Business / Companies
ZESA seeks cost reflective power tariff
10 May 2016 at 07:15hrs | Views
POWER utility Zesa Holdings needs a cost reflective power tariff to sustain imports and the prevailing consistent supply of electricity, secretary for Energy and Power Development Partson Mbiriri has said. This comes as Zimbabwe has gone for six months without significant interruptions to power supply, largely due to low demand from industry compared to 2015 and the imports from South Africa.
The country faces a debilitating shortage of power and relies on imports, including from Mozambique, to close the power deficit.
Presently, Zesa imports up to a maximum of 300 megawatts from Eskom under a non-firm power supply agreement, but the imports are coming at slightly higher cost than local power; meaning the cash strapped utility has to, somehow, subsidise consumers.
Electricidade de Moçambique supplies Zesa Holdings 100MW, firm, unlike the deal with Eskom which may not export if internal demand is high, and plans are afoot to increase hydro power imports from EDM, which is much cheaper compared to others.
Mr Mbiriri said the blended rate for power should be reflective of the different sources of the power utility to be able to sustain imports, to bridge the deficit, and for its operations to be viable."The key to sustainability of imports is our tariff," he said.
But it remains unclear whether the power utility will get its way given concerns around the likely burden on consumers who already owe distribution and transmission unit, ZETDC, over $1 billion.
Already, industry which has also been struggling to clear its huge arrears from accumulated electricity bills, has voiced its concerns over possible tariff ncreases and has lobbied vigorously against any hikes.
Mr Mbiriri said it was critically important that all stakeholders from consumers, officials in the Ministry of Energy and Power Development and all Government ministers consider the implications of a non-cost reflective tariff to sustainability of imports.
This comes as the power utility has requested for a 49 percent tariff adjustment, the first since the marginal to 9,86 percent in 2013, but awaits a decision from regulators who are still awaiting input from Government on the application by Zesa Holdings. If the increase is granted, it is likely to be lower than requested.
"It is being considered by Government and we hope that very
soon a decision will be made. Certainly from the ministry's point of view, we would like it (tariff), at the very least, to be cost reflective," he said.
Mr Mbiri said the basis for calculating the appropriate tariff should take into account the cost of producing thermal and hydro power, cost of transmission and cost of imports from the region.
"(We should be able to say) what does it cost us to generate the (power) from Kariba (South), what does it cost us to generate from Hwange; the three small thermal power stations, what does it cost us to transmit this power to the users?" he said.
"When you blend thermal, hydro and imports, what figure does it give us or what blend rate does it give us in terms of cost? That really, to me, should be the basis for determining the tariff," he added. "That is the formula that has been built into (the process)."
Mr Mbiriri said at the prevailing 9,86 cents per kilowatt hour the tariff is, however, not very far from being cost reflective despite the fact that Zesa has not been awarded an increase since October 2013.
But sub-economic rate partly explains the challenges Zesa faces to guarantee reliable supply of power, because of constraints around financial resources to refurbish, maintain and fund operations.
Mr Mbiriri said the current tariff is "not very far" from cost reflective despite "that is why we are managing to keep our heads above water" with regard to importation of power from regional utilities.
Although the country faces constraints in terms of generation during old age of Hwange, one of the two major plants in the country, the situation has been worsened by reduced output at Kariba South hydro power station due to lower water levels this year.
The country faces a debilitating shortage of power and relies on imports, including from Mozambique, to close the power deficit.
Presently, Zesa imports up to a maximum of 300 megawatts from Eskom under a non-firm power supply agreement, but the imports are coming at slightly higher cost than local power; meaning the cash strapped utility has to, somehow, subsidise consumers.
Electricidade de Moçambique supplies Zesa Holdings 100MW, firm, unlike the deal with Eskom which may not export if internal demand is high, and plans are afoot to increase hydro power imports from EDM, which is much cheaper compared to others.
Mr Mbiriri said the blended rate for power should be reflective of the different sources of the power utility to be able to sustain imports, to bridge the deficit, and for its operations to be viable."The key to sustainability of imports is our tariff," he said.
But it remains unclear whether the power utility will get its way given concerns around the likely burden on consumers who already owe distribution and transmission unit, ZETDC, over $1 billion.
Already, industry which has also been struggling to clear its huge arrears from accumulated electricity bills, has voiced its concerns over possible tariff ncreases and has lobbied vigorously against any hikes.
Mr Mbiriri said it was critically important that all stakeholders from consumers, officials in the Ministry of Energy and Power Development and all Government ministers consider the implications of a non-cost reflective tariff to sustainability of imports.
This comes as the power utility has requested for a 49 percent tariff adjustment, the first since the marginal to 9,86 percent in 2013, but awaits a decision from regulators who are still awaiting input from Government on the application by Zesa Holdings. If the increase is granted, it is likely to be lower than requested.
"It is being considered by Government and we hope that very
soon a decision will be made. Certainly from the ministry's point of view, we would like it (tariff), at the very least, to be cost reflective," he said.
Mr Mbiri said the basis for calculating the appropriate tariff should take into account the cost of producing thermal and hydro power, cost of transmission and cost of imports from the region.
"(We should be able to say) what does it cost us to generate the (power) from Kariba (South), what does it cost us to generate from Hwange; the three small thermal power stations, what does it cost us to transmit this power to the users?" he said.
"When you blend thermal, hydro and imports, what figure does it give us or what blend rate does it give us in terms of cost? That really, to me, should be the basis for determining the tariff," he added. "That is the formula that has been built into (the process)."
Mr Mbiriri said at the prevailing 9,86 cents per kilowatt hour the tariff is, however, not very far from being cost reflective despite the fact that Zesa has not been awarded an increase since October 2013.
But sub-economic rate partly explains the challenges Zesa faces to guarantee reliable supply of power, because of constraints around financial resources to refurbish, maintain and fund operations.
Mr Mbiriri said the current tariff is "not very far" from cost reflective despite "that is why we are managing to keep our heads above water" with regard to importation of power from regional utilities.
Although the country faces constraints in terms of generation during old age of Hwange, one of the two major plants in the country, the situation has been worsened by reduced output at Kariba South hydro power station due to lower water levels this year.
Source - the herald
