30 January 2014

Zimbabwe: Zesa Tariffs to Go Up

ZIMBABWEANS should brace for a hike in power tariffs from next month following revelations that the national power utility was charging way below the cost of production. Operational inefficiencies at Zesa Holdings have also compounded the situation, with the utility failing to curb power theft by electricity users despite introducing pre-paid meters.

ZERA chief executive Engineer Gloria Magombo last week said a cost supply study conducted by an independent consultancy last year found that the national power utility was incurring losses since it charged the approved 9,86c/KWh when it cost about 14 cents to produce the same.

The current tariffs were gazetted before the cost of supply study.

"One of the key issues which came up is that obviously the average cost of supply was coming up to about 14 cents, which is way above the average 9,86 cents (per KWh) which we had given as a tariff," she said.

"But having said that, we looked at the processes right from production and realised that there are a lot of inefficiencies within the processes. If you look at the power station, the way that they are converting their coal to energy, there is a lot of losses which are being incurred at that level.

"We have identified some of the key performance indicators which we are going to link to this year's tariff which they are supposed to work towards improving.

"We found that losses at distribution level, which are non-technical losses, are very high which means there is a lot of theft of energy and that energy if it's not being sold as units then it becomes part of the costs. If they curb and work on some of those thefts of energy then they will reduce the cost of production."

Eng Magombo said it was important for the power utility to curb power theft to improve efficiency, a development that would see costs coming down to about 10c/KWh.

She said if the utility failed to reduce the costs, the regulator would still be guided by efficient costs when it comes up with new tariffs.

"Obviously we will look at other economic conditions in the country and see how best we can achieve that. It's not something that we will jump to. It will be a slow progression towards that cost reflectivity while allowing the utility to improve on their efficiencies.

"We are going through the tariff review and will be announcing by the end of February what is the expected tariff after we have gone through a proper review where we are going to consult all stakeholders including Government in terms of what are the costs, what their expectations are. Our role as a regulator is to balance the various interests of the different stakeholders," she said.

Eng Magombo said it was unacceptable for the power utility to continue losing electricity to poachers when it had mechanisms to trace the culprits.

Zesa, through its subsidiary, the Zimbabwe Electricity Transmission and Distribution Company, last year has applied to the Zimbabwe Energy Regulatory Authority for a review of the electricity tariff to 11,48c/KWh from the current 9,86c/KWh.

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