Six years after government ordered a review of their Power Purchase Agreement (PPA), Egenco and Escom remain deadlocked.
The unresolved billing arrangements have since fuelled concerns that inequitable pricing could distort the utilities’ financial positions, weaken investment capacity and ultimately leave consumers bearing the cost.
The two State-owned power companies signed the PPA in October 2018, backdated to March that year. In November 2020, the Secretaries for Treasury and Energy directed them to work with Power Market Limited (PML) to identify areas for review and submit the revised agreement to the Malawi Energy Regulatory Authority (Mera) for approval.
The ‘2024/25 Consolidated Report for State-Owned Enterprises in Malawi’ says the review process only commenced during the 2022/23 financial year—and remains incomplete.
“Although the review of PPAs for Egenco Hydro Power Plants commenced during FY [financial year] 2022/23, the process is yet to bear any fruit,” the report says.
The review followed a long-running billing dispute that left Escom owing Egenco K65.9 billion, largely because of disagreements over how electricity generated by Egenco’s hydropower plants should be billed.
The unresolved issues come as Egenco’s financial position continues to deteriorate. Its debt-to-equity ratio rose to 150 percent in 2025 from 83 percent in 2024, according to the consolidated report.
No clear update
When Weekend Nation sought an update on the PPA review from Egenco, Escom, Mera and the Ministry of Energy, none could clearly outline what progress, if any, had been made.
But energy expert Kandi Padambo said the delay risked creating a mismatch between the wholesale price at which Egenco supplies electricity to Escom and the regulated retail price Escom charges consumers.
“The PPA between Egenco and Escom has to be reviewed to ensure that the financial performance results of the two companies are not distorted by inequitable pricing that does not reflect the true cost of inputs and outputs,” he said.
Padambo, a former Escom chief executive officer, also called for an analysis of Egenco’s debt to establish whether it largely stems from its arm’s-length transactions with Escom.
If the debt is predominantly linked to operational transactions between the two companies, he said, the focus should shift to why Escom has repeatedly failed to settle its obligations to Egenco.
“The ultimate aim must be to ensure that the two entities are operating on a level-playing field anchored on equitable regulated set tariffs,” Padambo said.
“It cannot be to the benefit of electricity customers, in particular, and the country at large, if any of the two State-owned electricity companies are subjected to undue pressures, financial or otherwise.”
K65.9bn dispute
The billing dispute prompted government in July 2023 to announce that it had resolved to cancel the K65.9 billion Escom owed Egenco up to January 2023.
A report titled Resolution of Billing Disputes between Egenco and Escom said the debt was written off to allow the billing mechanisms under the 2023–2027 base tariff to take effect from February 1 2023.
In a June 27 2023 letter to Escom board chairperson, former Secretary to the Treasury Macdonald Mafuta-Mwale said the disputed debt had accumulated largely because of differing interpretations of the hydro PPAs and the billing mechanisms used under the 2015 tariff methodology.
The letter said the parties had subsequently agreed to modify the mechanisms used in the 2018–2022 tariff submission.
Among the changes was a proposal to split tariff charges into 70 percent capacity and 30 percent energy. This was expected to reduce the disputed K65.9 billion liability to about K4.1 billion.
‘Taxpayers are paying twice’
Consumers Association of Malawi (Cama) executive director John Kapito said the prolonged failure to resolve the PPA review exposed weak accountability across government institutions and reflected a culture of impunity.
He said taxpayers were effectively being made to pay twice—first through budget allocations to State-owned entities and again through bailouts or higher electricity tariffs aimed at keeping Escom afloat.
“The payment fights have led to massive debt write-offs, weakened Egenco’s investment capacity, contributed to tariff increases for consumers and forced repeated government interventions to keep the lights on,” Kapito said.
He said the cycle was fuelling higher tariffs, poor service delivery, waste of public resources and declining public trust.
Kapito called for an end to bailouts and urged government to enforce accountability, honour PPAs, ring-fence investment funds and ensure consumers have a voice before tariffs are approved to compensate for poor corporate governance.
“Government must stop writing off debts. Boards and management of both Escom and Egenco should be held accountable for financial indiscipline,” he said.
“The PPA must be respected by both parties, with clear, transparent billing mechanisms that cannot be disputed every year.”
The dispute over Escom’s K65.9 billion liability arose from the methodology used to calculate charges for electricity generated by Egenco’s hydropower plants, triggering disagreements over billing.
The PPA and tariff methodology were developed as the two key instruments governing electricity trading between Escom and Egenco.
The prolonged uncertainty comes against a backdrop of severe constraints in Malawi’s electricity sector. According to the United States International Trade Administration’s Malawi Country Commercial Guide, less than 25 percent of the country’s population of about 21 million has access to electricity.
