This Directive for electricity tariff setting methodology and guideline is prepared in accordance with the energy law and the energy regulations of Ethiopia with a view to providing clear and detail directions in the preparation of tariff Application to be submitted to Ethiopian Energy Authority. Tariff application can be submitted every four years interval supported by a comprehensive tariff study. Tariff application submission is also expected under the regulation in the preparation of interim tariff adjustment resulting from the conditions indicated in this Directive. All adjustments including the one after the elapse of the regulatory lag require preapproval applications and regular rate adjustment computations as per the energy regulation and as more elaborated in this Directive.

This Directive is designed to give sufficient freedom to the Utilities to introduce more innovative elements such as in the rebalancing of rates which they may file other alternative structures than what is indicated in this Directive.

In other cases while there are a number of proven approaches and methodologies to address specific tariff determination such as transmission wheeling charge, the level of development of the sector has been taken in to account in adopting approaches and methodologies subject to the fact that this could be revised and upgraded as the need may arise. Still under circumstances where national economic situation and the domestic debt and equity market may not provide sufficient statistical insight regarding the cost of capital, proxy data and benchmarking from regional or international experiences, as may be adjusted to local circumstances are indicated to be used alternatively to such benchmarking also suggested in the body of this Directive.