ENERGY Minster Mathew Nkhuwa says power supply on the Copperbelt will not be interrupted despite Zesco Limited’s failure to reach an agreement with Copperbelt Energy Corporation (CEC) Plc to extend the Bulk Supply Agreement (BSA) following its expiry, Tuesday.
And Nkhuwa says that power will continue to be supplied to CEC on an interim basis on conditions dictated by Zesco because they remain the suppliers of electricity.
The BSA that was primarily made to facilitate power supply to mining companies on the Copperbelt, as well as domestic customers in mining communities and surrounding areas, was signed back in November, 1997, and was initially scheduled to expire after 15 years, but was extended in November, 2012, to give an effective 23 years lifespan, ending midnight, Tuesday, March 31, 2020.
During a press briefing in Lusaka, Tuesday, Nkhuwa disclosed that CEC refused to agree to a 12 months interim agreement proposed by government as they insisted only on agreeing to a 16-year agreement, whose terms government was not in favour of.
“Most importantly, it has come to government’s attention over the last few days that CEC is, in fact, not willing to sign an agreement with a 12-month tenure, which has been the basis of the negotiations conducted by the two parties over the last seven weeks and which was initially proposed by government and Zesco. Instead, CEC has now indicated that they prefer an agreement with a 16-year tenure straight away with commercial terms that may not be favourable to Zesco, the government and the public in the long-run. This is the most unfortunate situation as government would have hoped that all parties see the need to arrive at a workable short-term solution as the parties endeavour to work out a long-term sustainable relationship,” Nkhuwa said.
“From 12th of February, 2020, a combined team from IDC, Zesco and relevant government departments have been sitting around the table with CEC to negotiate a new short-term agreement to facilitate continuity of power supply as a longer mutually beneficial relationship was being worked out. Sadly, after negotiations, we have to note that the end of these negotiations is still not in sight, even a few hours before the expiry of this agreement. Notably, there are disagreements concerning effective tariffs of both power supply to CEC and reciprocal transmission charges, also known as Wheeling Charges. Amongst others, these factors are critical in achieving commercially sustainable power supply between Zesco and CEC.”
He added that the Cost of Service Study was currently underway and that Zesco could not commit to a long-term supply agreement.
“In addition, as we may be aware, the Cost of Service Study is currently underway under the auspices of the ERB (Energy Regulation Board) and the final report is expected somewhere in November, 2020. This Cost of Service Study will have far-fetching consequences to the entire electricity supply industry with regard to matters of pricing and sustainability. Zesco cannot, therefore, commit to long-term supply agreement, which may later result in difficulty in implementing the recommendations of the Study. Needless to say that this has ramifications, not only to the electricity industry players, such as Zesco and CEC, but also all customers, including the mines situated in the Copperbelt,” Nkhuwa added.
“This Bulk Supply Agreement has run its full course and it has not been a happy one for Zesco, the government or, indeed, the public who we serve. Government and Zesco have been aware that this Agreement was expiring and sought earnest to engage CEC for an interim agreement to facilitate continuity of power supply in the Copperbelt under significantly new and better terms, which ensure sustainability of supplies on the Copperbelt.”
And he assured of stable supply of power to the Copperbelt, adding that government would not tolerate any threat to the continuity of reliable power supply.
“Despite the challenges in reaching the Agreement between the two parties, as I have already outlined, government would like to assure the public and all customers, who are currently supplied through the CEC infrastructure on the Copperbelt as follows; Bulk Supply Agreement expires tonight (Tuesday) at midnight. Government recognizes the strategic contributions of the mining sector in the Copperbelt to the health of the Zambian economy, as well as the need to provide sustainable social economic environment for domestic customers on the Copperbelt. Therefore, government will not allow any threats to the continuity of reliable power supply on the Copperbelt,” said Nkhuwa.
“Consequently, commencing at 00:01 hours on Wednesday 1st April, 2020, and thereafter, Zesco shall continue to provide continuous and uninterruptible power supply to CEC for Copperbelt-based customers under conditions as proposed by Zesco on an interim basis and these conditions have been given to CEC because we are the suppliers of power and, therefore, we have to call the shots!”