Power tariff hike faces resistance

ZESA queueBusiness Reporter
BUSINESS member organisations comprising manufacturers, miners and farmers have united to oppose the proposed tariff increase by the power utility, the Zimbabwe Electricity Transmission and Distribution Company saying it will reverse progress made towards addressing competitiveness.

The Confederation of Zimbabwe Industries, the umbrella body for manufacturers, the Chamber of Mines, Zimbabwe Farmers Union, Zimbabwe Commercial Farmers Union and the Commercial Farmers Union met and resolved to oppose the proposed tariff increase arguing that it is counterproductive.

This comes after the Minister of Energy and Power Development, Dr Samuel Undenge, last week said that Government was not going back on electricity tariff increases.

He said the proposed tariff increase is justified as ZESA was selling electricity at below cost and because the cheapest source of power, Kariba Power station has reduced production forcing the utility to import power. But Dr Undenge said he would ensure a win-win tariff.

The Zimbabwe Energy Regulatory Commission is currently conducting consultations on the proposed tariff increase.

In a statement yesterday the business member organisations said Zimbabwe cannot have cost increases in any of the inputs at this stage.

“Business member organisations met to discuss the proposed 49 percent electricity tariff increase application by ZETDC. It was clear that every sector represented at the meeting cannot afford any tariff increase and in fact some of the companies belonging to these sectors are struggling to pay electricity tariffs at current levels as evidence by the current $1 billion owed to ZETDC by some consumers,” the business member organisations said.

Instead of a tariff increase, the business member organisations want ZESA group to be restructured to reflect the reduced levels of electricity production, efficiency to be increased at generation centres and that the utility should reduce payroll costs.

“Inefficiencies at power stations need to be improved as we understand that energy conversion at Hwange Power Station is about 21 percent when the industry norm should be above 35 percent,” business said.

The organisations are not happy with plans introduction of diesel generators for 200MW at Dema substation saying that it will come at a huge cost to the economy.

“We are seriously perturbed by the decision that was taken to bring into the tariff equation the emergency power from diesel generation. This proposed 200MW emergency power is coming at a huge cost to the economy. The investment by the economy in this proposed scheme can be better utilised if deployed to give permanent solutions to this energy crisis, even if it means that permanent energy will be realised 3-5 years down the line,” the organisations said.

They said all imported power is coming from utilities operating in weak currencies and therefore the cost of power should be low not to cause a review of tariffs upwards.

Focus should be given to improving inefficiencies which could help create a virtual power station with an output of 300-500MW.

“This must be the focus area of the utility instead of taking the simplistic route of hiding these inefficiencies through tariff increases. Significant cost reduction can be realised within the utility itself. With pre-payment system now supposedly working, banking halls can be dispensed of. Head office overhead can be significantly reduced.

“Taking depreciation and return on assets out of the revenue required, we find that payroll costs are 32 percent and Zimbabwe Power Company and 20 percent at ZETDC which we believe should be reduced like what is happening in all other sectors of the economy,” the business organisations said.

They said regional competitiveness is under serious threat with the currency crises in emerging/regional economies.

“Strong headwinds are also facing commodities. With no monetary ability to devalue currency, there has to be internal devaluation to remain competitive. This, by definition, means costs (electricity included) have to come down,” they argued.

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