PHILLIMON MHLANGA
Government and the country’s power utility, ZESA Holdings have resumed discussions to review the tariff after a former minister had shut the door on the energy company, Business Times has established.
ZESA has been operating a non-cost reflective tariff for the past eight years.
Energy and power Development Minister, Fortune Chasi, disclosed the latest development at the post Cabinet meeting media briefing on Tuesday. He said the sub-optimal tariff of ZWL$0,986 per kilowatt hour (kWh) “will kill ZESA” because it’s uneconomic. Former Energy and Power Development minister, Joram Gumbo had blocked the power utility’s proposal to increase tariffs.
“We are engaged in fresh tariff discussions because for ZESA to continue operating on sub-optimal tariff, we will destroy it ZESA) and ourselves,” Chasi said adding that: “We need ZESA to generate enough not only to deal with the deficit but also to be able to sell.”
The last time the power utility was granted a power tariff increase was 2011 and the current non-cost reflective has resulted in ZESA accumulating a loss of more than ZWL$500 million. It has relied heavily on borrowings, which have now ballooned to over ZWL$1 billion.
ZESA maintained the 2011 tariff despite the fact that the Confederation of Zimbabwe Industries successfully challenged the ZWL$0, 0986 per kWh tariff at the Administrative Court. ZESA appealed to the Supreme Court, saying the junior Court judgment would open the floodgates of lawsuits from customers who had paid bills based on the old tariff. A court ruling on ZESA appeal has not yet been made.
This non-cost reflective tariff has been driving away potential investors.
Apart from that the power utility has not been able to pay for the Zimbabwe Power Company (ZPC) for power generated and other creditors. Some suppliers are now charging exorbitant prices to factor in delay in payment. The company has also not been able to replace obsolete or damaged infrastructure due to non-reflective tariff.
ZESA’s subsidiary the Zimbabwe Electricity Transmission and Distribution Company (ZETDC) has also been struggling to collect about ZWL$1,2 billion owed it by defaulters. The biggest culprits are local authorities and domestic consumers who respectively owe ZWL$344m or 32% and ZWL$263m or 24 percent of the total debt.
Farmers come third, owing the ZETDC ZWL$124m or 12%, industry come fourth owing ZWL$97m or 9%, mining follows with ZWL$81m or 8% of debt, parastatals owe ZWL$45m or 4% of the debt, and other government departments owe ZWL$21m or 2% of the total debt.
This means the power utility is grappling with negative working capital, and is losing a huge amount of electricity during transmission.
It is also battling high maintenance costs and low reliability of supply due to its aged infrastructure. Currently the ZETDC has a critical shortage of transformers, resulting in the company losing about ZWL$9m a year in potential revenue.
In recent years, ZESA has been pushing for a tariff increase but the government has been turning down its proposals.
