The Citizen (Dar es Salaam)
19 August 2008
Electricity tariffs in the country may increase again if the Energy, Water and Utility Regulatory Authority (EWURA) approves the proposed increment in natural gas distribution tariffs.
The Pan African Energy Co. and the Tanzania Petroleum Development Corporation applied for a multi-year tariff adjustment mechanism for the period from 2008 to 2025, proposing unbundled downstream gas tariffs for the power sector and industrial customers for the period from early next month to end of next year.
Such a move is rejected as disastrous to industries as it is likely to lead to unmitigated increases in the cost of power for production.
Presenting views of the industrial sector at a public hearing yesterday, Charles Mdondola of the Confederation of Tanzania Industries (CTI) thought the move would have a direct impact on industries.
He said if the tariff is increased for the Tanzania Electric Supply Co. (TANESCO), the main consumers of gas, the power company will raise charges for customers to cover the hiked costs. Power generation tariffs, according to TPDC would rise from $ 0.082652 per Mmbtu (million British thermal unit) to $ 0.139 per Mmbtu, representing a 68.17 per cent rise.
"The application for such a great increment should be investigated by the relevant authority as it may cause Tanesco tariffs to increase, with a negative impact on industries," he said.
Gas developers (TPDC & Pan African Energy) proposed that different downstream tariffs be applied to their two customers; Tanesco and industrial users.
Mdondola said the total tariff is more than ten times the earmarked pricing type charged if the cost of unregulated component is included. Unregulated component is the one bearing international oil price from an accepted formula, he said.
Both the Ministry of Energy and Minerals as well as the Ewura Consumer Consultative Council opposed the move to increase the tariff saying it would have a negative impact on consumers.
Geoffrey Msella, chairperson of the government consultative council said PAT and TPDC aimed at bringing prevailing tariff determination arrangements to consistency with the best international practice.
They also aim at increasing transparency in the gas value chain, to reduce regulatory uncertainty amongst the stakeholders and facilitate fast track infrastructure expansion, he emphasised.
GCC wanted the applicants to provide evidence for their claim that well overhead prices are deregulated and burner-tip prices were liberalized as they claimed in the application.
Mr Sharad Salgar, chairperson for the Ewura Consumers Consultative Council said the council believes that the motive behind the application for tariff methodology is maximization of profit.
"The council is opposed to unwarranted maximization of profit at the expense of consumers," he asserted, wondering why the price charged to local gas consumers is so high. He said this is baffling because the gas is obtained in the country.
Summing up the public hearing, Muna Mahanya, the acting director general for Ewura said a decision on the application would be made by the regulatory authority's board of directors next month.
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