👉🏾Now that he can afford to pay
ZESCO has applied to the Energy Regulation Board (ERB) to approve a hike in electricity tariffs up to 75% across various consumer categories with an initial 50% increment potentially effective, 1st May, 2019.
As expected, this development has been met with uproar and negative criticism from the general public who feel that such a move will push the cost of doing business and the cost of living in an upward spiral.
The ERB has since organised public discussion forums to engage the public to get their views and sentiments over ZESCO’s application.
Before we condemn or applaud ZESCO’s application to ERB, it is important to analyse the facts and deal with the realities surrounding the electricity sector.
FACT No. 1
ZESCO is supplying power to us at a loss. ZESCO tariffs are not cost reflective, meaning that the current tariffs are below the actual cost ZESCO is paying to generate, transmit and distribute electricity.
ZESCO is supplying power to consumers at 15 NGWEE per kilowatt hour while the actual cost is estimated to be around or above 30 NGWEE per kilowatt hour. Government is subsidising the rest of the cost. Like i earlier said: ZESCO is supplying power at a loss; in short, the current tariffs are uneconomical, not cost reflective and unsustainable.
Due to the non cost reflective tariffs ZESCO is failing to attract the envisaged private sector investment which is key in improving the generation, transmission and distribution of power to meet the ever increasing demand. No investor is willing to invest in a loss making venture.
The demand for electricity is ever increasing. Zambia’s electricity demand is forecasted to be at 3000 MW by 2021 against an estimated capacity of 2971 by the same period. This demand is expected to continue and ZESCO will have no choice but to migrate to cost reflective tariffs to attract private sector investment, increased generation capacity and to implement the much needed energy mix.
FACT No. 4
Any increase in the electricity tariffs will have an adverse effect on business and may eventually push the cost of living further high. It is in the view of the above that earlier, this year, His Excellency, President Edgar Chagwa halted ZESCO’s plan to increase electricity tariffs.
The current ZESCO tariffs are uneconomical, non cost reflective and totally unsustainable. Government cannot continue to subsidize ZESCO, it is simply unsustainable and economically imprudent.
The only way ZESCO can attract private sector investment and continue to improve its generation, transmission and distribution capacity as well as to implement its Energy Mix Program is to migrate to cost reflective tariffs.
However, it must be borne in mind that any tariff increment may disrupt business hence it must be done with caution and after ZESCO complete the Cost of Service Study which the African Development Bank has funded and is expected to be completed this year.