ZERA to engage on power tariff hike

Harare Bureau
THE ZIMBABWE Energy Regulatory Authority will engage government for the final part of its consultative exercise on whether to approve the Zimbabwe Electricity Transmission and Distribution Company’s proposal to hike power tariffs by 5 percent. Chief executive Engineer Gloria Magombo said ZERA has already consulted key stakeholders including representatives of industry and commerce, residents’ associations, mining sector, media, the Consumer Council of Zimbabwe and the public in general.

“ZERA is in the final process of analysing and reviewing stakeholders’ response and also conducting an impact analysis of the tariff application on all sectors. Further consultations with the minister of energy will be done in accordance with section 53 (1) of the Electricity Act before announcement of the outcome.

The energy regulator said it had analysed the tariff and interrogated the cost of the power generation, transmission and distribution among other factors, but is yet to make a determination. ZETDC said a marginal increase in the tariff will be detrimental to its operations in the long term.

The energy regulator said a 5 percent increase was in line with inflation. The firm said only one significant increase had been effected since dollarisation of the economy in 2009. Annual inflation dropped to minus 0,49 percent last month.

Zesa generates about 1,200 megawatts daily against peak demand of 2,200MW and cannot produce enough to meet demand, as no investment has gone into new capacity in years.

ZERA added that average expenditure is higher than the average tariff previously awarded. A tariff of US9,83c per kilowatt hour was awarded in 2009, but was reversed and replaced by a US7,53c/kWh in February. There was no tariff hike in 2010 while a US9, 83c/kWh raise was approved for 2011.

ZETDC said there was no change in 2012 with a 0,3 percent increase to US9,86c/kWh effected in 2013 as ZETDC made losses since 2009.
The tariff hike request, the firm said, was meant to enable mobilisation of resources to fund plant and network maintenance backlog, correcting distortions in the current tariff, with the current cost of running the business put at US10,51c/kWh.

The proposed increase is based on a $986 million revenue requirement ZETDC said is in line with its 2014 planned expenditure. It said the proposed tariff is premised on the rate of return methodology, a methodology widely used by other utilities worldwide.

The company pointed out that while its revenue requirement is based on budgeted expenditure, the effective electricity tariffs should be cost-reflective covering efficient costs of its operations only.

However, consumers feel there are flaws in ZETDC’s model, pertaining to inefficiency (and its effect on cost) as the utility is not splitting the various customer types in the cost of supply model.

ZETDC has since lined up a number of measures to improve efficiency and these include installation of statistical meters to manage losses.
The utility is migrating to pre-paid meters to reduce customer service costs, system upgrade and refurbishment to improve on transmission network reliability and help reduce losses.