ZESA wants tariffs to be hiked by 67% in US dollar terms

Zimbabwe’s power utility ZESA is fighting for electricity tariffs to be raised from the current average of around US$0.09 per one-kilowatt-hour unit to US0.15. If the hike is approved it will result in at least a 67% rise in the cost of electricity per unit. Currently, ZESA’s electricity tariffs are based on US dollar prices of US$0.104 per kWh although the tariffs are stepped which means that electricity gets increasingly expensive for those who consume more per meter. According to ZESA thanks to rate movements customers were now only paying an average of US$0.07 against costs of US$0.1096 per unit. The biggest expense it seems is importing electricity from Zambia, South Africa and Mozambique as Zimbabwe has a power deficit.

The weighted average cost of imports from EDM, HCB, ZESCO, and Eskom is 10.9 cents per kWh and the cost of internal purchases from Zimbabwe Power Company (ZPC) and Independent Power Producers have a weighted average cost of 8.6 cents per kWh but we are selling at 7 cents kWh.

Just buying at 10.96 cents and selling at 7 cents, without putting additional operational costs there, how do you think we survive, our cash flows are going south, I tell you we are surviving by not paying suppliers on time.

For many years we have been crying for a cost reflective tariff of 12.3 cents kWh but circumstances have changed especially due to borrowings that we have had to do because of the insufficiency of our cash flows, so the weighted cost of average capital has affected our tariff requirement to the extent that the tariff requirement in terms of cost reflectivity is now beyond 15 cents per kWh, that’s what we require to operate optimally.

Howard Choga ZETDC Acting Managing Director

A temporary solution that will not solve anything

While ZESA’s request is very valid and sensible it papers over the real problem-the power deficit. The government has failed to solve Zimbabwe’s very well-known power deficit problem and has chosen instead to waste money importing power from other players in the region. Starting in the early 2 000s Zimbabwe’s electricity demand was around 2 000 MW against power generation of around $1 400 MW on a good day. To cover this deficit ZESA has embarked on ruthless load-shedding as well as relied on expensive power imports.

Real permanent solutions are, however, what is required. These can include the following steps:

• Putting a freeze on rural electrification unless power generation has improved. The current deficit is mostly due to the fact that the government has chosen to expand the grind to rural areas effectively increasing demand without putting much effort in improving power generation
• Find a partner who is willing to invest in the Batoka power generation project and turn it into reality instead of the political word it is right now. A fully functional Batoka project would solve all our electricity woes.
• Scrap bureaucratic requirements for independent power producers and introduce fair electricity tariffs that incentivise them to feed into the grid.
• Scrap fees for independent power producers who should only be required to register.
• Make it easier for those who own solar domestic installations to feed power into the grid and pay a fair tariff for this. Currently, solar owners who choose to feed into the grid only get a fraction of what they put back as a credit
• Invest more in solar power plants and micro and mini hydro power plants instead of relying on large monolithic power stations like Hwange and Kariba that sometimes fail.

NB Some of these measures require cooperation with other agencies such as ZERA.