Cost of Service study suspension necessitated new tariff application – Zesco

Zesco spokesperson Henry Kapata says the suspension of the Cost of Service study, pending the appointment of a new consultant to complete it, has resulted into Zesco making a tariff application in order to enable the company to mitigate the rising costs of its operations.

Kapata, who was reacting to calls from the general public to have the Cost of Service study released for the public to see its contents, also explained to News Diggers! in an interview that Zesco hoped that the removal of fixed charges would enable customers to properly budget for their electricity purchases and not find themselves with unsustainable arrears.

“The electricity supply industry in general, and Zesco Limited in particular, were expecting the Cost of Service study and its attendant list costs, such as generation, transmission and, of course, distribution plants to be completed by December, 2018, and it was hoped that with the conclusion of the Cost of Service study, the electricity sector would realise truly cost-reflective tariffs. However, the suspension of the Cost of Service study, pending the appointment of a new consultant to complete it, has resulted in the need for Zesco Limited to make a tariff application in order to enable the company to mitigate the rising costs of its operations, especially the cost of power from the new power plants. Because the increase in revenue will enable the corporation to be better able to meet the rising costs of operations and simultaneously attract additional private investment into the electricity supply industry thus making the sector and Zesco more competitive and efficient,” Kapata explained.

And Kapata said that the power utility wanted to price fixed charges into unit charges in its application for tariff adjustment to the Energy Regulation Board (ERB) to enable customers get value for their money.

“Then the other issue that our clients and stakeholders are not looking at is the issue of eliminating the monthly fixed charges for residential and commercial customers. Zesco has noted with concern that the monthly fixed charge is proving to be a hindrance to access to electricity for its most vulnerable customers and this is because it is the first item to which a customer’s initial purchase of units within a month is applied, with actual electricity units being purchased only when the fixed charge has been paid. So, the fixed charge is also cumulative in that a customer who does not purchase electricity for whatever reason for more than one billing cycle, at their next purchase, they will be expected to pay the fixed charge for each of the months that they have gone by since their last purchase of electricity,” he explained.

“So, in this application, Zesco is proposing that the fixed charges be priced into the unit charges for residential and commercial customers so as to enable the customer to get units for all the money they spend for electricity purposes. It is hoped that the removal of these fixed charges will enable customers to properly budget for their electricity purchases and not find themselves with unsustainable arrears.”

He added that another aspect that the utility hoped to partner with its customers on was the introduction of the bulk distribution tariff.

“Zesco further proposes the introduction of a bulk distribution tariff that will be set at slightly lower than the residential tariffs. This is in order to ensure that the distributors are able to make a return on their investments and encourage more investors into the bulk distribution business. This tariff category will also create business opportunities for distribution of power Multi-Facility Economic Zones and farming blocks. And to this end, the distributor category has been added to the pricing model as we have always proposed in our tariff summary. The other issue is the time of use for tariffs. Zesco will continue to support the country’s agricultural and industrial base by offering maximum demand customers’ time of use tariffs. These customers consume about 60 per cent of all retail electricity sales, excluding mining consumption. These measures should help to cushion the impact of electricity price increases on the cost of locally produced goods and, of course, this measure will also help Zesco to reduce the amount of very expensive electricity imported during peak period and sold at prices below those that were used to be purchased. So, we believe that is quite a strong application and we strongly believe that consideration will be taken,” explained Kapata.

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