Blackouts to cost more

Electricity consumers now have to look up to Malawi Energy Regulatory Authority (Mera) to check Escom’s plans to raise tarrifs amid persistent blackouts and rising cost of living.

Power utility Escom and its breakaway company, Power Marketing Limited (PML), have proposed a 99 percent tariff hike spread over four years, starting with an 80 percent increase this year alone.

But the proposed tariff hike has attracted mixed reactions, with experts, saying Escom is justified while consumers say the increase is unreasonable.

The two firms say the current tariff structure is outdated and does not reflect the true cost of generating power.

The 2022-2026 electricity base tariff application the firms have submitted to Mera wants electricity tariffs hiked by 80.75 percent from the current K104 per kwh this year.

If Mera approves the hike, the price of electricity could go up by K83.98 from the current price of K104 per kwh to K187.98 in the 2022-2023 year.

In the 2023-2024 year, the price could be adjusted to K184.18 per kwh while in the 2024 -20225 and 2025-2026 the price might go up to K210.59 per kwh and K249.15 per kwh, respectively.

Escom says throughout the period of 2018-2022 base tariff, energy sales were below target due to, among other reasons, the drought experienced in the country between 2017 and 2019.

The firm also says non-implementation of the phased tariff at the beginning of the base tariff period and automatic tariff adjustment mechanism (Ataf) affected them.

Escom further says it faced high technical and commercial losses of 22.2 percent at the end of the tariff period against a target of 16 percent, among other reasons.

It also cites the unavailability of 130 megawatts from Kapichira Hydropower Plant as having contributed to revenue losses.

Escom says these factors led to total revenue loss of K112.5 billion from July 2018 to March 2022.

Energy expert Kandi Padambo, who is former Escom chief executive officer, backed the utility firm’s proposal, saying power sector reforms in the country have done more harm than good, especially the splitting of Escom into three entities; namely, PML and Electricity Generation Company.

He said: “The problem in Malawi is we make politically influenced decisions and not take long-term views based on economic realities.  Escom could, therefore, be justified as it has to meet unnecessary expenses that have been imposed on it.”

Economics Association of Malawi executive director Frank Chikuta agrees with Padambo, saying currently Escom is buying electricity at K140 per kwh and selling the same at a lower price of K104 per kwh.

He said: “This essentially means they are operating at loss. In the long-run, Escom will not be sustainable as they are selling their product below the cost of production.”

Chikuta said this could be the reason Escom wants the cost gap covered.

“In time, this deficit goes to the national budget, which already has a gap we are failing to plug. By increasing debt for the government to pay, then we are increasing the principal deficit which we are grappling with,” he said.

But Consumers Association of Malawi executive director John Kapito yesterday said Escom is not justified to increase tariffs.

He said Escom has failed to perform to the expectations of Malawians because of inefficiencies.

 “Since the last base tariff was effected four years ago, Escom has failed to achieve any of the agreed key performance indicators [KPIs].

“It is unfortunate that Escom expects to make money when it has no electricity and makes a lot of poor management decisions,” he said.

The proposed tariff hike follows Escom chief executive officer Kamkwamba Kumwenda’s recent comments that the utility is on its deathbed due to losses.

Mera consumer affairs and public relations manager Fitina Khonje yesterday said the energy regulator will review the tariff adjustment  proposal.

“We are seeking comments and suggestions on the proposed tariff increase as mandated by   the country’s energy laws.

“This is very important in the tariff determination process so that the authority can arrive at an appropriate decision that takes into account both consumer interest and sustainability of the electricity sector,” she said.

In October 2018, Mera approved a 31.8 percent Escom base tariff covering the four-year period from 2018 to 2022.

The implementation of the base tariff was segmented into four annual tranches as follows: 20 percent, 7.20 percent, negative three percent and 10 percent tariff adjustments for the first, second, third and fourth years, respectively.