The Sunday Mail
Industry lost US$5,2 billion last year
Zera insists load shedding is unnecessary
THE ugly tiff between the Zimbabwe Electricity Supply Authority (Zesa) and energy regulator, the Zimbabwe Energy Regulatory Authority (Zera), where the former feels that it is being unjustifiably denied a tariff hike by the latter, is slowly dragging industry into the dark.Zesa believes that the tariff hike is critical to fund its power generation projects and power imports. Through its subsidiary, the Zimbabwe Electricity Transmission and Distribution Company (ZETDC), Zesa has begun load shedding as a way of managing power supplies to both industry and domestic users.
This could possibly affect the nascent recovery that was beginning to take root in local industries, especially after Government restricted the import of selected goods in July. Statistics from ZETDC show that last year, load shedding withdrew more than 1 813 giga watts hours (GWh) of power from market, which potentially prejudiced industry of business worth more than US$5,2 billion.
Experts say there is a direct correlation between power consumption and economic output as the economy loses US$2,89 per kilowatt hour (KWh) for every unit of unsupplied power.
Low tariffs and defaults
Zesa claims that a non cost-reflective tariff — currently pegged at US9,86c per KWh, compared to a regional average of US14c — has led the power utility to rake up losses of US$517 million between 2009 and 2016. While Zesa’s power tariff is marginally higher than that offered by Lesotho Electricity Company (US8,18c) and the Botswana Power Corporation (US9,74), it is relatively lower than those offered in Swaziland at US 10,53c, South Africa (13,54c), Namibia (14,21c), Uganda (17,40c) and Tanzania (US19,05c).
Tariffs in Tanzania and Uganda are noticeably higher because of the use of diesel power plants to augment supplies. Utilities in Botswana and Swaziland get government subsidies. While hydro electrical power is cheaper than other energy sources, Zimbabwe is presently getting most of its supplies from thermal power at Hwange Power Station.
The local average tariff from various power sources, which experts usually refer to as the energy mix, is pegged at US8,8c per unit at source without transportation. ZETDC managing director Engineer Julian Chinembiri said last week the power utility will soon be forced into a difficult decision of switching off the lights owing to the low tariff and debtors who are reluctant to settle their bills.
While Government wrote off debts worth more than US$80 million owed by energy customers on September 7, 2013; debts are slowly creeping up again. Miners are presently indebted to the tune of US$52 million, while industry owes more than US$210 million. Other commercial consumers owe the most at US$436 million.
Domestic consumers and farmers are also saddled by debt obligations of more than US$294 million and US$84 million respectively.
Engineer Chinembiri warned last week that the mounting debt will ultimately affect the country’s ability to pay for imports.
“This (debt) may lead to failure to procure power, leading to load shedding. ZPC (Zimbabwe Power Company), a power generating subsidiary of ZESA, is owed and struggling to pay, threatening generation.
“Eskom, HCB (Hydro Cahora Bassa) and Dema require upfront payment,” said Eng Chinembiri.
It is believed that payments to the three critical suppliers are already in arrears and the companies have since threatened to discontinue supplies.
Although ZETDC has been buying power on a pre-paid basis from Eskom, it has not been keeping up with payments as debts have since ballooned to US$8,8 million.
Overall, its debts, excluding historical debt, stand at US$987 million. Incidentally, the size of ZETDC’s debt is equivalent to the sum that it is owed by consumers. According to Engineer Chinembiri, the company “may require financial bail-out in the near future”.
Displeased by blocked tariff hike
But it seems the recently blocked tariff hike is displeasing ZETDC the most. In January, ZETDC applied for a 49 percent increase in tariffs to US14,69c but it was not approved by Zera, which claims that an increase in electricity charges would unnecessarily add an unwanted cost to business.
In fact, Zera believes that Zesa has the ability to supply power to local consumers without necessarily resorting to load shedding.
“When Zera makes decisions on tariff applications, the reasons are always provided as to why and how the decisions would have been arrived at.
“Zera has a number of options available to optimise current supply without resorting to load shedding. An increase in the electricity tariff is not the solution to power supply,” said Zera’s acting chief executive officer Engineer Misheck Siyakatshana last week.
But ZETDC contends that there are currently no efficiencies to improve.
It actually claims that this year alone, it will lose more than US$189 million in revenue due to the rejected tariff application.
“What are efficiencies? For me ‘efficiencies’ is now just a catchword. Since 2011 when we applied for tariff increases, they have been saying improve efficiencies.
“People should look at the real things. Our power stations are old. Hwange, for instance, was built before lndependence and was commissioned in the 1980s and you can’t talk of efficiencies for such a station,” said Eng Chinembiri.
A discounted tariff is also thought to be discouraging investors, especially independent power producers (IPPs), from embarking on planned projects.
Of the 18 IPPs that have been licenced, only seven are operational.
And only two IPPs — Pungwe B and Green Fuels — are contributing 2MW and 4MW respectively to the national grid.
Faced with limited prospects of pushing through a tariff hike, Zesa has had to embark on an aggressive six-month debt recovery strategy that involves legal action and hiking the debt recovery rate to 50 percent. It is forecasted that through the system, over half of the US$1 billion debt would have been recovered by year end.
So far, more than US$28 million has been raised since the hike. Also, supplies to over 35 000 customers with a combined debt of US$140 million have been cut, while cases involving debts of over US$572 million have since been handed over to lawyers.
In addition, summons have been issued for debts worth US$162 million.
Maintenance backlog
As ZETDC’s finances become increasingly stretched, there are fears it might fail to maintain the infrastructure that is currently supplying the local market. An estimated US$20 million is currently needed to replace faulty transformers at Alaska, Mutorashanga, Chertsey, Hwange and Orange Groove.
Another US$12 million is needed to replace faulty distribution transformers while US$10 million is required to maintain other critical spares and consumables such as switch gear (switching equipment used in the transmission of electricity) and communication equipment.
It is believed that deferring planned maintenance will likely result in increased forced outages and increased response time to faults. For example, ZETDC has not been able to restore power to more than 200 customers in Nembudziya, Gokwe, for the past seven months.
There are also difficulties in connecting more than 102 000 new customers to the grid as the project requires an estimated US$17 million. In addition, the smart meter project, which involves the acquisition of 40 000 smart meters, and the purchase of 130 000 pre-paid meters, is still in limbo.
However, there are other urgent projects such as the replacement of Kariba power evacuation cables at a cost of US$14 million in order to ensure the security of supply.
