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Electricity tariffs up to facilitate investment

KELVIN CHONGO, Lusaka
THE Energy Regulation Board (ERB) has adjusted electricity tariffs to generate revenue that will facilitate investment in generation projects that are expected to add 1,500 megawatts to the national grid.
But the increase will not affect residential customers whose fixed monthly charge will remain at K18.23 “to enable the underprivileged to benefit without compensating those who are able to afford power”.
The new tariffs are expected to make Zambia competitive and attract the much-needed investment in the electricity subsector, which has been hard-hit by inadequate power due to poor rainfall.
Tariffs for various customer categories have been increased from an average of 37 ngwee to K1.13 per kilowatt-hour, which is an increase from six cents to 10.35 cents.
ERB said in a statement yesterday that the increase has been necessitated by Zesco’s inability to meet the high cost of imported power.
“Energy supply costs and revenues are affected by changes in macroeconomic factors such as inflation, exchange rate, interest rates and the operating environment,” the statement reads in part, and adds, “in the recent past, the country has seen marked deterioration in these factors which has resulted in escalating operational costs for Zesco without corresponding increase in tariffs”.
ERB says Zesco has signed power purchase agreements with independent power producers at higher than existing average tariffs, which could force the utility to default payment if local tariffs are not increased.
The energy regulator says Zesco buys power at seven cents to 13.23 cents per kilowatt-hour when the current average tariff is six cents per kilowatt-hour.
It says in terms of impact on household expenditure, consumers will experience marginal changes.
“For example, households consuming 11 kilowatt-hours per month, their monthly expenditure will not increase, but remain unchanged.
Meanwhile, households consuming 33 kilowatts per month, which is the consumption level for most low income households, their monthly expenditure will decrease by 38.23. Further, for households consuming 500 kilowatt-hour per month, their monthly expenditure will increase by K231.79,” the statement reads in part.
The statement says the tariff measures on residential customers will enable the underprivileged to benefit without over-compensating those who are able to afford the power.
The ERB also notes that the new tariff will be a challenge to small businesses and commercial clients, but it’s unavoidable if the country is to continue having power.
It says industries will, therefore, be expected to put in place effective energy management measures, including power factor correction measures.
And in an effort to provide equity in carrying the tariff burden, Government is in the process of engaging the maximum demand consumers so as to ensure that all consumers of electricity pay revised tariffs.
“With the new increment, Zambia’s tariff will average 10.35 cents per kilowatt-hour, which will be closer to the regional average of 10 US cents per kilowatt-hour,” the statement says.
The ERB says this tariff will make Zambia become competitive and attract the much-needed investment in the electricity sub-sector.
The statement also said that the proposed tariff adjustment is expected to generate revenue that will facilitate investment of US$3.7 billion in generation projects to add 1,500 megawatts to the national grid.


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