Hiked electricity tariffs will be met with resistance – PMRC

The Policy Monitoring and Research Centre (PMRC) says the best time to implement cost reflective tariffs is way before elections, but warns that they will be met with resistance.

According to a policy brief prepared by PMRC senior researcher Albert Kasoma with support from director Bernadette Deka Zulu, the Centre noted that the increase in tariffs might lead to a decrease in electricity usage, which might result in decreased economic activities.

“The argument for the implementation of cost reflective tariffs are strong given the constrained government resources owing to sluggish domestic and international economic activities. The government cannot therefore afford to continue subsidizing electricity consumption especially to commercial and industrial entities that have the means to pay. Even with the implementation of cost reflective tariffs, government should ensure that the welfare of the poor citizens is always taken care of by retaining the lifeline tariffs as well as the provision of cross subsidies regarding connection fees for the poor households if the universal access to electricity should be achieved in Zambia. Government should also be wary of challenges that come with implementation of cost reflective tariffs in reversing efforts of ensuring universal access to electricity by all Zambians especially in rural areas were less than five percent of the population has access to electricity,” Kasoma stated.

“Government should be wary of possible public resistance to hiked tariffs as witnessed in neighboring countries. To avert this, timing of implementing such crucial policy decisions is key; preferably, way before elections when most decisions are made on the basis of appeasing the electorate. Key government policy documents, including Vision 2030, Seventh National Development Plans and National Energy Policy allude to the importance of harnessing other renewable energy resources to meet the country’s growing energy needs. PMRC further urges Government to formulate a ‘renewable energy policy’ to provide for strategies and targets that would develop the renewable energy sub sector. The implementation of cost reflective tariffs should be done in a phased manner to ensure minimal distortions to the economic activities. Consequently, citizens and commercial enterprises will be willing to pay stated tariff price.”

Meanwhile, Kasoma recommended that ZESCO should periodically publish its costs for public and stakeholder scrutiny to enhance appreciation of its cost structure and operations.

He also called on government to consider restructuring Zesco into smaller units.

“Government should continue exploring measures to restructure the vertically integrated ZESCO’s business model if the utility company is to be sustainable by possibly unbundling it into separate business units namely; generation, transmission and distribution. There is need to enhance planning, research and development units at both Ministry of Energy and Zesco to continue exploring least cost electricity expansion plans and integrated resource planning for the country. Government needs to consider that cross subsidies for connection fees for low income groups are borne by other customers (industrial or commercial customers) to ensure that access to electricity by the poor is guaranteed to minimize the economic shocks of cost reflective tariffs,” he stated.

Kasoma insisted that the implementation of cost reflective tariffs would affect different consumer categories differently if not done in a phased manner.

“Government should consider implementation of cost reflective tariffs in a phased manner. The government must also consider formulating a ‘Renewable Energy Policy’ to provide for strategies and targets that would develop the renewable energy sub sector and implementation of Renewable Energy Feed-in Tariff (REFIT). REFIT refers to schemes designed to provide certainty to renewable electricity generators by providing them with a minimum price for each unit of electricity exported to the grid over a 15-year period,” stated Kasoma.

Kasoma also recommended that government ensures that capacity was built among the locals in carrying out the Cost of Service Study (CoSS) so that subsequent Cost of Service studies could be done by Zambians while suggesting that ERB staff, additional personnel from key relevant stakeholders should be recruited in the study technical team to work with the consultant.

         

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