Business Briefs

Low tariffs could trigger load shedding: ZESA

Already, suppliers of coal are threatening to stop supplies owing to incapacitation caused by the Zimbabwe Power Company (ZPC), a subsidiary of ZESA. Added to this, is a huge water bill from the Zambezi Water Authority.

Because of sub-economic tariffs, the power utility can neither service nor buy boilers, transformers and secure oils and chemicals that should all be paid for in US dollars.

Last year, the Government took a decision to implement a tariff indexation formula that would align Zesa tariffs to movements caused by inflation and the exchange rate.

The reason for the move by the Government was to obtain cost reflectivity in the supply of electricity and maintenance of value of tariffs that would ensure viability and sustainability of the power supply utility.

In order to maintain cost reflectivity, tariffs were supposed to be reviewed and adjusted periodically each time the reference indexation combination of inflation and exchange rate increased by more than 10 percent.

However, that has not been carried out since March, a situation that could result in load shedding as the power utility struggles to pay for imports as well as servicing and buying equipment that requires foreign currency, sources in the energy sector said.

“Adjustments were not done since April 2020 despite a Cabinet approval to that effect, hence a massive erosion in the value of the tariffs. The current tariff level has fallen from 10.63 US cents achieved in October 2019 at the time of the approval of the indexation to 2.33 US cents per kWh as of September 2020. The ideal tariff full cost necessary is supposed to be 12.44 US cents,” insiders in the energy sector said.

Energy and Power Development Minister Hon Soda Zhemu said it is clear there is incapacitation within the power utility.

So low is the cost of electricity that it is actually more expensive to use firewood, LP gas or paraffin, something that experts say could plunge the power utility into debt and constrain it from importing power from the region.

The average cost for cooking two meals a day for a month is; electricity — $83.90, paraffin — $2 728.50, firewood — $2 400, LP gas — $780.

More — The Herald

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