The World Bank Group

TERMS OF REFERENCE

Consultancy Services to Conduct a Tariff Study for REGIDESO

I. Study Objective
The objective of this assignment is to define the optimal electricity and water tariff structure and tariff
indexation and adjustment mechanism in Burundi.

II. Context
Burundi is a small landlocked country in eastern central Africa with a total land area of 27,834 km2 and
approximately 10.5 million inhabitants, making it the third most densely populated country in continental
Sub-Saharan Africa. Conflict between 1993 and 2005 placed significant strain on Burundi’s economy and
population, and Burundi now has one of the lowest per capita Gross National Incomes in the world (US$280
in 2016).

In order to transform Burundi into an emerging economy, the GoB is committed to supporting the economic
and social development of the country as per its National Development Plan (NDP) 2018-2027. With
electricity access under 10%, the NDP identifies the energy deficit as one of the main constraints to
economic growth in Burundi, and the GoB has prioritized expanding electricity access to 30% by 2030.
Achievement of this ambitious goal will require significant investment across the power sector. As public
and donor resources are few, private sector investment will need to play an important role in achieving
Burundi’s energy sector development goals.

For the sector to attract private investment, REGIDESO, the publicly-owned national electricity and water
utility and the country’s sole electricity off-taker, must be financially and operationally sustainable.
However, the financial state of REGIDESO is fragile and is putting significant strain on Burundi’s public
finances. REGIDESO faces several challenges. First, the power system is overly dependent on expensive
fuel imports and thermal generation. Second, tariffs for electricity and water have in the past not been cost
reflective, requiring external public or donor support. In 2015 and 2016, subsidies accounted respectively
for 12.8% and 14.9% of total REGIDESO revenue. Third, technical and commercial losses are high. Total
losses over the past five years have averaged 23.3 percent and reached 32.1 percent in 2016, a majority of
which have been non-technical. Fourth, large buildups of arrears are impeding REGIDESO’s investment in
future growth and performance improvements.

The GoB is already taking steps to improve sector performance. The Jiji Mulembwe Hydropower Project,
financed by the World Bank and other donors, will provide low-cost renewable energy (consistent with the
recently completed power sector development plan, “Plan Directeur de Production, Distribution et de
Transport”, prepared with donor support). A critical component of the ongoing Jiji Mulembwe project is a
Performance Improvement Plan (PIP) for REGIDESO focused on organizational restructuring,
infrastructure rehabilitation and upgrades, and incorporation of state-of-the-art information systems to
support efficient, transparent, and accountable execution of operations in key business areas such as
electricity supply to customers, commercial functions, and management of corporate resources.

In parallel, ongoing activities financed by the Public-Private Infrastructure Advisory Facility (PPIAF) and

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the Energy Sector Management Assistance Program (ESMAP) are supporting increased private investment
in the power sector by enhancing the country’s regulatory environment for competitive procurement of
renewable energy generation and providing direct analytical support to REGIDESO. A cost of service study
(COSS) to determine REGIDESO’s revenue requirement was recently completed, and a separate piece of
analysis to determine potential pathways to REGIDESO financial recovery is ongoing. The GoB has now
requested the World Bank for additional support to help determine REGIDESO tariff structures and
trajectories that are both financially and socially sustainable.

III. Task Description

Following the GoB’s request for support, the World Bank is seeking the services of a “Consultant” (Firm
or Consortium) with proven and relevant expertise and experience to conduct a full tariff study for
REGIDESO’s electricity and water sales.

Starting from the outcomes of the COSS carried out in early 2020 that determined the revenue requirement
for REGIDESO, the consultant will perform the following tasks:

Task 0: Familiarization with cost of service study and high-level validation of findings. It will be
important for the Consultant to become thoroughly familiar with the analysis and recommendations in the
COSS before undertaking the tariff study. This should include a high-level validation of the COSS’s
findings, noting any points of disagreement or potential adjustments. It should be noted, however, that
since the COSS is already complete and has been accepted by both the World Bank and REGIDESO
management, this should be a high-level review only and is not expected to entail significant additional
analysis.

Task 1: Assess consumer ability to pay for electricity and water in different social and economic
segments. The Consultant will assess consumers’ current ability to pay for electricity and water in different
social and economic segments by carrying out a Poverty and Social Impact Assessment (PSIA) analysis.
Though the guiding principle behind future tariff design should be that all customers face cost-reflective
rates, low-income consumers should be protected through a social safety net, addressing the gap between
cost-reflective tariffs and their ability to pay. On the basis of findings of PSIA analysis and the current state
of social safety nets, mitigation measures should be proposed to ensure affordability of basic level of
electricity and water consumption for poor households. The Consultant will define the relevant metrics to
assess affordability and discuss with REGIDESO and the task team.

Task 2: Recommendations to improve the existing tariff structure and its periodical adjustments for
electricity and water service provided by REGIDESO to its customers. The Consultant will review the
existing tariff structure and propose amendments to make it simpler, provide consumers with the right price
signals and incentives, and promote efficient electricity and water consumption. Options to be analyzed
could include, among others: (i) binomial time of use (TOU) tariffs with separate consumption and demand
charges; (ii) tariff differentiation by voltage level (for electricity); (iii) seasonal tariffs. The identified
options should take into account economic efficiency, financial viability, and social objectives. In
particular, they should allow for socially sensitive rates that include cross-subsidies towards economically
weaker consumer categories, and cost-reflective rates for consumers with ability to pay, identified based
on consumption histograms. The recommendations should incorporate provisions for allocating fixed and
variable costs incurred for service delivery in each segment of the electricity and supply chains across tariff

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categories. Finally, the Consultant will develop formulae for the quarterly adjustment of the various rates
that form part of the tariff structure.

Task 3: Strategy for the transition period. The Consultant will design a strategy (“glide path”) to move
progressively from current situation to the target “steady state” tariff structure, in which a fully cost-
recovery tariff structure is achieved. The duration of the transition period and the progressive adjustments
to converge to the “steady state” condition should be determined considering political and social
acceptability as well as the magnitude of the changes proposed. Thus, the strategy will define formulae for
adjusting the different rates under the tariff structure with adequate progression, the time schedule for
effective application of the revised tariff regime, and modalities for communication. The Consultant may
be expected to coordinate with the Ministry of Finance when defining this path.

The full-fledged tariff study will guide AREEN and REGIDESO in planning the tariff adjustment trajectory
for different sectors by refining the adjustment calculation formula. The study will also shed light on how
cross-subsidization between varying levels of consumption blocks could be implemented along with the
subsidy requirement underpinned by a Poverty and Social Impact Assessment that the World Bank will be
carrying out. The results of the study will be presented to REGIDESO and other stakeholders as appropriate
in a workshop.

The Consultant will need to consider two scenarios for this exercise: the first scenario should determine
tariffs and tariff paths for REGIDESO as a whole, assuming that electricity and water are jointly operated,
and allowing for cross-subsidies between the two sectors if necessary. The second scenario should
determine optimal tariffs and tariff paths for electricity and water operations as separate entities, assuming
each sector has to be independently sustainable.

IV. Deliverables
All deliverables need to be in French.

(i) Financial/economic model underlying the tariff study;

(ii) Report detailing the methodology, input parameters, outputs of the assessment and the new design of
tariff structure and adjustment mechanism; and

(iii) Capacity building session of the final results.

V. Working Arrangements
The Consultant shall report to and be supervised by the World Bank team, led by Justin Marie Bienvenu
Beleoken Sanguen, Senior Energy Specialist and Task Team Leader, and David Loew, Financial Specialist.
In performing the tasks above, the Consultant shall comply with the World Bank’s policies and rules
concerning the work of Consultants, as well as standards and requirements indicated in the contract.

The World Bank will coordinate as and when appropriate with REGIDESO and the government
counterparts. REGIDESO requested this task and will be involved throughout the process. Therefore, the
Consultant shall work closely with REGIDESO in the execution of the above-mentioned tasks, as requested

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by them and advised by the Bank. Other stakeholders include – but may not be limited to local AREEN,
MoE, and MoF. The World Bank Team, with the help of counterparts, will facilitate contacts with national
stakeholders as needed.

VI. Timeline
This assignment is expected to start in January 2021 and be completed within a period of 5 months. The
firm’s financial proposal should contain any assumptions made by the consulting firm/consortium in
arriving at their price proposal and technical approach. If the start date is delayed, the deliverable deadlines
will be adjusted accordingly.

Deliverable Estimated time

1. Updated financial model April 2021
2. Tariff study report May 2021
3. Capacity building session June 2021

VII. Team composition and qualifications

The Consultant will be required to mobilize a team of experts with diverse technical competencies,
including electricity and water tariff design and management and operations of companies/utilities across
all segments of the electricity and water supply chain. Though electricity operations account for the bulk of
REGIDESO’s activities, the Consultant should also ensure adequate representation of water sector expertise
on the team. The Consultant’s team must include at least:
- One (1) Project Director at least 12 years of experience in cost of service studies concerning the
electricity and/or water sectors in developing countries, and at least 3 studies carried out within the
past five years.
- One (1) Economist with at least 7 years of experience in cost of service studies concerning the
electricity and/or water sectors in developing countries.
- Expertise in management and operations of power companies/utilities.

A working command of French is required.