Zesa seeks another shock 300% tariff hike

POWER utility ZESA has approached the power regulator for a threefold increase in tariffs to ZWL$0.81 per kilowatt hour from the current ZWL$0.27 in an effort to reduce load shedding. The bid for a review comes barely a month after the government increased tariffs to ZWL$0.27 cents per kilowatt hour from ZWL$0.0986 cents, the first time it has done so since 2011.

Insiders say despite the review early this month, Zesa is still struggling to meet its operational costs due to the current high inflationary environment in the country. Another dilemma is that the Kariba Dam which used to generate over 750MW is now generating only 180MW, leaving Zesa to rely on thermal power producers whose operating costs have risen sharply after coal producers started pegging the coal price to the US dollar based on the interbank rate.

Bernard Chizengeya, the Business Performance Manager of the Zimbabwe Power Company (ZPC) told Business Times that it was time for the government to review electricity tariffs to help the ZPC, the generating unit of Zesa, to operate efficiently.

"The ZWL$0.27/ kWh tariff is not good enough to sustain operations as we continue to face the same operational problems we faced when we were still at ZWL$0.0986/kWh," Chizengeya said.

"With the current power tariffs when rated against the US dollar, we are essentially providing a service for "free" as we are charging US$0.03/kWh. To be operational we should increase the tariff to around ZWL$0.81 kWh" Chizengeya added.

He said tariff increase is one of the main ways to fund Zesa as this will improve debt collections due to the fact that most people are connected to prepaid meters. Zesa is owed close to ZWL$1 billion by its customers, and as most people are connected to prepaid meters, the more they buy prepaid electricity, the more debt Zesa collects as the debt is taken at source – from the electricity the debtors buy.

Currently, the country is facing crippling power outages of close to 18 hours a day due to low generation levels across all plants and imports. Zimbabwe mainly relies on imports from Mozambique and South Africa but due to foreign currency shortages, Zesa owes its regional suppliers US$73m, making the neighbouring utilities reluctant to continue with supplies.

Zimbabwe has the potential to generate close to 2 000MW but the country is currently only producing 750MW due to low water levels in the Kariba Dam and antiquated machinery at Hwange and other thermal stations. Currently Kariba South, which has a capacity of 1050MW, is only allowed to generate 180MW due to low water levels that dropped to 478 metres.

Chizengeya said the water levels were so low that Kariba could no longer supply Harare with adequate power. There is a looming danger that if the water level drops to 475 metres, Kariba will close and wait for the rains.

Three other small thermal plants (which produce an average 120MW each) based in Bulawayo, Munyati and Harare, are occasionally utilised due to old age. The ZPC uses 80 percent of coal produced by local firms for its thermal power stations. According to the Zimbabwe Energy Council, the government's energy think tank, Zesa should charge cost reflective tariffs.