Zesco justifies need for cost reflective tariffs 

Wed, 12 Apr 2017 06:08:17 +0000

ZESCO will continue to import electricity from Independent Power Producers (IPPs) at a total cost of US $502 million this year in order to meet local demand for power, managing director Victor Mundende has said.

Mr. Mundende said due to the expensive electricity that the utility company will be importing, there was need to adjust the price upwards in order to sustain the importation of power as Government was no longer supporting the company as the move had proved unsustainable

He said as a result, the high cost of power from IPPs needed to be supported by an adjustment in tariffs so that Zesco could continue to make these purchases, adding that while Zesco received support from the Government for purchases of power from IPPs and imports in 2015 and 2016, it now expected its tariffs to be cost-reflective.

He explained that Zesco will purchase 4,543 GWh of energy from Independent Power Producers (IPPs) in 2017 at a total cost of US $502 million and that the average cost of these purchases was US 11.04/kWh, against an average selling price of US 3.3/kWh.

“In 2015 and 2016, Zesco received support from the Government for purchases of power from IPPs and imports. However, the Government now expects tariffs to be cost reflective as this level of support is not sustainable. Zesco will purchase 4,543GWh of energy from Independent Power Producers (IPPs) in 2017 at a total cost of US $502 million.

“The average cost of these purchases is US cents 11.04/kWh, against an average selling price of US cents 3.3/kWh. The high cost of power from IPPs needs to be supported by an adjustment in tariffs so that Zesco can continue to make these purchases,” Mr. Mundende said.

He explained that the Zambian electricity sector needed regular tariff adjustments in order to secure reliable electricity and reduce load shedding.

He said increasing electricity tariffs had huge benefits to the country such as increase in national access to electricity, thereby improving the standards of living of the people.

He also noted that in order for Zambia to attract investment from the private sector in all the economic sectors, there was need for the country to charge cost-reflective tariffs that would trigger the desired investment towards power generation.

Investments in various capital projects for power generation would also lead to increase in access to electricity, thereby minimizing the use of other energy sources that had a negative impact on the environment, he said.

He said regular tariff adjustments by Zesco were inevitable as they were a key to improving generation, transmission and distribution infrastructure required to meet demand for electricity to end load shedding.

“The Zambian electricity sector needs regular tariff adjustments in order to secure reliable electricity and reduce load shedding as well as increase national access to electricity, thereby improving the standards of living for the people. This also attracts investment from the private sector in all the economic sectors and increase access to electricity to minimize use of other energy sources that impact the climate adversely. “Zesco needs regular tariff adjustments in order to invest in the new generation, transmission and distribution infrastructure required to meet demand for electricity to end load shedding. The consequences of not having tariff adjustments include under-investment in the energy sector, insufficient capacity to support accelerated growth in the economy, unreliable quality of supply of electricity and perpetual load shedding,” he said.