Emergency power imports too costly-ZCM

Fri, 24 Mar 2017 13:41:11 +0000

By BUUMBA CHIMBULU

EMERGENCY power imports currently at an average of 62.5 percent are being over-priced as it they are above the global benchmark cost of generation and are unsustainable, says Zambia Chamber of Mines (ZCM).

ZCM president Nathan Chishimba said emergency power importation was expensive and a worrying use of Government resources as colossal sums of money was being spent.

Finance Minister Felix Mutati announced recently that Government was spending an average US $30 million on power imports per month and the country could not sustain the expense.

Said Mr Chishimba: “However, it is not just emergency imports that appear to be over-priced. Proposed tariffs on some of the new power generation projects that are coming on stream are also well above international benchmarks.

“For example, according to a study by one of our members, the proposed electricity tariffs for Maamba Collieries and Itezhi-Tezhi are on average 23 percent higher than global benchmark costs,” he said.

Mr Chishimba said these procurement cost inflations included ZESCO’s own internal cost efficiencies which were unnecessarily escalating the power utility’s revenue requirements to levels that were totally unsustainable for power customers.

He said mining operations could not consume less power without damaging their operations, as reduced production meant relatively higher fixed-cost overheads, as could be seen from the price inelasticity of electricity.

“If tariffs were, therefore, increased to meet ZESCO’s inefficiency fuelled by revenue requirements, there would be no option but to absorb them. But this would necessarily lead to cost-cutting in other business areas, or if there was no further room for manoeuvre, the possibility of moving unviable operations to ‘care and maintenance’ are inevitable,” he said.

Mr Chishimba also observed that electricity losses, or leakages, were inevitable in a national grid.

He explained that technical losses were always heaviest in the distribution network, during the ‘stepping down’ process.

Mr Chishimba further said what was not predictable was the amount of losses, adding that in the developing world, it could be as high as 20 percent or more.

“Because the mines manage their own distribution networks, they bear their own distribution losses, whilst ZESCO must bear the losses of all other categories, as it is the distributor of electricity to them. These losses, and who bears them, make a significant difference in the calculation of the cost of service,” he said.