Power tariff hike to delay

Malawi Energy Regulatory Authority (Mera) says the review of the proposed 99 percent the tariff increase staggered over four years will delay as the dissolution of Power Market Limited (PML) has changed the costing landscape.

Mera consumer affairs and public relations manager Fitina Khonje yesterday said in an interview it was necessary to suspend public hearings to seek views on the electricity tariff as PML was party to the electricity tariff review application submitted last year.

She said: “Escom [Electricity Supply Corporation of Malawi]  has to submit a revised application. Once we receive the application, we will publicise it and then arrange public hearings. The regulator’s decision will be informed by the application, stakeholder feedback and the discussion.”

Khonje said if Escom says it will propose a lower percentage then “it will be relieving”.

“But it would be premature for the regulator to form an opinion on an application we haven’t received yet and an application that hasn’t yet been subjected to public scrutiny,” she said.

The Nation calculations based revelations by Escom chief executive officer Kamkwamba Kumwenda indicate that PML’s pending dissolution will help consumers to dodge a K48 billion bill the parastatal was projected to earn in the next four years through its electricity tariffs share.

He said in the proposed 2022-26 Electricity Base Tariff Application, PML would have been earning K250 million per month, representing a 212 percent jump from the current K80 million PML gets weekly for its operations from Escom.

Speaking on the sidelines of Escom Staff Union (ESU) quadrennial congress in Mponela, Dowa on Saturday, Kumwenda hinted at the tariff proposal facing review.

He said: “As we speak now, before the tariff review, we would transfer about K80 million on a weekly basis to PML for their operations. This is based on the current tariff setup which is K2.80 per kilowatt hour.

“Now on the advised tariff application, they have increased it to K8.80, which translates to K250 million per week.  Which means that Escom will have to be transferring K250 million per week to PML.”

This means if Mera approved the proposed 99 percent tariff increase, the K250 million to PML, the power single buyer licencee, would mean Escom paying it K1 billion per month and K12 billion annually. In four years, which the proposal focused on, it meant that PML would receive a K48 billion cut from the tariffs.

Kumwenda said following the dissolution of PML, Escom does not expect to be spending a lot to re-embrace the single buyer role as it will be using existing structures within the Escom system.

He said: “As PML, all they are doing is administrative work. They just write independent power producers [IPPs], sit down and make agreements. Then they write Escom to do all the technical work.

“Going forward, that [single buyer role] transition will not be difficult because we already do technical work. But we need to have a smooth transition.”

Kumwenda said PML’s existence subjected Escom to higher tariffs.

He said: “When PML is going into power purchase agreements, Escom is not involved and yet it is us who are going to collect that money.

“So, if they agree to higher tariffs, it affects us because Escom tariffs are much lower. For example, right now we are charging K104 per kilowatt per hour, but the power purchase agreement is 15 cents which is already K160. What we want is that that portion should come back to Escom because we can easily marry the supply and demand side.”

Escom is expected to submit a revised tariff adjustment proposal covering the next four years.

In December, government announced plans to dissolve PML and has since set up a committee to implement the process.

Minister of Energy Ibrahim Matola on Saturday said in an interview when the process is complete the government will communicate publicly.

Consumers Association of Malawi executive director John Kapito said the dissolution of PML is a relief for Malawians.

He said: “The challenge I was raising was that it was going to create a burden on consumers. It will raise the tariffs so much and paying for the services that would not help the consumers to have access to electricity.”

PML is a licensed single buyer responsible for buying and selling, exportation and importation of electricity into  Malawi. It was formed as part of the power market restructuring meant to improve efficiency. The reforms also saw Escom unbundled and its generation business tasked to newly formed Electricity Generation Company.

However, PML’s existence has always courted controversy and critics said it was a drain on resources which also pushed up the cost of electricity.