Power sector riddled with fights

The restructuring of the power market has led to conflicts among State-owned companies that were created, stakeholders have stated.

In 2018, power market restructuring reforms left  Electricity Supply Corporation of Malawi (Escom) unbundled to promote efficiency in the power sector and attract investors.

The unbundling of Escom gave birth to two other companies, namely  Electricity Generation Company (Egenco) to handle power generation and Power Market Limited (PML) as the single buyer to handle power purchase agreements with independent power producers (IPPs). On the other hand, Escom was left with the role of managing power transmission, distribution and issues of electricity fluctuations.

However, from the series of meetings that  the joint parliamentary Committee on Natural Resources and Climate, Legal Affairs, Public Accounts and Trade and Industry held this week to appreciate the impact of unbundling of Escom, it has been clear that the three institutions formed are at war.

There is no proper collaboration that would help promote efficiency in the power sector as well as attract investors.

Appearing before the committee yesyerday, PML chief executive officer Rosemary Mkandawire said Escom is trying its best to fight PML, but PML wants players in the sector to co-exist and improve on efficiency so that the power sector delivers.

“All power purchase agreements with independent power producers were signed by Escom except for one that we were just forced,” she said.

Mkandawire said PML is the one trying to negotiate for better deals so that Malawians are not burdened with high tariffs.

She argued that Escom has other functions to handle and letting it manage the single buyer function not be appropriate.

Mkandawire further accused Escom of cooking up stories to get rid of PML so that it can manage the single buyer function.

Where did this outburst come from?

Earlier on Tuesday, appearing before the same committee, Escom chief operations officer Maxwell Mulimakwenda said the power supplier is best placed to be the single buyer not PML.

He said: “The single buyer function PML plays is supposed to be within Escom. That was the initial plan.

“Malawians are the ones that are suffering with the creation of many companies governing the power sector.”

Mulimakwenda wondered why PML, which does not have transmission and distribution assets, should be a buyer without infrastructure.

On the other hand, Egenco also has issues with Escom that it takes forever to pay and owes Egenco K82 billion which it has refused to pay.

Escom chief executive officer Kamkwamba Kumwenda clearly stated that the power supply utility will not foot the bill as it is for power that was not delivered.

“Escom is bleeding. Escom is dying slowly because every month it is paying for something that has not been delivered and customer [end user] has not paid for. Escom has to find money to pay for something that has not been delivered,” he said.

Kumwenda was also irked by Egenco’s move to make an  application to be paid in dollars. When there is a devaluation, Escom says it loses money when it is charged in dollars as customers are charged in kwacha.

“If that happens let us just close Escom. If Egenco will be allowed to charge Escom in US dollars there is no way Escom is going to pay unless they pass on the cost to the customer. There is no way, I can guarantee you.

“So, this is what we are grappling with. Just to buy power we are making a loss,” he said.

Kumwenda further accused Egenco of failing to supply enough power to Escom which he said is contributing to blackouts.

“Since 2018 Egenco has only supplied Escom with 68 percent. If Egenco was to supply over 90 percent the country would not be facing power challenges,” he said.

The Escom CEO believes Egenco is underutilising equipment so as to post profits.

“Failure to generate enough power cannot attract investors. The economy is suffering with persistent blackouts,” he argued.

Escom also accuses PML of failing to properly negotiate for deals with IPPs and in the end they charge more for electricity.

There is also a fight over connecting of mining companies off grid.

It appears the only thing these three utility companies agree on is the need to hike tarrifs to manage their operations.

Currently, Escom, PML and Egenco have applied for a tarrif hike, arguing it will sustain their operations as well as improve on services. In total, they are seeking a 99 percent hike spread over a four-year period.

Public Private Partnership Commission (PPPC) also has problems with the way the power sector is being managed.

PPPC chief executive officer Patrick Kabambe said the commission is not being involved in the deals with IPPs which is an anomaly.

“We have raised that concern. It is an anomaly,” he said.

However, Malawi Energy Regulatory Authority chief executive officer Henry Kachaje pointed out that PML has the single buyer licence, Egenco has the generation licence while Escom has licences for transmission and distribution.

The joint committee co-chairperson Ned Poya  feared that Malawians are the ones suffering in the fights among the power utility companies.

He called on government to fix the situation.

Said Poya: “There is a big need for government as the owner of the these companies to bring them together. There is a great need for the Attorney General to look into the law that govern these institutions.

“There are certain clauses that are not very clear and maybe people are misinterpreting those clauses. So there is need for the legal fraternity to look into these legislations and map the way forward so that Malawians can see the benefit of having these institutions.”

Malawi is currently struggling with persistent power outages, with Egenco stating that it is generating about 220 megawatts (MW) against an estimated demand of over 600MW. The country has capacity of about 400MW.

President Lazarus Chakwera has challenged the stakeholders in the power sector to increase capacity to 1000MW by 2025 so that the country has enough power to support industries, attract investors and in turn create jobs but also boost the economy.