Zesa tariff hike rejection will put company under massive strain

Zesa Holdings, which had planned to spend $1,5 billion on capital projects, says the rejection by Zimbabwe Energy Regulatory Authority of its proposal for a tariff hike will put a strain on the utility.

The power utility said such an amount of capital outlay would enable it to generate 11 440 gigawatt hours compared to 9 000Gwh that it had targeted to send out last year.

Zera rejected the proposal for an increase of the power tariff by 14 percent to 14,69c/KWh, declaring instead that the tariff remains at 9,83c/KWh. The regulator said that it had considered the state of the economy and Government efforts to improve the ease of doing business.

Zesa has come under increased pressure to grow its revenue inflows to import enough power from the region, including South Africa's power utility, Eskom, which is paid about $6 million upfront monthly.

Zesa said that changes to the country's power mix, which now includes a more significant portion from imports, will put the power utility under strain given that the last tariff hike was effected as far back as 2012.

ZETDC prepays power imports to Eskom alone at $6,6 million a month, which supplies it with between zero and 300MW under a non-firm agreement, which sees Eskom export when it has excess power.

Zesa's transmission and distribution unit also gets a good portion of its power imports from Mozambique's power utility Electricidade de Moçambique and Lunsemfwa Hydro Power Company of Zambia.

"While our 2016 tariff application has not been approved, Zera (Zimbabwe Energy Regulatory Authority does acknowledge the fact that there has been a change in the generation mix," said Zesa spokesman Fullard Gwasira.

He said that the absence of a power tariff hike will have a negative effect on Zesa's capital expenditure and its maintenance works. "Changes in the generation mix will obviously put a strain on the utility, especially in the immediate term before we realise any cost savings, given the fact that the last tariff increase was four years ago in 2012."

Mr Gwasira said the fact that Zesa was able to keep the lights on for the past four years, without a tariff hike, reflects the efficient interventions management has managed to put in place over the years.

Zimbabwe has been facing acute power shortages, due to limited generation capacity at some of its old major power stations, and also due to reduced hydro power output at Kariba South to avoid depleting the lake but has been bridging the deficit with imports.