Mera explains IPPs tariffs

 

Malawi Energy Regulatory Authority (Mera) says the coming in of Independent Power Producers (IPPs) will increase the cost of electricity, ending speculation on the affordability of electricity.

At the current 351 megawatts (MW) capacity, the country still fails to meet its demand as Energy Generation Company (Egenco) supplies between 145MW and 150MW to Electricity Supply Corporation of Malawi (Escom) against the average demand of 300MW.

However, Mera says while it projects to add 200MW to the grid going through single buyer arrangements, consumers will have to pay for the costs due to better services and efficiency.

Nkula A under construction: Upon completion, more IPPs will be accommodated in the power grid

The Ministry of Natural Resources, Energy and Mining developed a pricing model for the IPPs but to date, no IPP has reached a Power Purchase Agreement (PPA).

Speaking on the sidelines of a media sensitisation workshop on developments in the energy sector in Salima on Monday, Mera director of electricity and renewable energy Welton Saiwa said while the regulator will end up with least costs, IPPs will come in as private investors operating on a commercial basis.

He said: “When we talk of IPPs, we are considering the private sector and that is commercial money. The alternative is for government to do big investments. But the big question is, does government have the money to do the investments? That is why perhaps we are going to the private sector to come in and invest and they will do it on commercial basis.

“As long as you are doing more investments, you expect to make more money, and therefore, you don’t expect the tariff to be the same because as you go through those processes, there is a new cost on board.”

Mera director of economic regulation Eunice Potani said, so far, there are five IPPs and three have signed a memorandum of understanding with Escom while the other two; Kwam’mwamba and a mini-hydro project are being reviewed by Mera.

“We will have efficiency when these IPPs come. As a regulator, we wished we had signed them yesterday because for now, what is of concern is the capacity needed to bridge the capacity gap,” she said.

In an earlier interview, former Escom chief executive officer Kandi Padambo said while the country urgently needs IPPs, especially in areas of power generation, the price of electricity should be at fair value between a willing buyer and a willing seller.

“IPPs should be generally welcome, particularly in the areas of generation capacity expansion and diversification of our power sources. Competition always benefits the customer. However, that competition must be genuine and not artificial if the electricity customer is to really benefit,” he said.

Padambo said if Escom buys the electricity from the IPPs other than as a willing buyer, the country may not see the benefits of that policy. n

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