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Regulations on General Principles for Regulating Electricity Tariffs_071026

Published: 2011 Sep 19

KINGDOM OF CAMBODIA
NATION RELIGION KING

ELECTRICITY AUTHORITY OF CAMBODIA

REGULATIONS

ON GENERAL PRINCIPLES FOR REGULATING
ELECTRICITY TARIFFS IN THE KINGDOM OF CAMBODIA

Under Electricity Law of The Kingdom of Cambodia

Approved by EAC session No. 113 on dated October 26, 2007

 

DECISION
ON GENERAL PRINCIPLES FOR REGULATING ELECTRICITY TARIFFS
IN THE KINGDOM OF CAMBODIA

ELECTRICITY AUTHORITY OF CAMBODIA

− In exercise of  the Electricity law of the Kingdom of Cambodia, which was promulgated by
the Royal KRAM No. NS/RKM/0201/03 of February 2, 2001
− In exercise of the Royal Decree of Preahbath Samdech Preah NORODOM SIHAMONI,
the king of the Kingdom of Cambodia No. NS/RKT/1104/022 of November 20, 2004 on the
appointment of Excellency TY NORIN as Chairman of Electricity Authority of Cambodia
− In accordance with the consultation with concerned Ministries and institutions, licensees,
and the public made from May 25, 2007 to July 08, 2007
− In accordance with the decision of EAC’s Session No. 113  dated October 26, 2007

DECIDES

Article 1-
Issue Regulations called “Regulations on General Principles for Regulating Electricity Tariffs
in The Kingdom of Cambodia” under Electricity Law of the Kingdom of Cambodia for governing
the process of tariff review and tariff setting, and to ensure the fair and equitable balance between
the interests of suppliers and consumers in the Kingdom of Cambodia.

Article 2-
These Regulations have the whole contents as attached document.

Article 3-
These Regulations shall apply to all Distribution Licensees, Retail Licensees, consolidated licensees
whose license consists of either Distribution or Retail activity and all consumers of electricity in the
Kingdom of Cambodia, related to the supplying, receiving and use of electricity.

Article 4-
These Regulations shall come into force for implementation from the date of signing until the new
decision.  EAC may revise and reissue these Regulations at any time.

Article 5-
Secretariat of the Electricity Authority of Cambodia shall publicize these Regulations to the public.
Chairman of EAC

 

TABLE  OF CONTENTS

CHAPTER 1: GENERAL PROVISIONS

1.1 Purpose
1.2 Title
1.3 Jurisdiction
1.4 Consistency with Electricity Law, Sub-decree and Other Laws
1.5 Power to revise or modify these Regulations
1.6 Power to remove difficulties
1.7 Definitions

CHAPTER 2: PROVISIONS IN THE ELECTRICITY LAW

2.1 Power of EAC to review and approve the Electricity   Tariff
2.2 Objectives of Electricity Tariff
2.3 Procedures for Tariff Review
2.4 Rules for tariff discussion

CHAPTER 3: EAC POLICY FOR REGULATING ELECTRICITY TARIFF

3.1 General Policy
3.2 Approaches for EDC and Larger Licensees Tariff  Setting
3.3 Approaches for Smaller Licensee  Tariff Setting

CHAPTER 4: REVIEW AND APPROVAL OF ELECTRICITY TARIFF

4.1 Annual Tariff Monitoring
4.2 Tariff Review when requested by a Licensee
4.3 Tariff Review for New Licensee
4.4 Obligations of Licensees related to Tariff Reviews

CHAPTER 5: EVALUATION OF LICENSEE COSTS

5.1 Reasonable Costs
5.2 Separate Treatment for Separate Business
5.3 General Methodology for evaluating the generation reasonable cost
5.4 General Methodology for evaluating the Transmission reasonable cost
5.5 General Methodology for evaluating the Distribution reasonable cost
5.6 Principle for determination of reasonable Operation  and Maintenance Costs
5.7 Principle for determination of reasonable fuel costs
5.8 Principle for determination of administrative and general management costs
5.9 Principle for determination of reasonable power purchase costs
5.10 Principle for determination of reasonable asset valuation
5.11 Principle for lease charge
5.12 Principle for determination of reasonable  depreciation costs
5.13 Principle for determination of reasonable rate of return and costs of Loan
5.14 Principle for determination of energy sales and revenue
5.15 Principle for Energy Loss

CHAPTER 1

GENERAL PROVISIONS

1.1 Purpose
In exercise of powers conferred by Article 7, 46, 47 and 48 of the Electricity Law
promulgated by the Royal Decree No.NS/RKM/0201/03 dated February 02, 2001, the Electricity
Authority of Cambodia (henceforth referred to as EAC) hereby makes the following Regulations on
Tariffs for providing electricity services in the Kingdom of Cambodia.  The aim of these regulations
is to ensure that in the determination of tariffs the interests of Licensees and consumers are balanced
and the objectives of the Law are met. These regulations cover the EAC’s Tariff Policy, Obligations
of Licensees to submit financial data and other information, and the methodologies and process that
EAC is to follow in reviewing and determining tariffs.

1.2 Title
These Regulations shall be called “General Principles for Regulating Electricity Tariffs in the
Kingdom of Cambodia”.

1.3 Jurisdiction
These Regulations shall apply to all Distribution Licensees, Retail Licensees, consolidated licensees
whose license consists of either Distribution or Retail activity and all consumers of electricity in the
Kingdom of Cambodia, related to the supplying, receiving and use of electricity.

1.4 Consistency with Electricity Law,  Sub-decree and Other Laws
1. These Regulations are made in accordance with the Electricity Law of Kingdom of Cambodia
and with the Sub-decree on Principles for Determining the Reasonable Costs in Electricity
Business issued under the Law.  These Regulations relate to EAC’s powers in respect of the
review and approval of tariffs.  These Regulations shall be read in conjunction with any
Procedures or other Regulations that EAC shall issue from time to time.
2. These regulations apply to the accounting information and other information to be maintained by
Licensees for the purposes of providing information to EAC in order to fulfil its obligations
under the Law.  These Regulations do not cancel or modify in any way other obligations on
Licensees to maintain and submit accounts to other authorities under the provisions of other
Laws or regulations.
3. A distinction should be made between regulatory data that Licensees will be required to prepare
and submit to EAC, and the audited accounting data that the Licensees will routinely prepare
and submit for other purposes.   Some of the information required in the tariff setting process
will differ in format and content from information routinely collected in the standard accounting
records of the licensee.  The standard accounting records and statements primarily provide basic

information about revenues, costs, profits or losses, assets, and liabilities for the Company.  The
purpose of auditing is to check the correctness of accounting standards followed.  On the other
hand, the purpose of regulatory data is to verify Licensee operations for prudence and efficiency,
provide a complete analysis of its costs, revenues, tariffs and examination of the performance
parameters, and ensure that there is proper balance between interests of the licensees and the
consumers.  The required regulatory data may therefore differ in content and format from
standard accounting data.

1.5 Power to revise or modify these Regulations
EAC may at any time vary, alter, modify or amend any provisions of these Regulations.

1.6 Power to remove difficulties
If any difficulty arises in giving effect to the provisions of these Regulations, EAC may, by general
or specific order, make such provisions not inconsistent with the provisions of the Law, as may
appear to be necessary for removing the difficulty.

1.7 Definitions
In these Regulations, unless the context otherwise requires, the following terms shall have the
following meanings:
“EAC” means the Electricity Authority of Cambodia established under the Law.
“EDC” means Electricite Du Cambodge, including any of its operating companies in Cambodia.
“Law” means the Electricity Law of the Kingdom of Cambodia, 2001.
“Licence” means any licence issued under the Law to which these Regulations apply.
“Licensee” means any holder of a Licence to which these Regulations apply.
“Procedures” mean the Procedures for Data Monitoring, Application, Review and Determination of
Electricity Tariff in The Kingdom of Cambodia issued under the Law.
“Regulation” means these regulations.
“Sub-decree” means the Sub-decree on Principles for Determining the Reasonable Costs in
Electricity Business promulgated under the Law.

CHAPTER 2

PROVISIONS IN THE ELECTRICITY LAW

The Electricity Law of Kingdom of Cambodia has a number of provisions on Electricity Tariffs for
Electricity Supply in Cambodia that has been taken into account in the preparation of these
Regulations. These provisions are the following.

2.1 Power of EAC to review and approve the Electricity Tariff
Article 7 of the Law provided EAC the power to approve tariff rates and charges and terms and
conditions of electric power services of licensees, except where EAC considers those rates or
charges and terms and conditions are established pursuant to a competitive, market-based process.
Under the terms in Article 46 of the Law, EAC can determine or revise the tariff of a Licensee
either (i) on application by the Licensee or (ii) on a review being made by EAC.

2.2 Objectives of Electricity Tariff
Article 48 of the Electricity Law of Kingdom of Cambodia has provided the requirements that the
Electricity Tariffs approved by EAC shall:
1.  Protect consumers against monopolistic prices;
2.  Provide licensees with an opportunity to recover their costs, providing this cost shall be
the reasonable cost according to the business principles which are determined by Sub-
Decree;
3.  Encourage the efficiency of operations and internal management of Licensees by
allowing to increase their financial returns and minimise services costs consistent with
meeting the requirements of their licences.
4.  Encourage the economic efficiency of power sector by reflecting short run and long run
marginal costs and by sending accurate price signals regarding the abundance or
shortage of the supply of electric power services;
5.  Take into account the cost and other differences between categories of consumers and
types of service, including any subsidies provided by the Government.

2.3 Procedures for Tariff Review
To facilitate the EAC process of determination or revision of the tariff of a Licensee either (i) on
application by the Licensee or (ii) on a review being made by EAC, Article 47 says that EAC shall
establish procedures and models for submitting the tariff applications for approval in accordance
with the provisions of the Law, and this is to include:
(a) Evidentiary requirements for tariff applications, including audited financial information;
(b) Time frames for tariff applications and decisions;
6
(c) Procedures for consumers and other interested parties to comment on tariff applications; and
(d) Procedures for EAC to obtain additional information from the applicant as necessary to evaluate
tariff applications.
Article 46 of the Law says that EAC shall determine and review the tariff rates, charges, and service
terms and conditions of the licensee, and that within ninety (90) days from the receiving date of any
application by licensees requesting EAC to determine or revise their tariff, EAC shall approve,
revise, or disapprove this request.  In addition, EAC shall determine the effective date for new tariff
or the revised tariff not later than ninety (90) days as stipulated above.

2.4 Rules for tariff discussion
To ensure transparency in the process of Tariff Review, in carrying out its functions under
these Regulations EAC shall follow its internal rules on proceedings as specified in Article 20 of the
Law.  These rules shall control meetings between EAC’s members or employees and any party
involved in the establishment of a tariff.  The rules shall determine the objective, the date and time,
the place and the meeting proceedings for giving an opportunity to the interested persons to
participate.

CHAPTER 3

EAC POLICY FOR REGULATING ELECTRICITY TARIFF

3.1 General Policy
1. EAC will only approve tariffs for Licensees where it considers that the tariffs are best able to
meet the objectives set out in the Law.  In determining such tariffs, EAC will follow the
principles set out in the Sub-Decree and this Regulation except to the extent that it considers that
to do so is not appropriate in all the circumstances.
2. EAC shall ensure that the Licensee’s tariffs will recover only the Licensee’s reasonable level of
costs, minus any revenue subsidies received by the Licensee and any other income received by
the Licensee business. In those special circumstances where EAC decides to leave an uncovered
revenue gap in the recovery of the total reasonable costs, EAC may make adjustments to
compensate for this gap in future based on reasonable cost analysis.
3. Where revenue from current or proposed tariffs is held below the level of reasonable cost to
reflect any subsidy, EAC will need to satisfy itself that the subsidy is in accordance with the
policy of the Government and that the Licensee does receive full payment of the subsidy from
the subsidy giving body on a timely basis.
4. Where current or proposed tariffs result in any cross-subsidy between customers or classes of
customers, EAC shall satisfy itself that the cross-subsidy is in accordance with the policy of the
Government, and is reasonable taking into account all the circumstances.
5. EAC will wish to ensure that, subject to any subsidy arrangements, current or proposed tariff
structures achieve the following objectives, and will expect Licensees to provide cost or other
studies to demonstrate this:
(a)  That the revenues collected from different classes of consumers reasonably reflect the costs
of service for those classes.
(b)  That the structure of tariffs, both within classes and between classes, reflect the costs of
serving those classes.
6. Where it considers it appropriate, EAC may include in any tariff structure a fuel adjustment
surcharge mechanism and its terms of implementation.  Such mechanisms can allow pre-
specified adjustments to be made to the tariff, to reflect changes in fuel prices, power purchase
prices etc.
7. The tariff so finalised by EAC shall be in force from the date specified in the Order and shall
unless amended or revoked, continue to be in force. No tariff or part of any tariff may be
ordinarily amended except in respect of any changes expressly permitted under the terms of any
fuel surcharge formula as specified by EAC.

8. For the purposes of tariff setting, EAC will designate a licensee as either a ‘Larger Licensee’ or
a ‘Smaller Licensee’.
3.2 Approaches for EDC and Larger Licensees Tariff Setting
1. In the case of EDC and other Licensees that EAC will designate as “Larger Licensees”, all
Licensees will be required to make annual submissions to EAC of accounting and other data,
and the procedure and requirements for this will be laid down in the Procedures.  On the basis of
these submissions and other information, EAC may decide to review tariffs of one or more
Larger Licensees.  The Licensees themselves may make a submission to EAC for tariff review
whenever they consider it is necessary to do so.
2. Because of the different conditions that exist in different Licensees’ service areas, EAC may
determine different tariffs for different Licensees.
3. In reviewing Larger Licensees’ submissions and reviewing tariffs, EAC will examine both their
reasonable costs in total, and the extent to which tariffs reflect costs.
4. In examining a Licensee’s reasonable costs, EAC will try to ensure that these include only
prudently incurred costs necessary to undertake its licensed activities as consistent with the Sub-
Decree.  The Licensee’s estimate of reasonable costs for the next year will be reviewed by EAC
according to the Sub-Decree and used to assess whether a tariff revision is necessary.  In
reviewing a Licensee’s reasonable costs, EAC will follow the provisions of the Sub-Decree and
the methodology set out in this Regulation.

3.3 Approaches for Smaller Licensee Tariff Setting
1. All Smaller Licensees will be required to make annual submissions to EAC of accounting and
other data, and the procedure and requirements for this will be laid down in the Procedures.  On
the basis of these submissions and other information, EAC will evaluate the reasonable cost of
Licensee according to the Sub-Decree and based on the result of this evaluation EAC may
decide to review tariffs.  The Licensees themselves may make a submission to EAC for tariff
review whenever they consider it necessary to do so.
2. In examining a Licensee’s reasonable costs, EAC will try to ensure that these include only
prudently incurred costs necessary to undertake its licensed activities. EAC will estimate the
Licensee’s reasonable costs for the next year and assess whether the tariff revision is necessary.
In reviewing a Licensee’s reasonable costs, EAC will follow the provisions of the Sub-Decree
and the methodology set out in this Regulation.

3. EAC may aim to move towards issuing same tariffs for groups of licensees. This would require
grouping of Smaller Licensees with similar operational, technical or geographic characteristics.

CHAPTER 4

REVIEW AND APPROVAL OF ELECTRICITY TARIFF

4.1 Annual Tariff Monitoring
1. All Licensees shall submit annually to EAC the data and other information related to its tariffs
and costs, so that EAC may review and monitor the tariffs and determine whether any revision
in tariffs is necessary. The timing of these submissions, the contents of the submission, and the
procedures to be followed are set out in the Procedure for Data Monitoring, Application, Review
and Determination of Electricity Tariff published by EAC from time to time.
2. Where following EAC’s review of an annual submission or other information available to it,
EAC determines that it’s existing tariffs need to be reviewed, it shall require the Licensee to
submit the additional information to EAC with all the financial and other information that are
necessary for EAC to determine whether the tariff revision is necessary.  The timing of such a
submission, its required contents, and the procedure to be followed are set out in the Procedure
for Data Monitoring, Application, Review and Determination of Electricity Tariff published by
EAC from time to time.

4.2 Tariff Review when requested by a Licensee
When a Licensee wishes to revise its existing tariffs, it shall submit an Application for Tariff
Revision to EAC with all the financial and other information that are necessary for EAC to
determine whether the tariff revision is necessary.  The timing of such a submission, its required
contents, and the procedure to be followed are set out in the Procedure for Data Monitoring,
Application, Review and Determination of Electricity Tariff published by EAC from time to time.

4.3 Tariff Review for New Licensee
For a New Licensee, before the licence is issued, it shall submit an Application for Tariff
approval to EAC with all the financial and other information that are necessary for EAC to set its
tariff.  The timing of such a submission, its required contents, and the procedure to be followed are
set out in the Procedure for Data Monitoring, Application, Review and Determination of Electricity
Tariff published by EAC from time to time.

4.4 Obligations of Licensees related to Tariff Reviews
Every Licensee must submit information to EAC in accordance with the requirements laid
down in the Law, the Sub-decree, its License, the Procedures, and these Regulations.
The information that Licensees may be required to submit to EAC includes:
•  Accounts, reports, data, documents and such other information in any form that EAC may
require;
•  Accounting and other information for each of the Separate Businesses that the Licensee
operates under its licence, such that the revenues, costs, profits, losses and assets for each
Separate Business are clearly identified, presented in the form that would be required where
each Separate Business was a separately established company.
Where a Licensee fails to submit any required information to EAC within the specified timescale,
EAC may impose such penalties as it considers necessary in accordance with Article 7(l) of the
Law.

CHAPTER 5

EVALUATION OF LICENSEE COSTS

5.1 Reasonable Costs
1. In determining the extent to which specific items within a Licensee’s costs are reasonable, EAC
shall act in accordance with the principles set out in the Sub-Decree and shall also take account
of the factors specified in these Regulations.
2. EAC will wish to determine that each Licensee’s costs are as low as is consistent with reliable
and efficient operation and with maintaining its long-term financial viability.  EAC may
determine acceptable cost levels by reference to cost levels of comparable utilities elsewhere,
indexes of relative efficiency, or to reasonably achievable levels of productivity improvement.

5.2 Separate Treatment for Separate Business
In the case of any Licensee having more than one business activity or area of operations, EAC will,
except as provided elsewhere in these regulations, evaluate the reasonable costs separately
according to these separate areas and business activities.  In accordance with the Law and the
Licences, for the purposes of these Regulations these separate businesses shall be defined as:
1.  Generation Activities;
2.  Transmission Activities;
3.  Distribution Activities.

5.3 General Methodology for evaluating the Generation reasonable cost
The total reasonable costs for a generation business will be evaluated by EAC, by examining the
main components of costs that go to make up the total.  These include
–  Generation fuel costs
–  Other generation Operation & Maintenance costs
–  Generation Administrative & General  costs
–  Generation asset depreciation
–  Generation Reasonable Profit
–  Cost of Generation loans
EAC will evaluate each of the components of a Licensee’s reasonable costs in accordance with the
methodology described in this section below.

5.4 General Methodology for evaluating the Transmission reasonable cost
1. Transmission and distribution costs are basically costs associated with the wires business. They
include costs associated with operation and maintenance of the system, depreciation expenses,
interest charges, any taxes, and a reasonable return on the net direct capital employed.
2. The total reasonable costs for a transmission business will be evaluated by EAC by examining
the main components of costs that go to make up the total, using methodology similar to that
used for distribution.  EAC will evaluate each of the components of a Licensee’s reasonable
costs in accordance with the methodology described in this section below.
3. For the time being, transmission shall be considered jointly with the distribution costs, but EAC
may decide in the future to separate these and require separate cost information.

5.5 General Methodology for evaluating the Distribution reasonable cost
The total reasonable costs for a distribution business will be evaluated by EAC by examining the
main components of costs that go to make up the total.  These include
–  Power purchase costs
–  Other Distribution Operation & Maintenance costs
–  Distribution Administrative & General costs
–  Distribution asset Depreciation
–  Distribution Reasonable Profit
–  Cost of Distribution loans
EAC will evaluate each of the components of a Licensee’s reasonable costs in accordance with the
methodology described in this section below.

5.6 Principle for determination of reasonable Operation and Maintenance Costs
1. In determining whether Operation and Maintenance Costs are reasonable in respect of a
Licensee, EAC may take into account:
(a) trends in general inflation, specific prices indices, and other factors affecting actual or likely
costs of the Licensee;
(b) any plans submitted by the Licensee for improvements in performance, the steps being taken to
implement the plans, and results achieved against the plans.
2. EAC will expect that each Licensee will take all possible steps to reduce the necessary level of
costs consistent with an acceptable level of service, and that the level of costs per unit of sales
will be reduced on a step by step basis.

3. Costs of employees are a major item in the total O&M costs of a Licensee, and EAC will
examine the numbers, pay rates, and other benefits received by employees to ensure that the
costs incurred are reasonable in all the circumstances.
4. O&M expenses of assets taken on lease shall be considered if the licensee has the responsibility
and bears expenses for it, provided they are considered reasonable by EAC.

5.7 Principle for determination of reasonable fuel costs
1. EAC will expect each Licensee to demonstrate if required that in purchasing fuel it has taken all
necessary steps to ensure that the requirements of the Sub-Decree have been met. EAC needs to
ensure that reasonable quality fuel is purchased at reasonable price. For the Larger Licensees
EAC will also expect each Licensee to demonstrate the necessary steps taken to procure fuel
through competitive bidding.
2. EAC will ensure that licensee shows progressive improvement to achieve efficient levels of
specific fuel consumption.

5.8 Principle for determination of administrative and general management costs
EAC may consider the trends in general inflation, specific prices indices, and other factors
affecting actual or likely costs of the Licensee while determining the reasonable levels of
administrative and general costs.

5.9 Principle for determination of reasonable power purchase costs
1. Licensees will need to satisfy EAC that its procedures for carrying out the scheduling and
`despatch of its own plant and contracted plant follow normal merit order principles. Such
procedures shall ensure that demand will be met at the lowest possible total cost, taking account
of likely operational condition, the conditions of power purchase contracts, the need to ensure
adequate system reliability, impact of seasonality and any other special conditions.
2. Where new power purchases are thought to be required the
(a) first step in the procedure of a competitive power procurement would be a demand forecast by
the Licensee whereby it would estimate demand for future years.  This would take into account
the growth rate of demand, distribution loss reduction plan and any other relevant information
available on additions to load in the Licensee’s system.
(b) Then the Licensee would be required to develop a plan to meet the demand growth in its area of
supply by examining all the available sources  of power e.g., own generation, purchase from
existing IPPs, import from neighbouring countries. These Demand Forecasts and Power
Procurement Plans of the Licensee will have to be approved by the EAC.
(c) Before entering into contractual obligations to buy power from the IPPs or any other sources, the
Licensee would be required to establish the need to purchase additional power and whether the
proposed arrangement is the best (least cost) option available among all the alternative sources
of power.  If the available sources are not economical or sufficient to meet demand, then one of
the options could be inviting competitive bids for establishing new generation capacities. The
competitive bidding process, if conducted in a transparent manner under EAC review, would be
expected to result in lower cost and more reliable and flexible power.  In this process, the EAC
would verify the terms and conditions of the draft and final PPA and its effects on the financial
condition of the utility and its customers both in the short term and in the long term.  If it finds
any of the terms unacceptable, the EAC can either require them to be modified or reject the
same. The Licensee shall obtain no objection on price and conditions of power purchase from
EAC before signing PPA with the other party.

5.10 Principle for determination of reasonable asset valuation
In accordance with the Sub-decree, the valuation of different types of assets and capital of Licensee
shall be determined according to the following basic principles:
1. The gross value of fixed assets utilised in the Licensee’s business shall be the cost of their
acquisition at the time of their acquisition, plus any subsequent expenditure on their
enhancement and less the proceeds of any subsequent partial sale or any decommissioning.
Expenditure by the Licensee shall only be regarded as expenditure on asset enhancement where
that expenditure results in one of the following:
(a) a significant extension of the life of the asset, beyond the life assumed in the depreciation rate
that is applied to the asset, in which case the appropriate adjustment should also be made to the
depreciation life of the asset; or
(b) a significant improvement in the capacity of the plant, beyond the recorded rated capacity of the
asset at the time that it was acquired.
2. In determining the total gross value of fixed assets the Authority shall exclude the amount of
contributions, grants or gifts for the purposes of determining tariffs except under special
circumstances.  In cases when the amount of contributions, grants or gifts is excluded from gross
value of fixed assets the Authority can based on public interest allow for creation of a fund to
replace the asset such created over its economic life.
3. Where the Licensee has an asset that was not acquired through competitive procurement and
which EAC believes has a value, assigned to the asset by the Licensee, significantly in excess of
its market value, EAC may require an adjustment to be made to the asset’s value.  Such an
adjustment shall have the effect of revising the asset’s value to a level that would apply if a
similar asset were acquired through a competitive procurement process.
4. Where requested to do so by a Licensee, EAC shall determine an appropriate value for the
working capital necessary for the operation of the business.  This shall reflect in all cases:
(a) the reasonable lags in payment that would arise in the Licensee’s business where it operated
according to normal prudent commercial practices;
(b) the normal stocks of fuel and other materials that it is reasonable for the Licensee to hold to
ensure an acceptable reliability and quality of service for its consumers;
(c) less guarantee deposit from consumers.
5. EAC will review licensee’s major investment schemes for approval and for this purpose may
require the licensees to provide technical and  commercial details. Major investment schemes
would include those which are significant in terms of financial or physical parameters with
respect to the size and area of licensee business.

5.11 Principle for lease charges
Lease charges for assets taken on lease by a licensee shall be considered as per lease agreement
provided they are considered reasonable by EAC.

5.12 Principle for determination of reasonable depreciation costs
1.  The depreciation cost of fixed assets shall be based on following principles:
(a)  the straight-line depreciation method must be used
(b) no allowance to be made for residual value of the assets and
(c) Except for cases referred to in paragraph e) of this Article, the depreciation life of any
fixed asset or class of fixed asset shall be based on reasonable estimates of the expected
economic life of the asset as shown in the table below.

Type of Asset

Depreciation Life (Years)

Land   Non-depreciable
Land Improvement 5 years
Buildings :
-Administration 33 years
-Generation 25 years
-Transmission & Distribution 25 years
Generating Equipments :
-Hydro-electric 30 years
-Diesel electric and gas plant 18 years
-Thermal 25 years
Transmission & Distribution Related :

Type of Asset

Depreciation Life (Years)

-Transformers & Sub-station equipments 25 years
-Lines on Steel Support, 115 kV and more 35 years
-Lines on Concrete Support,  115 kV and
below
30 years
-Lines on wood support, 115 kV and below 25 years
-Meters 15 years
-Other network equipments 25 years
Miscellaneous :
-Office equipments 5 years
-Furniture 10 years
-Motor Vehicles 6.5 years

(d) For assets purchased second hand and assets not otherwise provided for in the above
schedule, EAC may determine the depreciation life for each case having regard to the
nature, age and condition of the assets at the time of its acquisition by the licensee.

(e) Under circumstances provided in the Sub-decree, where a Licensee requests it and EAC
approves the request, different depreciation lives may be used.

5.13 Principle for determination of reasonable rate of return and costs of Loan
1. In determining what would be a reasonable rate of return in the circumstances of any Licensee,
EAC may consider all evidence relating to the Licensee or to business conditions in Cambodia
or elsewhere that it considers relevant.   Such evidence may include the rates of return earned by
other similar businesses or other businesses of the Licensee in Cambodia or elsewhere, and the
Licensee shall make available such information as EAC considers necessary.
2. The rate of return determined by EAC shall take into account the need for expansion and
improvement of licensee’s business so as to be able to meet all reasonable demands placed on it
by consumers and EAC and shall ensure reasonable balance between the interests of consumers
and licensee.
3. In determining the reasonable costs of loans, EAC shall take into account the costs of loans
offered by banks and other institutions, the costs of loans taken by other Licensees and other
businesses, including other businesses of the Licensee.  The Licensee shall make available such
information as EAC considers necessary.
4.  Where a Licensee has loans that amount to a significant proportion of its fixed assets, and the
repayment term of those loans is short in relation to the depreciation life of the fixed assets, the
Licensee may apply to EAC for a revision of the depreciation lives in accordance with Article
5.12  (e).  EAC shall only approve such a change to the depreciation lives where it is satisfied
that the Licensee would otherwise face cash flow difficulties that would threaten the financial
viability of the business. However EAC shall ensure that this will not result in a tariff shock for
consumers.

5.14 Principle for determination of energy sales and revenue

1.  The Larger licensees shall forecast the number of consumers and energy sales, for the period
under consideration. EAC will examine these forecasts by the licensees for reasonableness, past
trends, etc., before accepting and adopting them.
2.  All licensees, when so requested by EAC, shall provide its consumer database having desired
particulars like name, energy consumption, revenue billed etc. to facilitate accurate
determination of energy sales and revenue.
5.15 Principle for Energy Loss
1.  Licensee shall carry out proper loss estimation studies as required by EAC to set a realistic loss
estimate. EAC shall approve a loss target based on the opening loss levels, licensee’s filings,
submissions and objections raised by stakeholders.
2.  Losses should be brought down gradually to acceptable norms of efficiency. The licensees must
provide plans for reducing the losses, together with the details of the investment required to
achieve the planned reductions.

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Local Ministries

ministry-of-information Ministry of Information
ministry-of-public Ministry of Public Works and Transport
ministry-of-education Ministry of Education, Youth and Sport
ministry-of-tourism Ministry of Tourism
ministry-of-agriculture Ministry of Agriculture, Forestry and Fisheries
ministry-of-mines-energy Ministry of Mines and Energy
ministry-of-commerce Ministry of Commerce
General Department of Taxation General Department of Taxation
General Department of Customs and Excise General Department of Customs and Excise
Ministry of industry and handicraft Ministry of industry and handicraft
Ministry of Economy and Finance Ministry of Economy and Finance
Ministry of Foreign Affairs and International Cooperation Ministry of Foreign Affairs and International Cooperation
ODA-Cambodia

Supporter

Mizuho Bank, Ltd. Mizuho Bank, Ltd.
Net Frontier Cambodia Co.,Ltd. Net Frontier Cambodia Co.,Ltd
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