Government sees reduced Electricity tariffs

Minister of Energy Newton Kambala says government wants to see a reduction in electricity tariffs to increase electricity penetration currently at a paltry 11.5 percent.

In an interview on Tuesday, the minister expressed displeasure with the current electricity tariffs, which he said denies many Malawians access to electricity.

He said: “We will achieve this by negotiating with investors what we want and also diversify our energy sources to nuclear, coal-fired plants and advocate for increased use of liquid petroleum gas [LPG].

“As you know, the cost of doing business in the country is high because of the high cost and insufficient electricity.”

To illustrate his point on how high electricity tariffs are in the country, Kambala said Electricity Supply Corporation of Malawi (Escom) buys electricity from generation companies at an average of $0.13 (about K96.20) per kilowatt hour (kWh), far above the $0.05 (K37) that utility companies in India and China pay to generation companies.

In an ideal situation, the minister said if Escom bought the same at $0.08 (K59.20) or less, consumers would be in a better position to access affordable electricity.

Currently, Mera figures show that Escom sells electricity to 11.5 percent of the population connected to the national grid at K88.02 per kWh.

By 2023, government’s aspiration is to have 100 percent electricity penetration, comprising 30 percent connections by grid and 70 percent by off-grid.

With a thriving income realised from selling tomatoes and locally brewed beer, Blantyre-based businessperson Grace Banda said she does not see the need to have her house electrified, because it is expensive.

“As it is, I would rather light my house with solar lamps than electricity as I cannot afford,” she said.

Consumers Association of Malawi executive director John Kapito said in an interview that few people have access to electricity because of high tariffs.

He said: “Several studies have been done in Malawi regarding the electricity tariffs and the country ended up coming up with a cost- reflective tariff electricity regime to ensure continued maintenance and supply of electricity and bring new energy generation investors.

“But many consumers have been failing to access electricity because the tariffs are prohibitive.”

A cost-reflective tariff is one which reflects the true cost of supplying electricity and removes the reliance on government subsidies to cover the variance between the current tariffs and the the cost of supply of electricity.

Earlier, Escom announced that it was considering adopting a cost-reflective model to sustain operations on the market.

Escom chief executive officer Allexon Chiwaya said the utility supplier wanted to find out how much it cost to produce one unit of electricity so that it sells that unit above the cost of production to sustain its operations.

On his part, Energy expert and former Escom chief executive officer Kandi Padambo observed on Monday that the minister’s quest to have electricity tariffs reduced should be understood in the context of unnecessary expenses and abuse reports at Escom, but a company such as  Escom has a least cost development plan to ensure that the utility develops capacity to meet demand.

He said: “The cumulative effect of all this and other sub-optimal decisions and management malpractices is bloating of operational expenditure with the consequent increasing of tariffs to finance the high levels of expenditure.

“Good tariffs must take into account the least cost development plan. Any reduction of electricity tariffs, therefore, factors in into long-term plans and provides for cost of capital  to avoid  compromising capacity development.”