ZESCO Limited has entered into a long-term power supply agreement with Konkola Copper Mines (KCM) following successful conclusion of negotiations.
And Zesco has revealed that it is currently being owed millions of dollars by Copperbelt Energy Corporation (CEC) for power supplied to the company under the recently expired Bulk Supply Agreement (BSA).
In a statement, Saturday, company director of strategy and corporate services Patrick Mwila stated that the agreement with KCM was part of Zesco’s long term strategy of correcting imbalances in the power supply chain.
“The agreement between ZESCO and KCM is part of ZESCO’s long-term strategy of correcting imbalances in the power supply chain. These artificial imbalances were the result of the Bulk Supply Agreement (“BSA”) that was signed between ZESCO and Copperbelt Energy Plc (“CEC”) on 21 November 1997 which had been commercially disadvantageous to ZESCO and which expired on 31 March 2020. These imbalances were aided by certain clauses which ensured only CEC could supply the lucrative Copperbelt mining market ever since the BSA was signed in 1997. It is also in line with the Government’s new policy framework, which supports an open Electricity Supply Industry (“ESI”) that is intended to encourage participation of various players in the three key segments of the value chain, i.e. Generation, Transmission and Distribution,” Mwila stated.
“The future is brighter for the electricity trade if new entrants are free to setup a power plant, negotiate for direct supply with any willing consumer and request and negotiate for the wheeling (or transportation) of their power with owners of infrastructure on commercial terms across all transmission and distribution lines as long as capacity is available, and regardless of the ownership. By eliminating monopolistic tendencies, the Zambian electricity sub-sector will soon realize efficiencies, as neither ZESCO nor any other owner of Transmission or Distribution Infrastructure can claim exclusivity for their use as third parties will be able to supply power across Zambia. ZESCO welcomes this competitive environment and the opportunity to prove that it can compete on a level playing field with the best competitors in the market.”
He stated that with the current opening of the electricity supply industry, players were free to trade as long as terms were commercially competitive.
“Specifically, ZESCO is now in a position to compete for the supply of power directly to those mining consumers in the Copperbelt who are able and willing to enter into new commercial relationships. Supply to such consumers was previously the preserve of CEC, but with the lapse of the BSA, the consumers, ZESCO and CEC are free to buy and sell power from anywhere and supply to anyone as long as the terms are commercially competitive. ZESCO also notes that under these circumstances, ZESCO’s traditional consumers may also be subject to competitive bids or solicitations from other potential suppliers, but we firmly support the new market framework and we are ready to prove that we can supply power more competitively than anyone else in the Southern African region,” he stated.
“The “common carrier” declaration typically unlocks resources and avoids “hoarding” of Transmission capacity or even worse still, duplication of infrastructure by competing players in the ESI. Transmission and Distribution asset owners still remain fully in charge of their assets, but they must negotiate wheeling arrangements on commercial terms once they are approached by parties intending to trade. The law thus prevents any party from using its vantage point to block commercial trade and stipulates that if the parties fail to agree on wheeling terms for the power, any aggrieved party may then appeal to the Electricity Regulation Board to arbitrate and determine fair terms and conditions of supply.”
And Mwila stated that despite CEC owing Zesco millions of dollars, the company was still supplying power to CEC in order for it to continue supplying its customers who had already contracted for power before the collapse of the BSA.
“Meanwhile, despite our initial failure to finalize a new power supply agreement to replace the now expired BSA, ZESCO continues to make power available to CEC to allow it to continue supplying its consumers who have already contracted for power supply from CEC and to supply ZESCO’s existing consumers in the Copperbelt. This is despite the fact that CEC continues to owe ZESCO millions of dollars in unpaid arrears under the recently expired Bulk Supply Agreement,” stated Mwila.