ENERGY Regulation Board (ERB) Director General Yohane Mukabe says this year, the board is expected to approve a nine per cent increment in Zesco tariffs and then a 14 per cent hike in 2025.
And Mukabe says citizens can complain to the board if Zesco is not following the load shedding schedule.
Meanwhile, Mukabe says there are current engagements to determine whether ERB can get the private sector to bring in fuel which will last for three months.
Speaking on Radio Phoenix’s Let the People Talk, Tuesday, Mukabe said Zesco was expected to collect lower than projected revenue due to the power deficit, which will be taken into consideration as the board considers the power utility’s application to increase tariffs.
“One of the things that we discovered, as we were revealing that particular application [by Zesco], was that the tariffs that Zesco was charging last year and prior years was sub-economic and what Zesco then applied for each year specific quantum to move us to cost reflectivity and they also took into account in their application the cost of [service] study that was done in just a year or two before that, that cost of study also confirmed that tariff that Zesco was charging was not cost reflective. So, that cost service study has certain recommendations in which we can move to a cost reflectivity, you can do a one-off step or you can do a gradual migration to cost reflectivity,” he said.
“So, Zesco did take into account some of the recommendations in that report and basically, we are now in a journey of moving to cost reflectivity and that is under normal conditions. Although this year it’s an abnormal condition with the power supply deficit that we have now, the amount of revenue that Zesco will earn this year will be much, much lower than they projected to earn in 2024. So, when we make our decision to allow for the next subsequent year increase, we have to take into account this particular condition that has arisen which we did not anticipate at the time the tariff application was made”.
Mukabe said the board was supposed to increase tariffs by nine percent in 2024.
“For last year, we did approve a 37 percent increment, 2024 is supposed to be nine percent and 14 next year and so on and so forth. So, basically, for this, we are looking at a nine percent possible increment so the board did give a conditional approval. The condition being that we need to review the Zesco account so that we can interrogate how much they earned last year and also look at the projections for 2024 to see whether the nine percent is still given or maybe a different figure will be approved. We are moving from five to six cents/ kilowatt per hour and we are migrating to 10, 11 cent/ kilowatt per hour so basically that’s the number that allows Zesco to recover all the costs,” Mukabe said.
And Mukabe said citizens could complain to ERB if Zesco was not following the load shedding schedule.
“It’s a matter which the ERB takes keen interest in, if at all the schedule is not being followed, they can report to the ERB. In their [Zesco] distribution licence when they are developing a schedule for load shedding, they are actually supposed to, in this particular case, submit their eight hours schedule. So we are yet to receive the new schedule that they have just started to implement and if they go off the schedule and somebody complains, ERB can investigate it. We do have bites and the law basically provides us with powers, so any contravention of either the Electricity Act or the Energy Regulation Board Act is something that you might find yourself in court. The licences that we issue, because we issue them under our Energy Regulation Act, so any contravention of our licence conditions, you find yourself at the wrong end of the regulator,” he said.
Meanwhile, Mukabe said the board could start pricing fuel every three months once the private sector began procuring petroleum products which could last more than a month.
“The way that our product [fuel] is procured currently, is that the product is procured on a monthly basis that’s the reason we use the IPP model to price it that way. If we can buy product which lasts for three months, then we can have a pricing cycle which is longer than one month. There are moves by the government to see whether…I think one key thing that we have is that the entities that bring petroleum products are the private sector today. In the past, the government used to procure petroleum products if you recall and they would basically procure it which will last longer than a month and we used to price it for every quarter. With the private sector on the market now, we obviously need a pricing model which caters to the cost of importation and also to cater for their supply cycle,” said Mukabe.
“If their supply cycle currently is a month, we need to price it for a month. There are current engagements to see whether we can get the private sector to bring in products which will last for three months and once we can get that done, then we can start pricing of course every three months. The other thing that government is working on, which is quite key, is to have strategic reserves built up. Building up our strategic reserves of course requires money, it requires time and I think at the time this will be done, this can also be key to ensure that we can have some kind of stability going forward. Currently, we do not have strategic reserves and the current supply cycle is monthly and that’s the reason we price every month”.
