Mnangagwa wades into ZESA tariff hike

President Emmerson Mnangagwa has ordered power utility ZESA to reduce its stepped electricity tariff from about US$0.19 per kilowatt hour (kWh) to about US$0.10 /kWh following a public outcry.

ZESA, wholly owned by the government, recently increased power tariff by more than 100% in a space of a month, a move that triggered panic in the critical sectors of the economy and the public.

There were growing fears that the tariff hike would worsen the operating environment by increasing the cost of production. Well-placed ZESA and government sources told Business Times that President Mnangagwa had to intervene.

"The president issued a directive to ZESA to reduce the tariff. ZESA has complied," a well-placed ZESA source said.

His sentiments were echoed by several other sources at the Ministry of Energy and Power Development.

Efforts to get a comment from deputy chief secretary in charge of Presidential communications, George Charamba, were futile.

Contacted for comment Energy and Power Development Minister, Zhemu Soda confirmed the reduction of the tariff saying this was after consumers complained about the skyrocketing tariff.

"ZESA had indicated that it wanted to absorb their running cost, that's why they were granted tariff increases.

But, consumers were not happy about the tariff increase and they raised a complaint.

"So, they appealed and the regulator, ZERA ordered ZESA to revise downwards its tariffs. You can imagine ZESA is importing at US$0.10 but wanted to sell at US$0.19. So, the regulator reviewed downwards the tariff," Soda told Business Times.

This is not the first time that consumers have challenged ZESA's tariff increase.

In 2011, the Confederation of Zimbabwe Industry, successfully challenged ZESA's proposed tariff increase in the Administrative Court.

ZESA, however, refused to budge and maintained the tariff at the contested level.

That increase had been approved by ZERA which claimed the judgement reversing the then agreed tariff had the potential to plunge the country into darkness, if implemented.

ZESA appealed to the Supreme Court saying the court judgement would open floodgates of lawsuits from consumers who had paid bills based on the new tariff.

A ruling on the appeal has not yet been made.

Some analysts say it would be illegal for ZESA to review upwards the tariff in the absence of a decision from the Supreme Court.

Last year in August, ZESA introduced the domestic stepped tariff to encourage consumers to use electricity efficiently and to make power affordable to low consumption households.

It had four steps.

But, it now has six steps following President Mnangagwa's directive.

In a notice to customers, the Zimbabwe Electricity Transmission and Distribution Company (ZETDC), a unit of ZESA, this week advised of structural changes to the stepped prepayment tariff structure which has been increased to six from four.

"ZETDC would like to advise that it has revised the domestic prepayment tariff structure from four to six stepped tariff structure to give customers more buying options," ZETDC said, adding that customers who bought prepaid electricity tokens on the old stepped tariff structure before this adjustment to six steps "will be credited the difference in due course".

The new tariff will see ZESA charging US$0.016/kWh for the first 50kWh and US$0.03 /kWh for units between 51-100kWh.

After the 100kWh, consumers start paying about US$0.06 per unit.

Between 201 to 300kWh, it will be US$0.086 per unit.

From 301 to 400kWh, it will cost US$0.09 per unit while those purchasing more than 400kWh, will have to fork out US$0.10 per unit.

This means the lower bands are now more expensive than the higher bands. Consequently, the directive to reduce tariff, analysts say would encourage reckless consumption of electricity.

This would render the demand side management concept useless.

The demand side management concept was encouraging consumers to save power, apparently creating or realising a virtual power station.