ZESCO SEEKS ADJUSTMENT OF ELECTRICITY TARIFFS

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By BENNIE MUNDANDO

ZESCO has applied to the Energy Regulation Board (ERB) for adjustment of electricity tariffs owing to prevailing economic conditions, system customer base expansion, and the rising cost of power from its new infrastructure and Independent Power Producers (IPPs).

But fixed tariffs on which most domestic household fall will remain static.

If approved, customers on residential metred tariffs will pay 0.47 from 0. 15 while under the same category, those who consume above 101Kwh to 300kwh will pay 0.85 and those consuming 301 and
above will pay 1.94.

According to a notice signed by managing director Victor Mundende, the company has applied for an upward adjustment owing to a steady inflation rate which has made the price of goods and services increase thereby triggering Zesco’s operational costs over time.

Mr. Mundende noted that lending rates had continued to rise from 2017 to 2018 with the six month LIBOR rising by over 100 points during the year 2018 and that this entailed a higher cost of the debt for both existing and new short-medium term debt, impacting on project implementation by both the public and private sector.

“The adjustments were necessitated by prevailing economic conditions. Additionally, the cost and
viability of utility projects is affected as they are premised on higher cost of borrowing.

The Kwacha has continued to fluctuate against the US Dollar over the past two years.

Given that the bulk of Zesco’s equipment and supplies are procured in foreign currency, the depreciation of the Kwacha leads to higher operation costs in Kwacha terms.

“In addition, Zesco plans to continue with its system planned expansion and reinforcement which will enable the company to improve the quality of service and meet the anticipated increase in demand for electricity from existing and new customers,” reads the notice.

He said the rising cost of power from new Zesco generation infrastructure and Independent Power Producers (IPPs) had also, prompted the adjustment proposal adding that the suspension of the Cost of Study (CoSS) also contributed to the need for an upward adjustment of electricity tariffs.

“The cost of power from new generation infrastructure is much higher than the cost of generation from old depreciated power plants. As the proportion of generation from new power plants increases to meet the increasing demand, the overall cost of electricity generation increases.

This means that the sell prices have to rise in order to keep the sector sustainable and enable it to continue growing along with the economy. However, the suspension of the CoSS pending the appointment of a new consultant to complete it has resulted in the need for Zesco to make tariff adjustment application in order to mitigate the rising costs of operation especially from the cost of power from new power plants,” reads the notice.

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