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PURC Operationalises its Capital Contribution Guidelines (CCG)

The Public Utilities Regulatory Commission is an independent statutory body established under the Public Utilities Regulatory Commission Act, 1997, (Act 538) to regulate and oversee the provision of utility services in the country.

As part of the Commission's efforts to enhance transparency and accountability to its stakeholders, and as a requirement under Regulation 22 of the Public Utilities Regulatory Commission (Consumer Service) Regulations of 2020 (LI 2413), the Commission has published the Capital Contribution guidelines (CCG), which takes effect from May 1, 2024.

The guidelines provide a framework for the orderly approval, calculation and refund of Capital Contributions paid by customers to utility companies. The Commission expects that the implementation of these guidelines will contribute to an increase in access to electricity and water services through user contributions.

The Commission is of the view that Capital Contribution is one of the means by which a utility company extends connections to enable customers to access the utility’s network services. The connection of new customers to a utility network is paid through several scenarios, including (1) the revenue from the new connection (2) a deposit to support that revenue until it materializes and (3) an upfront financial payment from the customer, known as a Capital Contribution.

The Commission wishes to emphasize that, Rule 2—Application for new service connection under the Electricity Supply and Distribution (Technical and Operational) Rules, 2005 (Li 1816), Sub-rule (7), states that, where with the approval of a supplier a customer finances the development of the supplier’s distribution system, the customer shall, subject to sub-rule (8), be entitled to a 60 percent refund of the investment from the supplier when the supplier subsequently connects other customers to the newly developed part of the distribution system. Under Sub-rule (8), a supplier shall establish and submit in writing to the Public Utilities Regulatory Commission for approval, procedures for making the refund stipulated under Sub-rule (7). The Public Utilities Regulatory Commission may direct the supplier to review its procedures and may approve an acceptable proposed modification to the procedures under Sub-rule (9).

The Commission has outlined the following application process; a Customer applying for the connection of utility supply by way of Capital Contribution shall complete and submit Form A1 or Form A2 in the Schedule to these Guidelines as applicable, to the utility company. The utility company shall assess the prudency of the investment, calculate the cost of optimally sized assets required and determine the quantum of the Capital Contribution to be paid by the Customer. Within 20 working days of receipt of the application, the utility company shall issue a quotation to the Customer unless the project requires load flow studies or hydraulic analysis, in which case the quotation shall be provided within a reasonable time, not exceeding 2 calendar months. The quotation shall indicate the materials required, the cost of the project, the quantum of the Capital Contribution to be paid by the Customer, the payment method and the validity period of the quotation.

A provision that payment of the refund shall be made by the utility either by cheque or credit to the customer’s utility account, in the proportions stated in the Connection Agreement. However, utility ownership and maintenance of the capital assets, for which the contribution is made, shall be the property of the utility and shall be maintained by the utility.

The Commission encourages stakeholders to take note of the following: that, an application for a Capital Contribution refund shall be made within five years from the completion of the project to qualify for the sixty percent refund. In the event that, the utility company makes no other connection to the newly developed part of the network within the five-year limitation period, the utility company shall pay a discounted refund for connections made after the five-year limitation period. The discounted refund shall be sixty per cent of the depreciated value of the assets and shall be in the form of a one-time payment to the customer.

A dedicated connection to one customer does not however. qualify for a Capital Contribution refund. A connection to the newly developed part of the network, which is illegal shall not qualify the customer for a Capital Contribution refund. In that case, the utility shall disconnect the illegal connection and apply the applicable penalty to the offender under Regulations 37 and 44 of the Public Utilities Regulatory Commission (Consumer Service) Regulations, 2020 (LI 2413).  Consumers should however note that, nothing in these guidelines prevents a utility company from declining an application, but the utility must assign reasons for declining an application and inform the Customer of the reasons.

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