Power tariff increase to help service ZESA loans

Michael Tome

Zimbabwe’s energy regulator, the Zimbabwe Energy Regulatory Authority (ZERA) has said electricity tariff increase will help ZESA Holdings to service loans extended for the recent upgrades of  Hwange 7 and 8 units as well as the Kariba Hydro Power Station.

This week, ZERA awarded a 2 US cents per kilowatt hour (kWh) tariff increase to the Zimbabwe Electricity Transmission and Distribution Company (ZETDC), a subsidiary of ZESA.

The increase takes effect immediately.

The tariff increase is also expected to help ZETDC to import electricity from the Southern African Power Pool (SAPP) to curb instances of severe power outages.  In early 2023, Zimbabwe experienced prolonged power outages, which forced companies to rely on expensive diesel generators to operate.

ZERA chairman, Mr David Madzikanda, said the tariff increase award was a mechanism to maintain the value of the tariff, which had been eroded by exchange rate movements and inflation.

He also said the adjustment would help ZETDC to meet its operations and maintenance obligations, as well as the growing electricity demand.

“The number one issue of concern is that of debt service,” Mr Madzikanda said. “We have Hwange 7 and 8 units, which were recently commissioned in addition to Kariba units’ upgrades. We have to be able to pay back those loans. It is important that we do not default on the loans.”

ZERA chief executive Mr Edington Mazambani, said the authority had allowed for a gradual increase of tariffs after considering the plight of the consumers.

“With regards to the quantum that ZETDC had applied for, we have approved an interim tariff adjustment increase,” Mr Mazambani said. “But we are far away from cost-reflective tariff, so we have to come up with a guiding path to a cost-reflective tariff so that we do not induce shock into the economy and consumers.”

Zimbabwe’s demand for energy is likely to reach 2,350 megawatts by 2025, especially with high demand from the mining sector.

The tariff increase is expected to help ZETDC to meet this growing demand and to provide reliable electricity supply to consumers.

ZETDC has long argued that it needs a cost-reflective tariff of between 12,3 and 15 US cents per kWh to operate optimally and service its debt and other operational challenges.

According to ZETDC its cash flows were in a dire position given that the firm is saddled with a major debt from unpaid power imports.

It is importing at an average cost of 10,9 cents kWh but selling at a price below the import cost.

Electricidade de Moçambique (EDM), Hidroeléctrica de Cahora Bassa (HCB), Zambia Electricity Supply Corporation (ZESCO), and Eskom from South Africa are the major suppliers of electricity to Zimbabwe.