Editor's Comment

Cost-reflective electricity tariffs must be for all

MINING companies have benefitted from development agreements they signed with Government.

These include pro-rated taxes to allow them to recoup their investments.
Most of the development agreements were signed during the world’s worst economic recession and when the prices of minerals were very low.
Little wonder some mining companies were literally sold for a song and Government became a laughing stock by the same buyers.
However, circumstances have since changed and copper is selling at significantly higher prices on the international market.
It is good Government is re-visiting some of the terms of the development agreements which we believe were not cast in stone.
This includes undertaking a study which will speed up a `cost of service’ study to compel mining companies and other bulk electricity users to migrate to cost-reflective tariffs.
This is aimed at raising funds for power generation projects.
Others say: Another costly exercise. What are cost-reflective tariffs? What other kinds of tariffs are in use? Does it need research to reach a conclusion that has already been reached?
Minister of Energy David Mabumba has justified that the cost of service study will be used to come up with appropriate tariffs for each sector.
This is because the mining companies are big corporations and consume large amounts of megawatts of electric power, and use billions of litres of water in Zambia.
Most importantly, mining companies are profit-making enterprises, so they ought to be the first bodies to pay cost-reflective costs for services rendered to the corporate entities.
The production of electricity in Zambia is derived largely from hydro-electric plants, and Zesco, the principal source that generates electric energy in Zambia, produces it at a given cost and, in many cases, Zesco borrows funds from banks or international financial markets to invest in power plants.
These monies borrowed by Zesco need to be repaid to its creditors. This means that Zesco is a business firm that is responsible to its board of directors and shareholders as much as the mining companies which utilise the power produced by Zesco.
Secondly, the ordinary customers of Zesco who are law-abiding citizens are obliged to pay cost-reflective charges.
This includes quasi-governmental institutions, which also pay cost-reflective rates in Zambia. The mining corporations, too, must pay reflective costs because the operational expenses of producing a unit cost of electric power by Zesco is ever rising – and have to paid for by the users of the energy, and this means that the mining corporations cannot be excluded from paying reflective costs.
All mining companies in Zambia have the ability to pay cost-reflective charges there is no doubt about this fact.
Mining companies are a major source of Zambia’s foreign currency but preferential treatment should not be excessive.
Mining companies in Zambia should begin to invest heavily in green energy sources as part of their re-structuring of industry in order to cut down the costs of utilising energy sources from other producers like Zesco.
Solar energy is now being deployed by heavy industries at a global scale – it is much cheaper. Mining companies must adopt and begin to acquire industrial machinery which uses solar or wind energy in order to reduce their operational costs and maximise their corporate performances and grow their profit levels.

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