The Electricity Supply Corporation of Malawi (Escom) is considering on adopting a cost-reflective tariff model to sustain its operations on the market.
Escom Chief Executive Officer, Allexon Chiwaya told the local media that they did a cost of service study on how much it costs to produce one unit if electricity and whether it’s selling price matches with cost price.
“We wanted to find out how much it costs Escom to produce one unit if electricity and we must sell that unit above the cost of production for us to be sustainable. But it has been proved that we are selling below that cost.
“So, we are going towards cost reflective tariffs where we will be selling at the two price of electricity, but this will be after consultation. Right now, Malawi Energy Regulatory Authority [Mera] is conducting nationwide sensitization with stakeholders,” said Chiwaya.
For instance, he said the power supplier has been supplying Likoma Island through use of diesel generators which costs an average of K32 billion a month while it is getting K500 000 in revenues for the same duration.
The Southern Africa Development Community (Sadc) Energy Ministers Conference in 2008 agreed to implement cost reflective tariffs by 2013. Two years later, only two out of 15 countries reported to have attained cost reflective tariffs. The attainment of cost reflective tariffs target was later shifted to 2019.
Under the $350.7 million (about K256 billion) energy compact sponsored by the United States Millennium Challenge Corporation (MCC), the Malawi government committed to a phased implementation towards a full cost reflective tariffs under the power sector reform.
Malawi is among countries with lowest rates of installed electricity capacity in Southern Africa with its penetration at a paltry 10 percent. According to the World Bank May 2018 Malawi Economic Monitor, at K57.72 per kilowatt per hour [kWh] or $0.08/kWh, which is not fully cost reflective, electricity tariffs in the country are lower than the average for sub- Sahara Africa which is at $0.14 kWh.
Escom is yet to effect a deferred 6.72 percent tariff adjustment which was supposed to be effected in November 2016, and its board chairperson Thom Mpinganjira said this means two years of lost revenue.
Consumers Association of Malawi (Cama) executive director John Kapito, while protesting the proposed model, said adopting cost-reflective tariffs will only push up the cost of goods and services, which has heavy implications on consumers’ disposal income.
As at December 31 2017, Escom registered a loss after-tax of K6.3 billion and it is projected that by the end of the financial year, the firm will have registered a profit after tax of K149.1 million.Follow and Subscribe Nyasa TV :