Is the President toying with a crisis?
The adage ‘when two elephants fight, it is the grass that suffers’, comes very live in the country now. The elephants are the big state-owned power utility firms, the Electricity Supply Corporation of Malawi’s (Escom) and the Electricity Generation Company (Egenco). They are fighting over bills. We, the consumers, are the grass.
Escom and Egenco are currently locked in a tussle over bills. Egenco generates power which it sells to Escom. Escom is complaining that it is being billed for power which has never been delivered. Escom claims right now there is a bill of K82 billion to that effect from Egenco for power that was not delivered. It is wondering why it should pay such a bill. Similarly, Escom claims it received an invoice to pay JCM Power K651 million but Escom received another invoice of K1.6 billion from the same entity for power not delivered.
It is these bills Escom is saddled with from Egenco and independent power producers (IPPs) such as JCM—from undispatched power—that are driving Escom crazy and making it conclude that it is buying power at K140 per kilowatt per hour. For Escom, the easy way out of the conundrum is also to push the bill to consumers. This is the basis for its recent proposal for a 99 percent electricity base power tariff hike. Escom is of the view that if it has to pay for the undispatched power, it should raise electricity base tariff by 99 percent in the next four years– starting this year by 80 percent—because it means it is buying from Egenco and IPPs at K140 per kilowatt per hour (kwh).
But we all know this thinking is wrong. And it is a lazy way of doing things. Escom and the problems it has with Egenco and IPPs should not concern consumers. It is illogical, inconsiderate and unfair for Escom to punish consumers for the sins committed with its suppliers. We also know the problems between Egenco and IPPs on one hand and Escom on the other emanate from wrong power purchase agreements the entities signed.
These are the issues that urgently need to be revisited to create a win-win business model for all players. The current business model seems to be skewed in favour of power producers and is hurting Escom. That is why Escom is saying the unbundling of Escom into two entities has created more problems than it has solved. The organization is now being lampooned for the problems on its lap as if it is their architect. It does not make sense—businesswise and otherwise—to be billed for a service not done. As if paying for undispatched power is not bad enough, Escom has to pay tax on the same. What kind of business is that?
But the problem, as we all can see, is a policy issue. This is where the President, Cabinet, the Malawi Energy Regulatory Authority and Parliament must rise to the occasion. And do so quickly, and resolve the matter once and for all. The country is now in the middle of a power crisis of no small proportion. The crisis is affecting businesses. Small and medium enterprises are the hardest hit. With Kapichira hydro power station which was adding 129.6MW to the national grid out, Escom is currently producing 220MW from hydro while JCM has the capacity to generate 80MW at its solar farms in Salima and at Golomoti in Dedza. But due to weather effects it is only generating 60MW. The total 280MW from all suppliers is a far cry from the national demand of over 600MW. That is why I am saying this is a crisis.
All said we are back to the same situation we were in 2017 when government had no option but to lease 84 Aggreko generators with a combined capacity of 78MW. There is no question that although the gensets deal was expensive, it brought great relief to consumers. At least people had power.
But when all is said and done, the buck stops with President Lazarus Chakwera. If he doesn’t act with urgency, the problem will only get worse and at his political cost. Crises come in all manner and sizes. This is one of them.
