Zimbabwe: Zera Boss Unveils Game Plan

16 October 2020

THE Government has appointed Mr Eddington Mazambani as the substantive CEO for the Zimbabwe Energy Regulatory Authority (ZERA). Mr Mazambani has been the acting chief executive since the departure of Dr Gloria Magombo to take up a new post as Permanent Secretary in the Ministry of Energy and Power Development just after the 2018 harmonised elections. The Herald Deputy News Editor, AFRICA MOYO (AM), engaged Mr Mazambani (EM), to hear his plans for the organisation. The following are the excerpts of the discussion . . .

AM: Let me start by congratulating you on your appointment as substantive CEO for ZERA.

EM: Thank you very much. It is a great honour to serve the country and I pledge to give my best for the benefit of the nation.

AM: You have been in this position for some time now. Tell us some of your immediate plans to reposition the organisation.

EM: Generally, the energy sector is guided by national development policies and it has rightfully been cited as a key enabler of economic and infrastructure development in the TSP. As such, the immediate plan is to take advantage of the National Renewable Energy Policy launched by His Excellency, President ED Mnangagwa in March this year. There are plenty of renewable energy initiatives that we will roll out soon in fulfilment of the key areas outlined in the policy.

As you might be aware, the country is endowed with significant renewable energy resources, especially for electricity generation, and these should be sustainably harnessed for the benefit of the nation. The RE programmes will benefit the heavy consumers; independent power producers; domestic consumers and the region. The use of RE has been adopted, albeit at a low level, in the transport or mobility sector which was traditionally associated with dirty fossil fuels; ZERA purchased an electric powered vehicle which will serve as a demonstration unit.

Our vision is to have the electric charging stations powered by RE sources such as solar. The second issue is operationalisation of the Biofuels Policy of Zimbabwe, again launched by His Excellency in March of this year. There are notable economic, social and environmental benefits that the nation will gain from fully embracing biofuel as a key component of our fuel supply chain. This is urgent given the fuel import bill.

Third, one of the low hanging fruits is energy efficiency at all levels. We will adopt all forms of engagement and awareness which include persuasion to legal enforcement for consumers to embrace efficient use of energy. There is evidently a lot of energy which is going to waste, and we wish to promote productive use of energy. On our part we facilitated the training of over 110 energy managers and energy auditors. We will be making follow ups to check how they perform at their different stations. Fourth, there is vast potential in the net metering space and it is bound to be the game changer in terms of the power supply matrix in future, and the process has to start now. This is where consumers will install mainly rooftop solar which is grid tied and bank their excess energy to the grid to be utilised later when they are producing less than they are consuming thus becoming "pronsumers".

Fifth, the country wants to introduce competitive bidding processes in the electricity sub-sector to ensure we engage and retain investors with the least cost technology who will hit the ground running and set up plants within the shortest possible period. Lastly, energy regulation is a knowledge-oriented arena which has to keep pace with local, regional and global dynamics and trends. As such, we need to attract and retain personnel with the right qualifications, experience while women are encouraged to view ZERA as an employer of choice, especially in the technical field.

AM: Your confirmation as CEO has come at a critical juncture as the fuel sector has all but dollarised. What plan do you have to cushion those that don't earn forex?

EM: Government allowed the use of the local currency and foreign currency as a way of allowing companies that have own foreign currency to import fuel. However, ZWL fuel is still available at some sites. This trend is not unique to the fuel sector, but throughout the economy. With the convergence of the exchange rate currency preference will be a thing of the past. The obtaining environment has created competition among the several suppliers of fuel and consumers should select those sites offering the best prices. Ultimately, this will push prices further down and, in the process, benefiting consumers.

AM: ZERA has largely been labelled a toothless bulldog that can't reign in errant players. Tell us if the criticism is fair and how you intend to change the perception of ZERA?

EM: The criticism is not fair and certainly ill-informed. ZERA has brought order in the energy sector if one is to look at the sector from a before and after perspective. Our role is to create and sustain confidence in the investor, consumer, supplier and policy maker. This, ZERA has done diligently through guidelines and frameworks that guide investment and operations of the electricity and petroleum sector. Standards are key in any sector and as an example we invested a mobile fuel lab worth over US$400 000 to ensure fuel at the tail end meets acceptable quality irrespective of location.

Through effective regulations, we compelled electricity and fuel licensees to adhere to public safety regulations, consumer service level commitments, transparency with public information, fair tariff and fuel prices. The regulatory impact is felt at the interface between an energy licensee and a consumer and based on the feedback we are having, there is a great improvement in both the petroleum and electricity sub-sectors.

We are aware that we do have potential investors in our country and our role is to highlight energy opportunities that one can invest in. So overall, ZERA has made an indelible mark at consumer, supplier and policy level. The issue of fines applicable and allowed by our laws are not deterrent enough but those are being addressed through amendment of the enabling laws and also engagement with other law enforcement arms of the state.

AM: There is a topical issue of fuel players that sell coupons or cards in advance but they are now refusing to pay the face value of the coupons. Have these customers lost out or something is being worked out?

EM: Pre-funded fuel is a standard practice in most businesses. It's meant to provide assurance to the supplier on return hence advance financing of products and services. However, under whatever circumstances, a customer who purchases fuel in advance must be assured of the same volumes regardless of the new prices. ZERA is currently developing regulations on fuel coupons which will provide guidance to industry and consumers.

AM: The power tariff has moved towards cost reflectivity, but consumers are concerned about the tariff. What's your comment on that?

EM: The electricity tariff like any other commodity or service must be sold at a price that recovers the cost as a minimum. That way, the producer is able to continue to offer the service and improve on the service. If that does not happen, there will be continuous decline in both quantity and quality of service. The objective of the current adjustments is to ensure that the price of electricity (tariff) is at least equal to the cost of supplying the service. The current reviews are a result of an approval granted in October 2019 whereby the utility has to adjust the electricity tariff based on the movements in exchange rate and inflation. At the current tariff of US$0,05c/kWh and US$0,03c/kWh, the tariffs are far below the level of US$0,10c/kWh and US$0,05c/kWh in October 2019.

AM: There are concerns over Zimbabwe's energy mix that it is responsible for the high-power tariff. As ZERA what measures are you putting in place to create an environment where investors are keen to take up opportunities in the local energy sector?

EM: The energy mix is about 70 percent hydro and 29 percent coal fired thermal system. So, the assertion that the current mix is responsible for the high-power tariff is not correct. However, the National Renewable Energy Policy launched in March 2020 aims to promote investment in the renewable energy sector by providing specific incentives. It recommends providing National Project Status to all the renewable energy projects.

It encourages that renewable energy projects on case-to-case be accorded Prescribed Asset Status so as to unlock Insurance and Pension funding. It also recommends specific incentives for promoting third party sale of power. Favourable tax incentives and rebates are also recommended in addition to the existing Statutory Instruments. Depending on the renewable energy technology of the plant and capacity, the procurement mechanism shall be tailored to ensure higher investment in the sector, effective implementation of the project in the scheduled time period and appropriate returns to the investor thereby meeting the development needs of the country.

Different procurement mechanisms, such as Feed-in Tariffs (FiT) for small renewable energy projects (solar, hydro-power, biomass, and geothermal) are recommended. Competitive Bidding for large projects solar photovoltaics (PV) and concentrating solar power (CSP) are proposed in the Policy. For wind, next five years procurement shall be through FiT and thereafter it may be through competitive bidding based on the analysis during the mid-term review. An appropriate procurement model will require a standard Power Purchase Agreement (PPA), approved by the regulator for FiT and Competitive Bidding projects. The Policy also aims to address the development risks associated with the promotion of the uptake of renewable energy in the country. It outlines and suggests well-defined approval timelines for the administrative processes.

The policy recommends setting up of a nodal agency to facilitate the entire process of obtaining approvals from different ministries and other Government agencies, and aims to make certain complex and time consuming processes such as land acquisition, simpler and time bound. The role of the nodal agency will be to facilitate the entire process of obtaining approvals from different authorities and departments, and also to monitor the progress of development of renewable energy projects. The implementation programme for the policy is being developed by ZERA and Ministry of Energy and Power Development.

AM: Some companies have gone for over a decade without implementing their power projects citing funding and tariff challenges. What instruments are in place to revoke their licenses if they continue to struggle to take off?

EM: The cancellation process is provided for in Section 51 of the Electricity Act [Chapter 13:19]. One of the reasons, inter alia, that will lead to licence cancellation is the licensee's failure to perform in line with conditions set out in a licence. ZERA can only cancel a licence when it has established that a licensee failed to comply with any term or condition of the licence, the breach of which is expressly declared by such licence to render it liable to cancellation. Based on the provision of section 51 of the Act, several licenses have been cancelled based on failure to move the project to fruition.

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