Zesco seeks to hike tariffs

 

Lusaka – Zambia’s power utility, Zambia Electricity Supply Corporation (Zesco), is seeking customer approval to more than double electricity tariffs. Sustainable tariffs will only be driven by mining companies, if they agree to pay the average 9 to 14 US cents per kilowatt hour that Zesco seeks, because they are the key drivers of tariff migration that would stimulate the envisaged new generation capacity.

Zambia plans to double energy generation by 1 500 megawatts from an average 1 400 generated daily to effectively sustain the economy, including the mining sector that consumes 50 percent of the power generated daily.

At the moment, Zambia Electricity Supply Corporation (Zesco) applies tariffs averaging between 5-6 US cents a kilowatt hour, which is not enough to meet the needs of the country and support old and new mining projects in Zambia.

These tariffs fall far short of the standard 15 US cents kilowatt hour needed for each country to reserve under the Southern African Power Pool (SAPP) regulations, says Zesco’s Director of Transmission, Christopher Mubemba.

Previously, transmission costs averaged 2.5 to 3.5 US cents/per kiloWatt hour until recently when it was reviewed to meet the SAPP standards but still falls below the needed average for Zambia to meet the desires of the mining companies.

Mubemba has urged mining companies to support the ERB over the desired tariffs to drive the industry and attract more multinational companies in the country as envisioned by players.

According to Zambia’s power utility, winning customer support requires more transparent tariff setting process supported by Cost of Service Study (CoSS) under the supervision of the country’s regulator, the Energy Regulation Board (ERB).

“CoSS is a critical step in determining appropriate tariff migration path,” he said during a recent Zambia International Mining and Energy Conference. More robust and equitable mechanism for passing tariff is required,” he said. 

Zambia has in recent years attracted various multinational companies that have acquired old mines in the country and are expanding to meet their production of various base metals chiefly copper.

The inadequate tariffs applied in Zambia have in turn affected most projects in terms of implementation as the country has continued to suffer power outages.

Mining companies are seeking to ramp up production at their various projects, as the country strives to attain the projected 1.5 million tonnes of copper production in the next two years and migrate to fourth global copper producer from the current seventh.

“Most projects have suffered delays….Projects need support to ensure they happen in time”

In a presentation to the last mining and energy conference under the title: “ZESCO Tackling the Challenges of Demand Versus Supply” Mubemba said the power utility planned to invest about US$5m over the next five years in generation, distribution and transmission.

Zesco’s equipment has remained under-capitalised for over 37 years and there is need to inject more resources in the ageing infrastructure to meet the present and anticipated increased demand for energy in the country and meet export obligations to neighbouring countries under the SAPP.

March 2014
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