Southern Africa: SADC to Pay More for Energy

Southern Africa: SADC to Pay More for Energy

Southern African electricity users will pay more under plans by regional energy regulators to let their utilities charge tariffs that reflect costs and create funds to increase power generation.

There have been concerns that as governments tried to cushion their citizens, power utilities have been left to contend with tariffs that are too low for refurbishing existing infrastructure and building new power stations.

Zimbabwe Energy Regulatory Authority (ZERA) acting chief executive Mr Eddington Mazambani told The Herald on the sidelines of the ongoing Regional Energy Regulators Association of Southern Africa (RERA) annual conference and general meeting here, that cost-reflective tariffs were prudent.

“From a regional perspective, we agreed that we all need to move towards cost reflective tariffs,” said Mr Mazambani.

“You recall that last year, there were two adjustments in Zimbabwe, one in August and another in October, that is what we were trying to achieve. We expect that we are going to do that.”

Last month, South Africa’s power utility, Eskom, approached the Gauteng High Court seeking to be allowed to increase tariffs by about 53 percent over the next three years, according to calculations by the National Electricity Regulator of South Africa.

Eskom intends to raise the tariff by 16,6 percent from April this year and another 16,72 percent from April next year to prevent a “financial disaster” due its liquidity problems and the dangers associated with failure to provide adequate electricity in a developing economy.

The South African regulator had granted Eskom a 9,41 percent tariff increase this year, 8,1 percent for next year and 5,22 percent in 2022.

Zimbabwe will not have another tariff adjustment in the short-term as the Zimbabwe Electricity Transmission and Distribution Company (ZETDC), a unit of ZESA Holdings, has not yet applied to Zera for another increase.

“On the issue of tariffs, we have a methodology in Zimbabwe which we call revenue requirement. So the utility, in this case the ZETDC, if they feel that the tariff they have now is no longer adequate, they will have to come to the regulator and give us a break down of their costs.

“We interrogate them to see whether these costs are being fairly incurred, whether these costs are justified, and from that we can determine if there is need to adjust the tariff or not.

“The utility knows it has to apply showing the revenue requirements they need for the year and at the moment, we have not received a tariff application from the utility,” said Mr Mazambani.

Some participants called for varying regional tariffs using cross subsidies that cushion the low income earners, but charge those who use above average energy more, a policy that Zimbabwe already follows with everyone getting their first 150 units a month at two subsidised rates, but then paying the full tariff if they use more.

However, some delegates said the rich tend to take advantage of their financial muscle to migrate to alternatives such as gas and solar, leaving the poor to contend with the high tariffs alone.

But Mr Mazambani said Zimbabwe’s tariff caters for all income groups.

“You also spoke on the issue of affordability. Our tariff structure encourages less consumption of power. It actually caters for the low income earners.

“We expect those people (low income earners) not to have a huge demand for power.

“That is why the tariff is structured in such a way that the first 50 units are at 41c and the second 100 units are at 91c.

“Thereafter you get the full tariff applying to you (of $3,87 per unit) and we expect that people who consume power in excess of 200kWh in a month are well-off people and they can afford it.”

Source: The Herald

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