ZESA seeks 52% power tariff increase

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CHENGETAI ZVAUYA

The country’s integrated power generation and distribution company, ZESA, through its subsidiary, the Zimbabwe Electricity Transmission and Distribution Company (ZETDC), is seeking a 52% power tariff increase to $0,15 per kilowatt hour (kWh) from the current $0,0986 per kWh, to help in the maintenance of the electricity infrastructure and the importation of electricity to cover for low local generation.

ZESA, owned wholly by the government, has been pressing for the past seven years for a tariff increase, but its pleas have found no takers at the highest level. In comparison, South Africa has a five-year rolling tariff programme whereby the tariff is increased gradually at a certain percentage in order for the country to reach a cost reflective tariff.

In other words, South Africa increases the electricity tariff every year. Last year, it increased its tariff by 25%.

ZESA, on the other hand, has been struggling to collect more than $1 billion owed by defaulters. The company is also losing a huge amount of electricity during transmission, an indication that it is not efficient in the discharge of its mandate. It has therefore been difficult for the parastatal to service its debts and invest in new capital projects, thus leading to frequent breakdowns of its ageing plants.

ZESA spokesperson, Fullard Gwasira, confirmed the development this week, saying discussions with the regulator, the Zimbabwe Energy Regulatory Authority (ZERA), were underway. He, however, declined to reveal the size of the anticipated tariff increase.

“We applied for a tariff review in December 2018 and we are still waiting for feedback from ZERA,” Gwasira told Business Times, adding: “It’s an ongoing process and we can’t pre-empt the figures until we finalise the discussions with ZERA.”

But the Minister of Energy and Power Development, Joram Gumbo, confirmed this week that ZESA was seeking a 52% tariff hike. The minister said the cabinet would discuss the matter soon after ZERA made its submissions. ZERA normally requires 45 days to evaluate an application for a tariff review.

“The last tariff increase was in 2011 and we are still using the old tariff of $0,0986 per kWh,” Gumbo said. “There are discussions with ZERA over a tariff hike in the range between $0,14 per kWh and $0,15 per kWh. The proposal is not yet on my desk,” Gumbo disclosed.

The country’s current electricity and telephone tariffs, unlike other goods and services, are not priced at the prevailing market rates. However when using the official rate of 1:1, Zimbabwe’s electricity tariff is among the highest in the region.

In 2011, the Confederation of Zimbabwe Industries (CZI) successfully challenged ZESA’s proposed tariff increase in the Administrative Court. ZESA refused to budge and maintained the tariff at the contested level.

That increase had been approved by ZERA, which claimed that the judgement reversing the then agreed tariff had the potential to plunge the country into darkness, if implemented.

ZESA maintained the tariff regime after appealing to the Supreme Court, saying the junior court judgement would open the floodgates of lawsuits from consumers who had paid bills based on the new tariff.

The power utility argued that it would become bankrupt, considering the costs of power generation, power imports and power leakages. A ruling on the appeal has not yet been made. Analysts, however, warned that a tariff review by ZESA would be illegal in the absence of a decision on the current tariff level by the Supreme Court. The analysts insist that ZESA should wait for a court resolution of the dispute before seeking a tariff review.

A tariff review is likely to trigger panic in critical sectors of the economy, with growing fears that it would worsen the operating environment by increasing the cost of production.

CZI president, Sifelani Jabangwe said: “We will evaluate the proposed tariff increase and compare with other countries in the region. It must not go beyond the inflation rate of about 40% at the end of December, because a surge in the power tariffs will increase the cost of production, resulting in the price hike of other goods,” he added.

For some time now, Zimbabwe has been struggling to generate sufficient power and has therefore been relying on imports, particularly from South Africa and Mozambique, to meet its consumption needs. Before the commissioning of the Kariba South Hydroelectric Power Station in March last year, which has expanded the country’s generation output by 300 megawatts (MW), Zimbabwe was importing about 300MW from South Africa’s power utility Eskom on non-firm basis, meaning Eskom would only supply Zimbabwe when it had a surplus.

Zimbabwe was also importing about 50MW on non-firm basis from Mozambique’s Hydro Cahora Bassa. But since Kariba South came on stream, Zimbabwe has reduced its import bill by about $72m.

Because of forex shortages, Zimbabwe has been struggling to pay its electricity import bills. Early last year, Eskom threatened to switch off Zimbabwe over a US$43m arrears. Hydro Cahora Bassa also issued a similar threat.

Gwasira said there had not been load-shedding in the past three years, but attributed the blackouts in industrial and residential areas to difficulties encountered by the old network distribution system.

“We are not experiencing any load shedding at all as we last carried out a load-shedding programme in 2016,” Gwasira said. “The current blackouts are because of the old network distribution system whose lifespan has expired as it was meant to last 20-25 years but it is now up to 40-45 years. It must be replaced, but we have no money to replace it,” he said, adding: “Most of our electricity cables are underground and are therefore affected by water in the rainy season. The cost of repairing and maintaining the system has gone up.”

Gloria Magombo, the permanent secretary of the Ministry of Energy and Power Development, concurred with Gwasira, saying violent thunderstorms during the rainy season are worsening power outages. The parastatal has also been complaining about theft and vandalism of its distribution cables, which lead to loss of power during transmission.

At the moment, the country is working on several power projects. A Chinese contractor, Sino Hydro Corporation, is working on an expansion of the Hwange Thermal Power Station, the country’s largest coal-fired plant, which will add 600MW to the national grid. Work on the Batoka Gorge project is also ongoing