Electricity tariffs not cost reflective – ERB

Energy Regulation Board (ERB) Manager for Economic Regulation Electricity, Rodgers Muyangwa says  the current cost of electricity in terms of  tariffs  are not cost-reflective and will need to transition  to be effective for a period of five years.

Speaking when a team of officers from the Ministry of Finance, Ministry of Energy and the Energy Regulation Board (ERB) paid a courtesy call on Central Province Permanent Secretary, Milner Mwanakampwe, Mr Muyangwa said the tariffs will have to move from an average of 8.9 cents to about 10.44 cents.

Mr. Muyangwa said another highlight of the Electricity Cost of Service study is that the current stock of investment from generation, transmission, distribution and supply is under invested to meet the projected demand to move from about 2001 megawatts to 4000 megawatts for a period of 20 years.

“To meet that demand, there is a need for massive investment in the sector from generation to supply which will need about USD 14 Billion,” he said.

Mr. Muyangwa said this was why Government through ERB has started releasing contents of a specialized study aimed at determining the Zambian power systems full cost of electricity generation, transmission, distribution and supply to different customer categories.

And Ministry of Finance economic analyst Esther Siyanda said though the study has placed that demand be driven by residential customers, demand will also be driven by other sectors such as the mines and the agriculture sector.

“Government’s ambition to reach universal access to electricity is also to see to it that it reaches 3 million metric tons of copper production in the next nine years and also to boost agriculture production and increase value addition, this would be the main demand for the consumption of electricity, and not only domestic consumers,” she said.

Ms Siyanda said government’s position is to maintain the 100 units per month in order to reach universal access for electricity and to ensure that the vulnerable among the community are protected.

“The study has also recommended us to move from a financial tariff-based mechanism to an economical one and basically this is cost reflectivity,” she said.

Ms Siyanda added that utility companies will only be allowed to charge a tariff that carries a non-effective cost.

“Anything that is not efficient the regulator will ensure that those things are not carried by the tariff.  That way if cost reflectivity means the tariffs go up which will then it will be a justifiable cost,” she said.

She said the study has recommended a gradual Multi-year tariff migration path with provision for Automatic cost-pass-through on factors that affect the Energy and capacity.

And Central Province Permanent Secretary Milner Mwanakampwe said cost reflectivity of electricity must be discussed without massaging the truth, especially that government’s ambition is to achieve universal access for electricity.

Mr. Mwanakampwe commended the team for taking up a consultative approach to hear how the critical mass was going to respond to the reflectivity of electricity.

He said demand for electricity in central provinces surpasses the supply capacity of the electricity company and that he was looking forward to hearing the people’s views.

“We have so many applicants that have been pending for so many years, they have paid all the fees required but they cannot be connected obviously because of so many factors that are beyond the electricity company which is ZESCO,” he said.

He appealed for a gradual front loading of the transition from 8.9 cents to 10.44 cents so that people can manage the shocks of the increment.