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Escom implements 16% electricity tariff hike

From February 1, electricity consumers are paying 16 percent more after Electricity Supply Corporation of Malawi (Escom) implemented the second-phase of its four-year tariff adjustment plan amid shortfalls in key performance indicators (KPI).

But Consumers Association of Malawi (Cama) and other stakeholders have described the timing of the approval as wrong, especially in view of the fact that Escom’s performance is marred by power rationing and other shortfalls much to the dissatisfaction of consumers.

Following the increase, consumers are now paying an average price of K142.98 per Kilowatt-hour (KwH), up from the previous K123.26.

In a statement announcing the adjustment on Friday, Escom said the increase is the second tranche of a four-year base tariff the Malawi Energy Regulatory Authority (Mera) approved in 2023.

“We assure our customers that the tariff adjustment would significantly help improve our service delivery,” reads the statement.

But in an interview yesterday, Cama executive director John Kapito said the tariff increase has been approved at a time when the public is dissatisfied with Escom.

Kapito: Escom service delivery is poor. | Nation

He said a leaked January 13 2025 letter from Mera chief executive officer Henry Kachaje to Escom highlighting poor handling of customer complaints confirms the assertions.

Said Kapito: “We would appreciate it if Mera explained why they have approved this base tariff increase given that it was conditioned on achievement of KPIs and Escom has not delivered on the promises made.”

In a separate interview yesterday, Chamber for Small and Medium Enterprises Association executive secretary James Chiutsi said Escom should have worked on how to reduce load shedding and its operational expenses rather than rushing to hike tariffs.

He said the tariff increase will affect enterprises which are already struggling to recoup costs of running their business.

“This hike will simply squeeze businesses further, given the fact that the economic environment is not favourable at the time,” said Chiutsi.

Centre for Democracy and Economic Development Initiatives executive director Sylvester Namiwa said the hike could lead to an instant increase in prices for essential goods and services which will translate into more pain and misery for low-income earners who are in majority.

He said Escom should have postponed the tariff adjustment until such a time when the economic pressure has eased.

“To those in rural areas, it means the milling price has gone up. The cost of production has also increased and this will hurt consumers,” said Namiwa.

In August 2023, Mera approved and granted Escom a 50.8 percent base tariff increase for the four-year period from 2023 to 2027.

At the time, the authority said it would be monitoring Escom’s performance based on agreed KPIs.

The KPIs contained in Escom’s strategic plan for 2023 to 2027 include the target to increase the number of electricity connections from about 30 000 to 60 000 per year by 2024 and reduce the number of days for a new connection from 204 in 2023 to 120 by 2024.

Escom also targeted to achieve a consumer satisfaction of three out of 10 by 2024 and reduce losses of energy due to technical and non-technical reasons.

In the 2023/24 financial year which ended in March 2024, the electricity supplier recorded a K49.6 billion loss.

Mera spokesperson Fitina Khonje was yet to respond to a questionnaire by press time yesterday.

But former Escom chief executive officer Kandi Padambo said yesterday a base tariff that is too low and not aligned to long run marginal costs can only spell disaster both for the utility and the country’s economy.

 “A good tariff is one that takes into account operational costs recovery in addition to long run marginal costs necessary to ensure maintenance of adequate levels of investment aligned to forecast demand,” he said.

In line with the 2017 tariff methodology, once every four years, Escom submits a base tariff application to Mera for consideration and approval.

The first-year tranche of the current four-year electricity base tariff was an 18 percent increase which became effective on September 1 2023 and moved the average tariff from K104.46/kWh to K123.26/kWh.

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