FINAL REPORT OF THE OFFICE OF ENERGY AND INFRASTRUCmW BUREAU FOR RESEARCH AND DEVELOPMENT AND CAIRO MISSION, UNITED STATES AGENCY FOR INTERNATIONAL DEVELOPhIE,hTT Prepared for: MINISTRY OF ELECTRICITY AND ENERGY Egyptian Electricity Authority Arab Republic of Egypt POLICY REFORM AND INSTI'IZTTIONAL DEVELOPMEllrvT ASSESSMENT FOR COMPETITIVE MARKET ADAPTATION OF THE EGYPTIAN POWER SECTOR VOLUME I: EGYPTIAN ELECTRICITY AUTHORITY Prepared by: K&M ENGINEERING AND CONSULTING CORPORATION 2001 L Street, N.W., Suite 500 Washington, D.C. 20036 December 15, 1993 FINAL REPORT OF THE POLICY REFORM AND INSTITUTIONAL DEVELOPMENT ASSESSMENT FOR COMPETITIVE MARKET ADAPTATION OF THE EGYPTIAN ELECTRIC POWER SECTOR VOLUME I: EGYPTIAN ELECTRIC AUTHORITY GLOSSARY . AND SECTION A GENERAL ACRONYMS ABBREVIATIONS ........... xii... SECTION B .TECHNICAL ACRONYMS AND ABBREVIATIONS ......... xlll 1 PART I EXECUTIVE SUMMARY ............................. 1-1 PART I1 PROPOSED IMPLEMENTATION PLAN ..................1 . 11 2 INTRODUCTION AND BACKGROUND 2.1 OBJECTIVES AND SCOPE OF THE STUDY .................. 2-2 2.1.1 GeneralRequirements ............................ 2-2 2.1.1.1 Review of Existing Laws. Policies. Procedures and Regulations ...............................2-2 2.1.2 Technical and Financial Information ................... 2-4 2.1.2.1 Demand and Energy Growth .................. 2-4 2.1.2.2 Generation ............................. 2-4 2.1.2.3 Transmission ............................ 2-5 2.1.3 Energy Pricing (Tariffs) ........................... 2-5 2.1.4 Real Property Ownership .......................... 2-5 2.1.5 Accounting Procedures and Systems ................... 2-5 2.1.6 Review of Existing Organizational Structures and Operations .... 2-6 2.1.7 Review of Previously Prepared Studies .................. 2-6 2.1.8 Recommendations ............................... 2-6 2.1.9 Methodology .................................. 2-7 2.1.10 Performance Schedule ............................ 2-9 2.2 INFORMATION REQUESTED ...........................2-12 2.2.1 Representative Plants to be Reviewed ...................2-16 2.3 PROJECT TEAM AND COUNTERPARTS .................... 2- 17 Page 3 OVERVIEW OF THE EGYPTIAN ELECTRIC POWER SECTOR 3.1 SECTOR BACKGROUND .............................. 3-1 3.1.1 Priorto1948 ................................. 3-1 3.1.2 From 1948 to 1956 .............................. 3-1 3.1.3 From 1956 to 1976 .............................. 3-1 3.1.3.1 The Egyptian General Authority for the Production and Transmission of Energy .................. 3-2 3.1.3.2 The Egyptian General Authority for Electricity ....... 3-2 3.1.4 From 1976 to Present ............................ 3-2 3.1.4.1 The Egyptian Electricity Authority ............... 3-2 3.1.4.2 The Nuclear Power Plant Authority .............. 3-3 3.1.4.3 The Kattara Depression Project Authority .......... 3-3 3.1.4.4 The New and Renewable Energy Authority ......... 3-3 3.1.5 EvolutionoftheElectricPower Sector inEgypt ............ 3-3 3.2 INSTITUTIONAL FRAMEWORK AND ROLES ................ 3-4 3.2.1 Overview ....................................3-4 4 LEGAL ISSUES 4.1 CURRENT STATUS .................................. 4-1 4.2 LISTOFLAWSREVIEWED ............................ 4-1 4.3 OPTIONS FOR LEGAL FRAMEWORK RESTRUCTURING ........ 4-2 4.3.1 Option 1: Allow EEA to Operate on Commercial Basis ........ 4-2 4.3.1.1 Practical Possibility ........................ 4-3 4.3.1.2 Advantages of Option 1 ..................... 4-3 4.3.2 Option 2: Restructure Power Sector to Conform with Law 203 of 199#-3 4.3.2.1 Practical Possibility ........................ 4-3 4.3.2.2 Advantages of Option 2 ..................... 4-4 4.4 REGULATORY FRAMEWORK .......................... 4-5 4.4.1 The Need For Regulation .......................... 4-5 4.4.2 Traditional Utility Regulation ........................ 4-6 4.4.2.1 The Regulatory Board and its Primary Responsibilities . 4-6 4.4.2.2 How Regulators Set Rates .................... 4-7 4.4.2.3 Current Efforts to Reform Traditional Regulation ...... 4-8 4.4.3 Performance Regulation ...........................4-10 4.4.3.1 How Performance Regulation Works .............4-10 4.4.3.2 Use of Negotiated Performance Agreements ......... 4-10 4.4.4 A Conceptual Framework for Utility Regulation in Egypt ...... 4-12 4.4.4.1 The Independence of Egypts' Regulatory Board .......4-12 4.4.4.2 The Functions of Egypt's Regulatory Board ......... 4-13 4.4.4.3 The Principles, Policies, and Process of Egypt's Regulatory Board ...................4-15 4.4.5 Framing the Policy Debate .........................4-16 Page 4.5 SUMMARY OF RECOMMENDATIONS .....................4. 19 4.5.1 EEA Charter ..................................4. 19 4.5.2 Regulatory Framework ............................4-19 5 MANAGEMENT AND ORGANIZATION 5.1 PRESENT ORGANIZATION ............................ 5-1 5.1.1 Board of Directors ............................... 5-1 5.1.2 Management Structure ............................. 5-2 5.2 MANAGEMENT STYLE AND REPORTING PROCEDURES ........ 5-4 5.3 HUMAN RESOURCE MANAGEMENT ..................... 5-6 5.3.1 Overview .................................... 5-6 5.3.2 Personnel Policies ............................... 5-7 5.3.2.1 Appointment to Senior Positions ................5-11 5.3.2.2 Promotion ..............................5-11 5.3.3 Compensation ..................................5-12 5.3.4 Training .................................... 5.14 5.3.4.1 Cairo-North Training Center for Electrical and Mechanical Power .....................5-14 5.3.4.2 The Cairo-South Training Institute ...............5-14 5.3.4.3 The Abu Quir Training Center .................5-15 5.3.4.4 The Financial and Administrative Training Center (FATC) 5-23 5.4 MANAGEMENT INFORMATION SYSTEMS ..................5-23 5.5 SUMMARY OF RECOMMENDATIONS ..................... 5-29 6 THERMAL AND HYDROELECTRIC GENERATION 6.1 THERMAL GENERATION ............................. 6-1 6.1.1 Operational Parameters ........................... 6-1 6.1.2 Reliability ................................... 6-5 6.1.3 Plant Wiciencies and Fuel Consumption ................. 6-6 6.1.4 MaintenanceIPreventive MaintenanceISpare Parts ........... 6-9 6.1.5 Current Maintenance Systems Management at EEA .......... 6-11 6.1.6 Plant Staffmg/Personnel ...........................6-14 6.1.7 Plant Personnel Training ..........................6-16 6.1.8 Fuel kurement ...............................6-18 6.1.9 Characteristics of Fuels ...........................6-18 6.1.10 Automatic Generation Control for Generation Plants .........6-22 6.1.1 1 Demand Side Management .........................6-22 6.1.12 Environmental Issues .............................6-23 6.2 HYDROELECTRIC GENERATION ........................6.24 6.2.1 Operational Parameters ...........................6-25 6.2.2 Operational Constraints ...........................6-27 6.2.3 Reliability and Rehabilitations .......................6-27 6.2.4 Maintenance and Preventive Maintenance for Hydroelectric Plants . 6-28 6.2.5 Spare Pms for Hydroelectric Plants ...................6-28 6.3 SUMMARY OF RECOMMENDATIONS .....................6-29 Supplement A - Comparison of Generation and Total Fuel Consumption ............................... 6-31 Supplement B .Design and Operating Conditions/Mazout Analyses .....6-33 Supplement C .Broad Elements of a Fuel Supply Agreement .........6-34 7 TRANSMlSSION SYSTEM 7.1 DESCRIPTION .................................... 7-1 7.2 TRANSMISSION PLANNING ............................ 7-2 7.3 EXPANSION OF THE 500 kV SYSTEM ..................... 7-3 7.4 EXPANSION OF THE 220 kV SYSTEM ..................... 7-4 7.5 EXPANSION OF THE 132 kV SYSTEM ..................... 7-4 7.6 EXPANSION OF THE 66 kV SYSTEM ...................... 7-4 7.7 DESIGN CHARACTERISTICS OF THE 500 kV SYSTEM .......... 7-4 7.8 DESIGN CHARACTERISTICS OF THE 220 kV SYSTEM .......... 7-5 7.9 DESIGN CHARACTERISTICS OF THE 66 kV SYSTEM ........... 7-5 7.10 FORCWOUTAGES .................................7-6 7.1 1 RIGHT-OF-WAY OF TRANSMISSION LINES ................. 7-6 7.12 MAINTENANCE OF THE TRANSMISSION SYSTEM ............ 7-6 7.12.1 Transmission Line Maintenance ...................... 7-6 7.12.2 Other Transmission Equipment ....................... 7-8 7.13 SUMMARY OF RECOMMENDATIONS ..................... 7-9 8 CUSTOMER SERVICE OPERATIONS 8.1 DESCRIPTION OF CUSTOMERS .........................8-1 8.2 LOSSES .................................... 8-2 8.2.1 Load Flow - Simulation ........................... 8-4 8.2.2 Load Flow .Transmission Lines Disconnected ............. 8-4 8.2.3 Metering Errors ................................ 8-4 8.2.4 Administrative Errors ............................ 8-5 8.2.5 Point Of Measurement ............................ 8-5 8.3 APPLICABLE TARIFFS ............................... 8-6 8.4 SUMMARY OF RECOMMENDATIONS ..................... 8-7 9 EXPANSION PLANNING AND FORECASTING 9.1 INTRODUCTION ................................... 9-1 9.2 MODELS USED FOR FORECASTING ...................... 9-1 9.2.1 Economic Models ............................... 9-3 9.2.2 Load Profile Model ............................. 9-3 9.2.3 End-Use .................................... 9-3 9.2.4 Growth-Rate - Specific Consumption (GRSC) Model ......... 9-4 9.2.5 Regression Analysis for Time Series (RATS) .............. 9-4 9.3 METHODOLOGY USED FOR LOAD FORECASTING ............ 9-4 9.4 AN ASSESSMENT OF FORECASTING ..................... 9-7 9.4.1 Demand Side Management .........................9-11 9.5 METHODOLOGY FOR LEAST COST FORECASTING