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Zesa mulls switch to forex-indexed power tariff

by Staff reporter
12 Feb 2023 at 07:26hrs | Views
POWER utility Zesa Holdings Limited wants all of its clients, including industries, to pay their electricity bills in foreign currency to fulfil its power import commitments, Zimbabwe Independent can report.

The State-run power firm has been importing most of its power from regional utilities after failing to meet domestic demand for several reasons. It says Zimbabwe dollar indexed tariffs have made it difficult to pay for imports.

Zesa indicated this week that it will be working with authorities for permission to grant industries the rights to deduct power costs before any official deductions are made to their foreign currency earnings. The business community is opposed to a tariff increase, arguing it would put industries, currently struggling to survive, in a more difficult situation.

"We feel that we need to ensure that all our customers are paying 100% of electricity in foreign currency so that we can cover the (power) shortfall and also be able to meet our imports obligation," Zimbabwe Electricity Transmission and Distribution Company commercial service director, Gift Ndlovu told captains of industry on Tuesday during a Confederation of Zimbabwe Industries symposium.

"To facilitate this, we would try to engage with the authorities to ensure that our customers will deduct electricity bill costs before the 75% surrender ratio or retention facility," he said.

Last week, the Reserve Bank of Zimbabwe reviewed its forex retention scheme, allowing importers to retain 75% of their foreign currency earnings. The remainder is given to them in Zimbabwe dollars, at prevailing official exchange rates. In his 2023 national budget statement, Finance minister Mthuli Ncube indicated that Zesa would review tariffs for major consumers such as miners to improve generation and boost its capacity to import electricity to meet local demand.

He said Zesa was incurring huge losses when supplying major consumers such as ferrochrome smelters.

According to Ncube, some of the major consumers of electricity such as ferrochrome smelters have been paying sub-optional tariffs of US$0,067/kWh, resulting in losses to the utility. In this regard, the tariff for such consumers will be reviewed upwards and aligned with other consumers, thereby generating additional revenue for the Zesa to meet its external obligations, as well as capacity to import spares for maintenance.

"The industry requires to be recapitalised so that we can reinforce the (power) network and also rehabilitate it. I just need to encourage industries or all our customers to make sure that we pay (in time)," Ndlovu said.

"The import facilities that we have require us to make prepayments. So, it is pertinent that our customers pay timeously so that we can then be able to meet our prepayment requirement from Zesco (in Zambia) and Electricity de Mozambique," he said.

According to Ndlovu, Zesa will be moving all of its clients to a prepayment scheme to increase revenue collection.

Prepayment meters already account for 30% of the utility's revenue, and by the end of this year, all consumers and industries are expected to be using prepayment metres, he said.

"Our hope is to make sure that we install 17 000 smart metres and also 100 000 prepaid meters by the end of the year."

"We are equally challenged in terms of being able to meet our contractual obligations for us to be able to keep supplies and keep lights on. The legacy debt is also in our name and is also giving us challenges. You also find that the issue of sub-optional tariffs remains an elephant in the room," he said.

"Last year we had some movement (on power tariffs) but we are not yet there. We feel we need to direct some energy towards getting a cost reflective tariff, a tariff that will ensure reliability of supplies and availability."

Theft and vandalism, according to Ndlovu, were two major difficulties confronting Zesa.

"You may want to know that just this year; we procured 4 000 transformers that are all going to be directed towards replacement of infrastructure," he said.

Source - independent
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