Two days after an animated public hearing on the national power utility’s application to introduce emergency power tariffs, the energy sector watchdog, Energy Regulation Board (ERB), rejected the application to avoid “unintended consequences on the economy”.
ZESCO sought to raise US$14 million from three customer categories as their contribution to a monthly import bill running into millions of dollars to enable the company to bring in critical power imports to arrest the ever-plunging power deficit the country is experiencing due to its worst-ever drought.
However, in rejecting the proposal in its entirety, the ERB says ZESCO is highly unlikely to raise sufficient revenue from the emergency tariffs to meet the monthly bill needed to import power.
ERB Chairperson James Banda said, “The projected monthly requirement may not be raised due to suppressed demand from both retail and non-retail consumers. ZESCO will still require extra intervention beyond the proposed emergency tariff measures.”
The regulator was also concerned that if the tariffs were approved, they would trigger energy poverty for affected consumers, cause inflationary pressure, spike production costs, and lead to potential job losses for many.
The ERB fears that higher energy prices may crowd out household spending on other essentials, including food and healthcare.
“There will be subsequent increases in the prices of goods and services, which are likely to be sticky upwards and may not revert to the old levels,” Banda said.
This would ultimately affect the same majority of the power users whom ZESCO intended to exclude from the increment.
Banda added that the proposed price hikes would not decrease the ongoing load shedding because, despite the increment, ZESCO does not intend to decrease the outage hours.
This is because the imports are meant to replace, rather than supplement, the 300MW expected to be lost in September when the Maamba coal plant shuts down for scheduled maintenance and the Kariba North Bank power plant shuts down after depleting its entire allocation of water for power generation for this year.
Prior to the application being brought to the market, the government had announced that ZESCO would from September onwards increase load shedding to 17 hours daily.
“It is noted, however, that despite the proposed increase in tariffs, the utility does not intend to decrease the hours of load shedding. This is of particular concern as the lack of stable and reliable electricity has been detrimental to business operations,” said the ERB.
Banda observed that while the proposed emergency tariffs were also aimed at compelling domestic consumers to switch to alternative energy sources such as solar and liquified petroleum gas in a bid to save power, the slow switch to alternative energy solutions for low-income consumers due to high start-up costs was concerning as they would not keep up.
“The uptake of alternative energy sources is slow and, therefore, most low-income households will likely not be able to switch to these sources in the short term.”
Zambia is facing its worst drought because of the El Nino weather as the last rainy season had very little precipitation, severely impacting hydroelectricity generation on which Zambia depends for at least 85% of its electricity.
As a result, the country’s installed electricity generation capacity has dropped to a third, causing severe economic and social shocks as authorities scramble to find solutions to avert economic collapse.
During the public hearing, ZESCO managing director Victor Mapani stated that shutting the economy was the biggest issue the utility was trying to avoid and that not doing something about the tariffs would result in a much worse situation than was currently obtaining.
ZESCO had hoped to have the emergency tariffs for nine months, reviewed after three months. Having agreed to higher tariffs with large users, the power company sought to adjust tariffs for domestic, commercial, and maximum demand consumers by a combination of reducing, maintaining, and raising tariffs for the different user categories from 38% to 156%.
