More money, more darkness: Tariff increase will NOT solve Zesa’s problems

Zesa spokesperson Mr Fullard Gwassira explaining how the prepaid metering system works.
Zesa spokesperson Mr Fullard Gwassira explaining how the prepaid metering system works.

Harmony Agere – Extra Reporter

Tariff increases alone will not solve Zimbabwe’s electricity woes, and power utility Zesa must deal decisively with critical issues like technical and non-technical leakages as well as poor debt collection that are hindering efforts to raise capacity, energy experts and economic analysts have said.

Zesa subsidiary, the Zimbabwe Electricity Transmission and Distribution Company, early this year applied for a 5 percent tariff increase from USc9,86 per kilowatt hour to USc10,36/KWh. This corresponded to a revenue requirement of US$890,60 million to supply of 8 594Gwh of electricity.

However, another subsidiary, the Zimbabwe Electricity Regulatory Authority, shot down the application.

“In coming up with the determination, the Zera board is of the view that the current tariff is adequate to meet ZETDC’s operations,” said Zera board chairperson Dr Ester Khosa. “The Zera board also expects ZETDC to improve its debt collection and operational efficiencies as well as reduce technical/ non-technical losses.”

Responding to this, the holding company — Zesa — said current tariffs hindered the drive to fund plant and network maintenance backlogs, which has seen the utility generating around 1 000MW against demand of 2 200MW.

Spokesperson Mr Fullard Gwasira said: “Zesa Holdings made a tariff application as mandated by the Electricity Act towards ensuring efficient service delivery. Zesa is cognisant of the prevailing environment and whilst efforts have been made towards making the tariff cost reflective, a lot more still needs to be done in that direction as the tariff is still to be cost reflective.

“Zesa is always reviewing processes to make them more efficient and thereby lower production costs. Unavoidably though, programmes such as maintenance may have to be scaled down to ensure that we operate viably.”

Energy experts like Professor Anton Eberhard have in the past said at below USc10/KWh, Zesa’s tariffs are the lowest in the region therefore frustrating its revival.

He said a cost-reflective study showed electricity in Zimbabwe should cost between USc10 and USc15/KWh.

However, local experts say a tariff increase is not central to Zesa’s turn around.

Instead, they say, Zesa should find ways to coup the debt it is owed by customers which is believed to be over US$800 million — more or less the same amount it needs to generate adequate power.

Since introduction of the multi-currency regime in 2009, Zesa has effected three tariff increases but generation capacity has not grown.

University lecturer and economic analyst Dr Takawira Mumvuma said the tariff model in use held back Zesa’s internal capacities.

“Blame can also be equally apportioned to the Rate of Return (ROR) price determination model, which only caters for revenue collection meant to cover recurrent expenditure, but not capital expenditure which is very high for Zesa at the present moment,” he said. “The implicit assumption built in the ROR methodology is that infrastructure rehabilitation and development should be met from the returns on assets which is pegged at 8,5 percent of the net asset value

“However, Zesa has not been able to get a return due to the inability of consumers to pay.

“Even if the consumers were in a position to pay the 8,5 percent of the net asset value, it is still inadequate to improve the dilapidated power generation, transmission and distribution infrastructure given the fact that the funding needs of ZESA are in excess of US$8 billion.”

It has also emerged that Zesa is losing about 17 percent of generated electricity through technical inadequacies. Normally, such losses should not exceed 11 percent. In essence, it means for every 1 000MW Zesa generates, only 830MW reach consumers.

Technical loses occur during transmission and distribution via obsolete infrastructure or dissipation of transmission lines. Furthermore, some consumers engage electricians to help them bypass meters, meaning they get free electricity.

While installation of pre-paid meters has improved Zesa’s revenue collection, it has also left the company prone to electricity theft as customers circumvent the gadgets. This has seen the utility opting to install smart meters, which are harder to tamper with.

Zesa is also yet to deal decisively with people who have been connecting themselves in informal settlements.

Figures also show that about US$230 000 has been lost through electricity theft this year alone, while customers continue to default.

Energy expert Mr Benson Mavedzenge said 4 percent and 17 percent of electricity is lost at transmission and distribution points, respectively.

He said installation of energy balance bulk smart meters at sending and receiving points on the transmission grid would help address the situation.

“This enables losses of energy to be isolated easily to a specific line consisting of a few kilometres to be investigated by line maintenance crews,” he said.

For non-technical losses, he said: “Large-scale application of Advanced Metering Infrastructure (AMI) can significantly contribute to sustainable development and efficient performance of power sector in developing countries. AMI provides powerful tools to reduce total losses and increase collection rates. Its application has the following positive impacts.”

Consumer Council of Zimbabwe executive director Mrs Rosemary Siyachitema said her organisation was totally against any tariff hike as nothing had changed in terms of salaries and wages of consumers.

“We had long rejected the proposal when it was first made because to us nothing prompted such an increase,” she said.

Other experts say Zesa should attract investment, as has been seen with partnerships with Chinese firms for works on Kariba and Hwange power stations, instead of rushing to effect tariff hikes.

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