Electricity hikes to hit hard southern Africa

Timo Shihepo

Windhoek – Electricity consumers in the region have to brace themselves for massive electricity tariffs increases as the power utilities in southern Africa gear up for the 2019 cost reflectivity tariffs deadline.

A cost reflective tariff is one which reflects the true cost of supplying electricity and removes the reliance on state government subsidies to cover the variance between the current tariff and the true cost of supply of electricity.

At the moment, many power utilities are still relying on government subsidies to stay afloat but a collective decision made by SADC council of ministers responsible for energy is that these utilities should be able to sustain themselves by 2019.

These utilities have already missed the 2013 deadline and were subsequently pushed to 2019. And with just over a year and half to the deadline, the power utilities are already putting pressure on energy regulatory bodies in their respective countries to approve electricity tariffs hike.

Zambia’s Energy Regulation Board (ERB) has approved 75 percent of electricity for bulk customers, effective from January 1, 2017, the board’s acting chairperson Francis Yamba announced on Wednesday.

The increase will be effected in phases with 50 percent taking effect on May 15, and the remaining 25 percent on September 1, 2017. National power utility, ZESCO, had applied to the ERB for a 75 percent increment as it seeks to urgently implement cost reflective power tariffs.

Bulk electricity buyers, including mines and other industry operators, had been paying for power at an average US$0.9 cents a kilowatt hour as of January this year from about US$0.4 cents a kilowatt hour.

Zesco feels that this would help the company meet the 2019 cost reflective tariffs deadline and would significantly cut government electricity subsidies, enabling the Treasury to channel resources to other needy sectors.

Citizens in South Africa will be fortunate to only have the electricity increase by 2.2 percent this year but that will significantly change as Eskom has proposed a 20 percent increase next year. The 2016/2017 electricity tariffs in South Africa stands at R82,53c per kWh and will jump to a massive 89,13c per kWh should the 20 percent increase come into effective. It is projected to generate R216 billion from the customers.

In Namibia, the Electricity Control Board (ECB) has already rejected a bulk tariff increase of 31.24 percent for the 2016/17 financial year instead slashing that to 16.71 percent. It would have represented an increase from R1.28 to R1.68 per kWh. The 16.71 percent represents an increase from R1.28 to R1.49 per kWh.

The ECB said although it wants to see NamPower meeting the 2019 deadline, it rejected the 31.24 percent increase because the utility was given R50 million by the energy ministry to relieve consumers from high tariff increases.

The Namibian electricity consumers are, however, in for another increase this year as the ECB has approved an 8% tariff increase for NamPower, effective July 1. Starting July the domestic consumers will be paying R1.61 kWh, an increase from R1.49 per kWh.

NamPower managing director, Simson Haulofu told The Southern Times that the company is hard at work to achieve cost reflectivity. He said achieving cost reflectivity might look like it is reaping off consumers in Namibia as compared to other consumers in the region. This is because Namibia imports about 70% of its electricity from the neighbouring countries and the power utility always adds the costs onto the consumer’s price.

Haulofu said Namibia is also unfortunate because the country does not have coal. For the country’s Van Eck power station, NamPower has to buy coal from South Africa, Mozambique or Botswana.

“Other countries are so lucky they have coal and this contributes to cheaper electricity prices. The price of a tonne of coal at the mine is less than the transport of that tonne to Van Eck power station. These things make it a bit difficult,” said Haulofu adding, “Maybe the time will come when the prices may look terribly higher but today I think they are sustainable for the economy.”

In Botswana, the power utility, Botswana Power Corporation (BPC), has increased its tariffs across all sectors starting last month.

The tariff for domestic customers consuming up to 200kWh (units of electricity) was adjusted upward by 7.5 percent.

This will see a 10 percent electricity tariff increase for domestic category customers consuming more than 200 kWh per month, a 10 percent electricity tariff increase for small scale business category customers consuming 500 kWh or less per month and a 12 percent electricity tariff increase for small scale business category customers consuming more than 500 kWh per month.

“This is necessary to assist Botswana Power Corporation to sustain its operations to meet growth in electricity demand, government has approved a combination of an adjustment to existing tariffs, and a subsidy cash injection to BPC. The latter has been done in order to reduce the burden of high tariff adjustments on both domestic and business electricity consumers,” BPC said in a statement.

In Zimbabwe, the power utility, Zimbabwe Electricity Transmission and Distribution Company’s (ZETDC) proposal to hike the tariffs last year was blocked by the Zimbabwe Energy Regulatory Authority (Zera). However,  the country’s Minister of Energy and Power Development, Dr Samuel Undenge told the Senate in February this year that Zera’s decision to refuse an electricity tariff increase ought to be revisited.

Undenge said the government wanted to balance the revenue from Zesa and ensure that there was a constant supply of electricity, adding that there was a point that “it is better to have expensive power than not to have it at all”.

In Zimbabwe, the current power tariff stands at 9.86 US cents (USc) per kilowatt hour.  The ZETDC has proposed that the tariff be increased to USc14.6 per kilowatt hour.  The SADC regional average is USc14 per kilowatt hour.

May 2017
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