Government, through Mera, killing Escom

This week, we learnt that the Electricity Supply Corporation of Malawi (Escom), is dying.

Escom chief executive officer Kamkwamba Kumwenda announced this week at a press conference that the power utility, once upon a time the country’s biggest parastatal, has piles of losses which are choking it to death.

To the graveyard of public entities, Escom is following its cousins, the Agricultural Development and Marketing Corporation (Admarc) and the Malawi Postal Corporation. The remains of Escom will be interred at the altar of its newly-born grandchild Electricity Generation Company (Egenco) whom it owes K112 billion and the new independent power producers (IPPs). But this is precisely what makes the whole debacle ironic and bizarre.

Here I argue that the Malawi Government and nobody else is responsible for Escom’s pitiful state. Egenco which is seemingly being blamed for killing Escom was birthed from the latter by no other than the Malawi Government itself. Escom is dying from government’s cluelessness about how to manage Egenco’s and IPPs’ ‘post-natal’ effects and consequences. 

Ordinarily, after splitting Escom into two firms—Egenco for generation and Escom for transmission and distribution—the two new entities should have been prospering together and growing together. That must surely have been the vision for the unbundling. The unbundling was for a good cause. Sadly, government has not been able to stop Escom’s bleeding occasioned by the legitimate demands of its sibling and the IPPs which have made the former accumulate the huge debt that is inevitably choking it. Egenco and the IPPS are simply saying for them to survive on the market, they can only sell their power at so much. How much Escom sells the same to its end-users is not and should not be Egenco’s or IPP’s concern or problem.

With or without a choice Escom then proceeds to procure the power from the manufacturers at K140 per kilowatt per hour (kWh) and sells it at K104 kWh. In addition, independent power producers (IPPs) charge Escom in dollars yet the entity charges its customers in kwacha. Escom is using the 2018-2022 base tariff rate. 

All the while, the Malawi Government which is the architect of the two entities is hopelessly and helplessly just looking on. Escom is dying on the watch of the Malawi government which started the whole fiasco.

Why?

There can be only one reason for Escom’s current unfortunate situation. Government’s cluelessness and timely intervention. Period. When you are siring babies, if you are a normal person, you ought to have a clear plan about how you are going to feed them, support them, and sustain them until they are old enough to be weaned away from parental care. But this does not seem to be the case with government and its two babies. 

There is a problem, first with the regulator, the Malawi Energy Regulatory Authority (Mera), which regulates the energy sector. It does not seem to understand and appreciate Escom’s predicament. Mera, the organisation that represents government’s interests in the energy sector through its regulatory mandate, has not leveled the playing field for all the players in the sector. If it allows Egenco and IPPs to sell their power to Escom at K140 kWh, what is the business sense in stopping Escom from selling the same at above the buying price? Is it rocket science to know that for Escom to remain afloat it must price its services above the buying price?

If the answer to this is that Escom has a social responsibility to the public, and therefore Mera cannot allow it to be raising tariffs willy-nilly, then it (Mera) should devise a way of ensuring that Escom serves the public well while at the same time does not go under. This is the intervention the Malawi Government whose interests in the energy sector are represented by Mera, must make. This is what government is taking too long to do. So yes, Escom will die if government through its regulatory and advisory body does not act quickly.

Long short, it is not Egenco that is killing Escom. Neither is Escom killing itself. Government, through Mera, is killing Escom. Government should level the playing field for all players in the sector.