ENERGY Regulation Board (ERB) director general Langiwe Lungu says progress on the Cost of Service Study has stalled due to COVID-19, with the appointed consultant having completed only three tasks out of the required 12.
Speaking during a press briefing in Lusaka, Wednesday, Lungu revealed that the much-anticipated Cost of Service Study, which was still required to establish cost-reflective tariffs, had stalled following the outbreak of COVID-19, with the appointed consultant only having completed just 25 per cent of the overall tasks.
The Cost of Service Study had faced repeated suspensions in the last two years, first because of delays in the appointment of a new consultant to complete it, and now because of the COVID-19 pandemic.
Its delay had resulted in Zesco Limited’s controversial unprecedented tariff hike application, approved by the ERB last December.
“The Cost of Service Study, which has been a major source of stakeholder and public interest, has unfortunately been stalled by the outbreak of the COVID 19 pandemic. The Study, which is being undertaken by the consultant, Energy Market and Regulatory Consultants (EMRC), commenced on December 31, 2019, and was expected to have been completed after 12 months. To-date, the consultant has successfully delivered on three of the 12 tasks. The remaining tasks are currently in progress and members of the public will be informed once these have been successfully completed,” Lungu disclosed.
She also announced that the newly-enacted Energy Regulation Act No. 12 of 2019 and Electricity Act No. 11 of 2019 had now given the ERB power to declare an emergency, which allowed for a tariff consideration without a public hearing.
Additionally, the Electricity Act allowed the provision for both enterprises and consumers, who wished to purchase or sell power outside Zambia to apply to the Energy Minister for approval.
“In line with best international regulatory practice, the new legislation has introduced a timeframe within which the ERB and the Minister are required to consider and decide on applications for a licence and appeals, respectively. This is to enhance efficiency in service provision. The new law also presents the following opportunities: Implementation of a multi-year tariff framework, which entails that electricity tariffs for a particular period of time will undergo a single public hearing platform; regulation of both domestic and mining tariff to ensure a level playing field. Prior to this, ERB was only regulating electricity tariffs for domestic customers; implementation of open access regime to promote increased investments in the power sector and increased compliance levels due to enhanced powers of inspectors. The new Act empowers our inspectors with powers to arrest,” she said.
And Lungu, who was previously the ERB’s executive director, announced that the regulator had collected over K209 million in gross revenues, exceeding its target of around K144.7 million during its financial year.
“The compliance rate for 2020 was marginally higher at 87 per cent than the compliance rate for 2019 at 86.71 per cent, but still fell below the ERB set target of 91 per cent in 2020 for the Strategic Business Plan period from 2018 to 2021. The main areas of non-compliance related to safety, environment, maintenance security of supply. The distribution compliance rate continues to perform poorly among the supply chain facilities namely generation, transmission and distribution. The ERB is mandated to collect revenue on behalf of government. Our collection for license fees has been above target from January to September, 2020. The ERB collected K209,098,924 against a target of K144,697,037. I wish to conclude by reiterating the Energy Regulation Board’s commitment to ensuring effective regulation. By facilitating the provision of quality products and services through effective regulation, the energy sector is set to contribute to the economic growth of our country. The ERB undertakes both routine and random inspections among licensees in order to ensure compliance to set standards and regulations as provided for under Energy Regulation Act No. 12 of 2019,” said Lungu.
“Results for 2020 compliance audit were as follows: inspected petroleum infrastructure scored an overall compliance rate of 94.9 per cent. This score is applicable to over 400 petroleum infrastructure inspected countrywide, which comprised 334 filling stations; 36 depots and 33 LPG Retail Sites. With regard to quality compliance for petroleum products; the compliance rate was 97.61 per cent. Petrol, diesel and low sulphur gas oil all scored above 97 per cent, while kerosene and Jet A1 scored a 100 per cent compliance rate. These results are based on over 500 samples of the above-mentioned products that were collected and tested by the ERB. Technical audits undertaken of electricity infrastructure yielded a compliance rate of 87 per cent. 462 facilities were audited countrywide, which comprised both the State and non-State-Owned Enterprises (SOEs) namely, Zesco; Copperbelt Energy Corporation; Lunsemfwa Power Company; Itezhi-Tezhi Power Company; Maamba Collieries Limited; Ndola Energy Company Limited; North-Western Energy Corporation and Zengamina Power Limited.”
Last December, Energy Minister Mathew Nkhuwa had insisted that Zesco’s power tariff hike would be effected without waiting for the Cost of Service Study to be completed because the utility had been “bleeding.”
The Minister’s remarks followed Zesco’s application to hike retail tariffs by an average 113 per cent, which was submitted to the Energy Regulation Board (ERB) in November, last year, projected to earn the power utility an unprecedented K16.1 billion in gross revenues this year.