Zesco Limited acting managing director Webster Musonda has insisted that hiking retail electricity tariffs by an average 113 per cent will keep the struggling power utility financially solvent, revealing that Zesco is projected to earn an unprecedented K16.1 billion in gross revenues if the new tariff schedule is approved.
Meanwhile, Energy Regulation Board (ERB) chairperson Raymond Mpundu says the regulator will quickly finalize its analysis on whether or not to hike the power tariffs this month.
According to a detailed Zesco presentation availed to the media in Lusaka, Tuesday, customers in the residential category face paying an increased power tariff of 106 per cent this month, meaning that electricity bills at this rate could skyrocket to as high as K1,653 per month from the current average of K805 if a consumer’s monthly consumption is 900 kilowatt hours (kWh).
Data reveals that consumers in the commercial category will, however, face the largest increase of 170 per cent, where the impact felt on the monthly electricity bill could be more than double to K1,976 per month from K760.38 for clients consuming 1,000 kWh, a 160 per cent rise.
This came to light during the ERB’s public hearing on Zesco’s application to vary electricity tariffs at the Mulungushi International Conference Centre.
A full breakdown of Zesco’s proposed tariff path contained in the presentation made by Musonda, showed that the residential tariff path is set to migrate from the current K0.93 per kWh to K1.92 per kWh, representing a 106 percentage increase.
The utility’s proposal for the commercial category shows that customers in this category will pay K2.08 per kWh from the current K0.77 per kWh, registering a 170 percentage hike.
The impact of the new tariffs on the commercial customer category shows that consumers could actually see their monthly bills shoot up to as high as K10,583.73 from K3,341.15 for monthly consumption of around 5,000 kWh, a 217 per cent increase, while the lowest monthly consumption of 400 kWh could see clients pay an estimated K685.84 from the current K373.27, an 84 per cent increment.
However, most customers who consume below 200 units per month will see a reduction in their monthly bills, according to Zesco’s data.
Justifying the proposed tariff hike, Musonda insisted that that hiking retail electricity tariffs by an average 113 per cent will keep the struggling power utility financially solvent, revealing that Zesco was projected to earn an unprecedented K16.1 billion in gross revenues.
“The adjustment is expected to generate revenue of up to K16.056 billion in the first full year of its implementation that will enable the company to meet its current obligations and implement its capital investment portfolio. There will be a direct benefit to the Zambian economy as securing electricity generation, transmission and supply is vital to economic development and allows for private sector participation. Additional private investment into the electricity supply industry, will thus make the sector more competitive and efficient,” Musonda said.
“A cost reflective industry tariff gives Zesco the ability to invest in new generation plants for both base load and renewable power sources. The proposed tariff adjustment, if approved, is expected to result in an increase in Zesco’s revenue and ensure it continues to run independent of government support as all businesses should.The increase in revenue will enable the corporation to meet its rising cost of operations driven largely by purchases of power from IPPs (Independent Power Producers).”
He also argued that the current load shedding crisis would persist if the power tariffs were rejected.
“The consequences of not having tariff adjustments include: under-investment in the electricity sector; insufficient capacity to support accelerated growth in the economy; unreliable quality of supply of electricity; perpetual load shedding; adverse impact on social services due to insufficient power; failure to attract investment in other economic sectors such as mining, industrial, agricultural, tourism etc.,” said Musonda, who also announced that the utility planned on abolishing the fixed monthly charge for both residential and commercial customers so that consumers get units for all the funds they spend.
Meanwhile, opening the public hearing earlier, Mpundu told stakeholders that the regulator would quickly finalize its analysis on whether or not to hike the power tariffs this month.
Mpundu stressed that the ERB would only make a decision after taking into account all submissions made by relevant stakeholders to determine the efficacy of Zesco’s application.
“The Board shall move expediently to fully analyze the efficacy of the application by Zesco and also balance it with public concerns. Understandably, migration to cost reflectivity is of utmost urgency for both Zesco and the economy in general. However, the ERB will, consistent with best practice, commit to applying itself to finalizing this process, which has a direct impact on migration towards cost reflective tariffs. Therefore, we have set a target to render a decision on this application within the month of November,” announced Mpundu.
“In that regard, analysis and final determination of the tariff would be completed as soon as possible to enable us make the tariff announcement within the next few coming days.”