Zesco seeks to hike tariffs again

Zambia’s state-run power utility Zesco Ltd. has asked for a 36 percent increase in electricity tariffs to allow the southern African country move towards cost-reflective tariffs, the company said on Thursday.

Zesco was granted a 26 percent hike for the period April 2010 to March 2011, but had asked the regulator to allow it to raise tariffs by a total 36 percent from July, citing inflationary pressures, rising import costs and steep hikes in the price of equipment, said spokeswoman Lucy Zimba.

“We are applying for an average tariff increase of 36 percent for the year 2010/2011 in order to continue on the path to cost reflective tariffs and we hope our request will be granted,” she said.

Zimba said the proposal did not include the copper and cobalt mines, whose tariff was last increased in 2008 under an agreement negotiated by the Copperbelt Energy Corp. (CEC), the country’s largest distributor of power to the mines.

The CEC purchases power from Zesco, which it distributes to the mines in Zambia, Africa’s largest copper producer.

Zesco said prices for copper, steel, aluminium and mineral oil, used to manufacturer machinery, equipment and spare parts used by the power utility, had risen sharply, pushing up its costs.

In order to address the local and regional power deficit, Zesco needs to mobilise huge amounts of funds to be able to invest in new generating and transmission infrastructure.

Zambia has said it needs to invest about $6 billion in the next five years to meet the country’s projected energy needs in the short and medium term. Zesco said it would need the higher tariffs to help foot the bill for the new investments.

But while the hikes would not affect mines directly, they would push up costs of production for the suppliers to the mines, ultimately hurting copper output, said Frederick Bantubonse, the general manager at Zambia’s Chamber of Mines.

“The mines buy from the business community and if the cost of production for the factories increases it will finally be reflected in the cost of mining,” Bantubonse told Reuters

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