Escom unbundling to end June 2016
- New company to distribute, transmit power
Government says the splitting of the sole power utility company, the Electricity Supply Corporation of Malawi (Escom) into two parastatals is expected to be complete by June next year.
The unbundling of Escom, which has over the years been enjoying the monopoly of power, is currently being undertaken under the Power Market Restructuring (PMR), a process which will see the establishment of a single buyer, systems and market operators, redesigning of regulatory process, changes in the Electricity Act of 2004 as well as the establishment of an independent power producers (IPPs) procurement process.
Principal Secretary in the Ministry of Natural Resources, Energy and Mining Ben Botolo disclosed this on Friday in Salima when he addressed journalists during a media sensitisation on PMR organised by the Millennium Challenge Account (MCA) Malawi.
Botolo said following an international research of power market models conducted by a Spanish firm, AF Mercados, Malawi government settled for model five which will see Escom being split into two companies.
“In essence, what will happen is that there will be Escom Generation as one parastatal and the other company that will concentrate on transmission, distribution and also system and market operation and also a single buyer,” said Botolo.
He clarified further that in terms of business, Escom will be concentrating on generating power before selling it to a new sister company as a single buyer which will take power to end users or customers.
He said government expects the process to be completed in 2016 and if there will be any spill over then the process would be complete in the first quarter of 2017.
Botolo said the two companies will have separate accounts, and technically they will also have to produce separate financial statements.
He said: “Currently, we are hiring consultants and also the refurbishment of NkulaA Hydropower Station and the hiring of consultants is underway to study the transmission line and also to look at the substations. We are looking at the procurement processes and towards the end of this year or the beginning of next year, we should see the people now on the ground.”
Botolo said the PMR is critical to Malawi as it will also boost private sector participation to increase the capacity of power generation, transmission and distribution.
Under the current power market structure, Botolo said, Escom is ‘enjoying a great monopoly’ and that the regulatory regime is not conducive to private investment.
“Escom monopoly is the single largest impediment to private participation and monopoly electricity utility is not conducive to technology or business innovation, customer oriented culture, power sector growth and economic efficiency,” he added.
On his part, MCA-Malawi deputy chief executive officer Lameck Mithi said the implementation of the PMR is likely to be one of the most important endeavors undertaken by government of Malawi in the energy sector.
He said the success of PMR programme will depend on the support and good will of various stakeholders including Escom board and senior management, Malawi Energy Regulatory Authority (Mera) board, MCA-Malawi board of Trustees, senior ministers and senior government officials.
