24 March 2014

Mozambique: Mozambican Electricity Tariffs "Unsustainable"

Maputo — The chairperson of Mozambique's publicly owned electricity company EDM, Augusto de Sousa Fernando, has warned that the current EDM tariffs are unsustainable and must be increased.

Interviewed in Monday's issue of the Maputo daily “Noticias”, Fernando pointed out that the costs of purchasing energy have risen sharply, because EDM is now buying not only relatively cheap hydro-electric power from the Cahora Bassa dam on the Zambezi, but also much more expensive power from gas-fired stations.

Mozambique's power consumption is growing by 70 megawatts a year, said Fernando, which has obliged EDM to look for sources of electricity other than Cahora Bassa. He said that EDM pays about 50 million dollars a year for 500 megawatts from Cahora Bassa - which is the same sum it would pay for 150 megawatts from the gas-fired station at Ressano Garcia, on the border with South Africa, operated by the company Aggreko.

Importing power from the South African electricity company Eskom is an even more expensive option. “Last year we purchased only four per cent of the energy needed for domestic consumption from South Africa - but it represented over 40 per cent of total expenditure”, said Fernando. “It's very expensive but we have no alternative”.

The total amount paid by EDM for electricity in 2011 was 63 million US dollars rising to 84 million in 2013. This year, because of purchases from the Aggreko power station, it will rise to 133 million dollars.

The projection for 2017 is 470 million dollars.

EDM's peak demand is 761 megawatts. Cahora Bassa supplies only 500 megawatts - so, even with EDM's own power stations at Chicamba and Mavuzi in Manica province (which are currently undergoing rehabilitation), there is no escape from buying power from Aggreko and Eskom.

The difference in prices is staggering. EDM pays 1,080 meticais (35.8 US dollars) per megawatt-hour from Cahora Bassa. Power from Aggreko costs more than four times that amount, at 4,500 meticais per megawatt-hour. And Eskom sells its power to EDM for 7,500 meticais per megawatt-hour.

But EDM's average sales price to its clients is only 2,400 meticais per megawatt-hour. “This is what's killing us”, said Fernando.

The planned coal-fired power station at Moatize will be cheaper than Aggreko or Eskom, but much more expensive than Cahora Bassa.

Fernando put the Moatize price at 3,000 meticais per megawatt-hour. EDM will buy 55 megawatts from the first phase of the Moatize station, but that will not be ready until 2017.

The increased expenditure is now calling into question EDM's ability to pay HCB, the operator of the Cahora Bassa dam, on time. Until recently EDM paid HCB regularly, nut “now we are paying with difficulties”, Fernando admitted.

EDM's financial difficulties were now making repairs difficult. “Sometimes underground cables burn out, and the company does not have the immediate financial capacity to import new ones, and we have to use alternative solutions to ensure that electricity continues to reach the clients”, he said. “If the company continues to have no money, in the future we won't even have the capacity to buy overhead cables”.

The solution lay in raising the price of electricity, and encouraging savings. On average, he said, EDM was paying nine meticais per kilowatt hour, and selling electricity for eight meticais per kilowatt hour. The ideal would be an average price of 10 to 12 meticais per kilowatt hour.

Prices would be differentiated, he said, with industrial consumers subsidising domestic consumers. A tariff adjustment should “look after the most vulnerable strata by making the major consumers pay more”.

Furthermore electricity should cost more at peak hours, after 19.00.

Fernando said EDM is encouraging consumers to switch from incandescent to low energy light bulbs. “We have bought about 50,000 low energy light bulbs, for consumers to use and understand the advantages”, he stressed.

Fernando wanted the government to ban the import and sale of incandescent bulbs. If each of EDM's clients were to replace two incandescent bulbs with low energy bulbs “we would save 50 megawatts and almost 15 million dollars a year”, he said.

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