Phased restructuring and sector reforms has resulted in an Jordanian electricity sector that provides power to almost 100 percent of the country

Phased sector unbundling and cost reflective tariffs create opening for private producers to expand and diversify generation to meet growing demands.

Before the 1970s, Jordan’s electricity sector had limited coverage through a series of regional concessions. The Jordanian Electric Power Company (JEPCO) – established in 1938 – provided power through a concession to Amman and Zerqa cities and Irbid District Electricity Company (IDECO) covered Irbid city including generation, transmission and distribution. Some municipalities had small generation facilities to serve their individual communities, but many did not have electricity. At that time, the Ministry of Economy approved the retail tariff rates for JEPCO and IDECO without an electricity regulator.

In the 1970s, the Jordan Electricity Authority (JEA) was established as a vertically integrated electricity entity with a mandate that spanned generation, transmission, wholesale power sale and distribution in non-JEPCO and IDECO territories. JEA calculated the wholesale and retail tariffs for the areas they distributed to as well as those JEPCO and IDECO were serving. These tariffs were approved by the Ministry of Energy Mineral Resources (MEMR). 

Electricity sector reforms allowed the GOJ to meet investment and generation targets, improve the country’s financial position, and finance the gradual phasing out of the nation’s oil subsidy by 2017 because the GOJ was not subsidizing the industry

In 1996, JEA was converted into a public shareholding company, the National Electric Power Company (NEPCO) and in 1998 NEPCO was unbundled into three government owned companies: (1) Central Electricity Generating Company (CEGCO), (2) NEPCO and (3) Electricity Distribution Company (EDCO). CEGCO was the Jordanian-owned and operated generation company. NEPCO owned and operated transmission, system operation, wholesale power purchase and sales, independent power producer (IPP) generation procurement and procured all fuel for generation. EDCO owned and managed all distribution and retail of electricity in non-JEPCO or IDECO concessions. 

Unbundling created an impetus to develop a strong regulator that could protect the interests of Jordan’s citizens as the market was opened to private sector investment and operation and to ensure that the regulation of the sector was fair and balanced to consumers, licensees, investors and other stakeholders.

In 2002, the General Electricity Law number 64 created the Electricity Sector Regulatory Commission (ERC) with a mandate to license those entities engaged in generation, transmission, supply, distribution and system operation and to set electricity tariffs. This law also allowed for the introduction of IPPs, which helped take some of the pressure off CEGO and led to increased  power generation in Jordan.

As the financial position of the utilities improved, there was an opportunity to privatize them to provide revenue to the country. In 2007, EDCO and IDECO, which are the government-owned entities, privatized their distribution operations. CEGCO was privatized by selling 51 percent of the GOJ shares to ENARA Energy Investment PSC (ENARA). The fuel was still provided by NEPCO, but the energy selling price was modified to be based on investment, operations, and maintenance costs.  EDCO was privatized by selling 100 percent of its shares to Kingdom Electricity Company (KEC) and IDECO was privatized by selling all Government of Jordan (GOJ) shares (55.4 percent) to KEC.

The reform of Jordan’s electricity sector was successful because it was done in a phased process where the country restructured the utilities first and then brought in private capital and ownership. This restructuring focused on adopting cost-reflective tariffs and was supported by a regulator that was able to oversee the system changes. The financial sustainability and transparency attracted private investment into the industry from companies that brought regional electricity generation experience. These companies have been able to make infrastructure investments because the regulator supported investments to be recovered through the tariff – a system that was pre-established before private ownership. Altogether, this allowed the GOJ to meet investment and generation targets, improve the country’s financial position, and finance the gradual phasing out of the nation’s oil subsidy by 2017 because the GOJ was not subsidizing the industry.

Since privatization in 2007, these companies have undergone changes in equity holders and operators spurring  increased participation by experienced, foreign companies in Jordan’s electricity operations. In addition, this new structure has allowed for the introduction of a number of IPPs as well as the import of power from other countries in an efficient and integrated manner given the international and regional experience of the private companies. The rapid growth in demand for electricity meant large-scale investments were necessary to expand generation and the grid.

Today, the electricity sector in Jordan is an enhanced single buyer model, where power plants are procured competitively and the regulated tariffs provide for a cost recovery operation. There are a number of IPPs that sell power to NEPCO as the single off-taker, who then sells power to the three DISCOs and the principal consumers.

NEPCO owns and operates the transmission and system operators for Jordan, including purchasing IPP power. NEPCO also manages Jordan’s interconnections with Egypt through a 400 kV submarine cable crossing the Gulf of Aqaba in the southern part of Jordan. In the north, the country is connected with the Syrian Power System through a 400 kV single circuit transmission line.

CEGCO has continued to increase its private capital ownership; ACWA Power International, a Saudi firm that specializes in developing privately owned and financed power generation, has recently increased its stake. This has helped CEGCO to expand to the largest power generator in Jordan, with seven power generation complexes nationwide totaling approximately 1,700 MW of installed power capacity (51 percent of the country’s electricity market).

Reforming the electricity sector has allowed the country to grow the installed capacity to approximately 3,366MW and provide electricity to almost 100 percent of the population. The energy sector requires huge investments to keep up with the needs of the national economy. Privatization has provided the capital to continue to expand generation and meet these needs. Finally, the reforms have allowed the participants in the electricity sector to integrate greater shares of renewable energy technologies.