Losses choke Zesco

By AARON CHIYANZO & KETRA KALUNGA
ZESCO is suffering heavy losses as a result of subsidising domestic customers leading to the company accruing more debt to banks and independent power producers, Zesco senior manager for corporate affairs, John Kunda has said.
Dr Kunda said Zesco sells power to domestic customers at about US cents 4.3/kWh and was vulnerable to foreign exchange rates, the tariff mismatches representing a subsidy of up to US cents 5.6/kWh.
He said in as much as the cost of a new connection was borne by the customer, the power utility company was spending more on each connection.
“As an example that for a standard connection in Kalingalinga, whilst the customer pays K769, the total connection costs including duplex cable, a meter, and labour as well as transport may range between K4, 500 and K5, 000,” Dr Kunda said in an interview.
Dr Kunda also said connection fees have not been adjusted since 2005 despite the increase in the cost of materials.
He also said despite tariff adjustments awarded to Zesco, the depreciation of the Kwacha reverses any gains and increases the subsidies that were required to be provided to domestic customers.
“These subsidies are unsustainable, as Zesco must continuously close the funding gap by borrowing from the capital market to connect its customers,” said Dr Kunda.
Dr Kunda said the pricing disparities between the cost of providing services and what the local market actually pays had resulted in accumulation of millions of dollars in debt to banks and the Independent Power Producers.
“Millions of dollars are owed in debt to banks and IPP such as Maamba Collieries Limited, Itezhi-tezhi Power Corporation, Ndola Energy Corporation Limited as well as Lunsemfwa Hydro Power Corporation, amongst others,” he said.
Dr Kunda said the only sustainable solution was for the entire electricity supply industry and all customers to quickly move to cost reflective tariffs.