Zimbabwe electricity company seeks tariff increase

The Zimbabwe Electricity Transmission and Distribution Company (ZETDC) has submitted a request to raise electricity tariffs for 2023 by 2 cents per kilowatt-hour (kWh). The power utility argues that these new rates are necessary to ensure a consistent power supply and to create the capacity required to support economic growth.

In local currency, the proposed tariff increase translates to approximately $147. Presently, Zesa's electricity tariffs are at a minimum of $137 per kWh.

ZETDC has specified that the additional revenue generated from this increase will fund various projects. These projects include the rehabilitation and maintenance of the transmission and distribution network, servicing loans for Hwange Units 7 and 8, and refurbishing Hwange Units 1 to 6.

In an official notice, the company stated that the tariff hike is essential to enhance service delivery and comply with the Electricity Act (Chapter 13:19) of 2002. The reasons for seeking this tariff review encompass covering costs for electricity purchase, operations, maintenance, regulatory expenses, research and development, and general administration. Additionally, it aims to address previous-year under-recoveries and create the capacity to support economic growth in sectors such as mining, agriculture, industry, and tourism.

ZETDC also pledges to implement internal measures to enhance revenue collection and reduce system losses. These measures include completing the prepaid metering program, deploying smart meters, and migrating medium and large power users to prepayment. Furthermore, the company intends to finalize statistical metering to enable load balancing, automate manual processes for greater efficiency, reinforce and rehabilitate the network, decommission and repurpose small thermal plants, and conclude the construction of transmission lines and substations to evacuate power from Hwange Units 7 and 8 projects, totaling 600 MW.

A comparison of electricity tariffs across the Southern African region reveals that ZETDC currently has one of the lowest rates. For instance, South Africa charges 11.2 cents/kWh, Namibia charges 16 cents/kWh, Mozambique charges 12.4 cents/kWh, and Madagascar sets the tariff at 15.3 cents/kWh. In Mauritius, it is 14 cents/kWh, Malawi charges 12.6 cents/kWh, Eswatini sets it at 14 cents/kWh, Botswana charges 11 cents/kWh, Zambia has a rate of 7.4 cents/kWh, Tanzania's tariff is 10.54 cents/kWh, and Seychelles charges 27 cents/kWh.

Despite enjoying stable power supplies in recent months due to the commissioning of two generators at Hwange Power Station, which added 600 MW to the grid, Zimbabwe has experienced a return of load shedding in recent weeks. This is partly attributed to reduced generation at Hwange Power Station, likely resulting from ZETDC's inability to pay its debt for purchasing electricity.

Hwange Units 7 and 8 were funded through foreign investment and contracted in foreign currency, leading to higher costs. ZETDC is believed to buy electricity at a rate of 12 cents/kWh but sells it to consumers at an average rate of 10 cents/kWh, resulting in a production cost deficit. This has led to an accumulated debt of over $60 million from Hwange Units 7 and 8, posing a significant threat to the country's power supply.

Recent power statistics from the Zimbabwe Power Company indicate reduced generation at Kariba Power Station due to low dam levels, a situation expected to persist until after the rainy season in April next year. Importing power from neighboring countries could be a short-term solution to address this power crisis. However, Mozambique and Zambia have discontinued electricity supply to Zimbabwe due to contractual issues, underscoring the need for a tariff review to bolster the utility's capacity to secure imports and meet domestic demand.