Zesa warns of massive power cuts

Published: 06 April 2018

THE country's power utility, Zesa, has warned that it could start rolling out power cuts three years after stopping them due to supply constraints, as government remains reluctant to approve a tariff hike ahead of crucial general elections by July, it has been established.

Official figures from the Zimbabwe Power Company show that the country is currently generating 1 229MW from its five power stations against a daily peak demand of 2100MW. Zesa now relies on regional imports to offset the deficit.

Zesa chief executive officer Josh Chifamba told the Zimbabwe Independent this week that the utility has been struggling to meet its obligations due to foreign currency shortages and lower tariffs. This comes barely a month after Energy minister Simon Khaya-Moyo shot down Zesa's proposed tariff hike. Zesa wants to increase tariffs to an estimated US15 cents per kilowatt hour (kWh) from US9,86 cents per (kWh.)

The latest application by Zesa for a tariff increase has also been fiercely opposed by the Confederation of Zimbabwe Industries (CZI), arguing that increasing power charges would derail efforts to push for the recovery of the country's manufacturing base.

"First of all you need to know that the last time we had a tariff increase was in 2011 and from 2011 to now the ground has shifted a lot. In 2011, we had Kariba contributing fully, but come 2015, Kariba stopped producing at the level we were producing in 2011 because of the water situation (drought). We then had to employ other more expensive sources of electricity which we have done," Chifamba said in an interview.

"In 2011, we had not started building Kariba and an additional cost item arose even during the time we were building Kariba. There was interest during construction and we did not have cost cover for that. It was about US$56 million. Now with the bond notes and the issue to do with forex, there is a premium on foreign currency and our suppliers who supply consumables they are factoring that into the items we buy from them. There is so much that has been happening, if you look at our salary bill, we have actually kept it flat.

"So the costs that we want covered are legitimate costs, they are external costs, they are externalities to us and they should simply be in accordance with the tariff that we have but we have not been able to pass through to customers and at the same time we don't have the capacity to absorb those costs."

Commenting on regional tariff levels in relation to Zimbabwe, Chifamba said countries like Zambia were relying solely on hydroelectricity, whose cost is lower than thermal.

Consumers and industry captains have over the years criticised Zesa for charging higher tariffs, which they said were making Zimbabwe uncompetitive.

"Those comparisons are nice to have, but the conclusions that are drawn from those comparisons are wrong. If, for instance, the Zambian tariff is lower than ours, it is lower because Zambia electricity is mainly hydro-based whereas ours is a mixture of thermal and hydro. So our costs of production will obviously be higher than their cost of production," Chifamba said.

"I think a more appropriate comparison is one where people compare the cost of power now and the cost of not having it because we have just thrown almost everything into it just to make sure that we have enough supply to meet demand. As you recall we have not done any load shedding since 2015 and if we then go back to 2015 when there was load-shedding, some of these customers were actually using diesel generators, which at that time was costing them about 40c/kWh, where we were charging 9,86c/kWh. So we are not yet out of the woods in-so-far as supply situation is concerned. The supply situation is still very tight. If this resistance becomes the order of the day, ultimately we will not be able to supply and when that happens we have to start load shedding and what will kick in now are prices that are much higher than the prices we are asking for.

"Our debt is now over a US$1 billion which is equivalent to about 400 days of revenue for us and that is not a healthy situation. Customers have a right to get electricity, but they also have an obligation to pay for it and that's where we have been coming short and it does impact on our operations badly. We then don't have sufficient liquidity to carry out all of our operations," Chifamba said.

Turning to revenue collection Chifamba said 38% to 40% of Zesa's income is now prepared, adding that the utility plans to roll out 4 000 prepaid meters for commercial consumers this year.

"We are also going out to employ pre-paid metering for industrial customers, which means for the other 60% of our income and we are very excited about it and we will start with about 4 000 meters sometime this year. Obviously those 4 000 will be deployed where we think we will derive maximum benefit," he said.
- the independent

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