reflective tariff structures.
Key Takeaways:
The capacity-building initiative laid the groundwork for ERA to advance Bhutan’s vision for an equitable and sustainable energy future. At the end of the capacity building workshop, ERA was equipped with:
- An in-depth knowledge of cost-reflective tariffs, power purchase adjustments, the true-up process, and solutions to address seasonal energy challenges and infrastructure constraints
- Practical experience in calculating aggregate revenue requirements (ARR) and profit-loss mechanisms
- Strategies for balancing financial sustainability with consumer affordability in tariff structures
- International best practices and frameworks tailored for Bhutan’s energy needs
This workshop for the ERA, Bhutan marked a significant step toward advancing the country’s energy regulatory framework. The initiative not only addressed Bhutan’s unique energy challenges but also aligned its regulatory framework with international best practices.
