MRA’s board member Lincoln Bailey opposes Power Market Limited:  ‘Malawi power sector focus is wrong’

Newly-appointed board member for Malawi Revenue Authority (MRA) Lincoln Bailey who has Jamaican roots has opposed to the issuing of a single buyer license to yet another state power company Power Market Limited (PML).

Lincoln Bailey and wife

Bailey, who runs Rukuru Power Company Limited, an Independent Power Producer (IPP), has opposed to the operationalization of PML through a letter to the Chief Executive Officer of Malawi Energy Regulatory Authority (Mera) dated 16th July 2020 which Nyasa Times has seen.

In the letter, Bailey argues that with an installed generation capacity of only 351 Megawatts (MW), bringing in a third state controlled power company in the power sector would increase electricity costs for the consumers and this should not be allowed.

Bailey said in the letter that the 2016 Electricity Amendment Act paved the way for the breakup of Electricity Supply Corporation of Malawi (Escom) into component parts of Generation,

Transmission and Distribution and under which the Single Buyer, Systems and Market

Operations as a separate entities were specified.

He said under this new dispensation the Electricity Generation Company (Egenco) was registered and made operational on 1st January 2017 and took over management of the 351MW generation capacity.

“Egenoc as a separate entity from Escom means that it has its own institutional structure from board, executive management to staffing. Since its operationalization its main claim to fame is the contracting of international company Aggreko to provide very expensive 78 MW of gas turbine Peaking capacity.

“Had Generation remained a division under Escom the bulk of the additional cost associated with Egenco’s operationalization would have been saved and not become a burden on electricity tariffs.”

“The operationalization of Power Market Limited will have the exact same effect of adding to electricity supply cost without any measurable efficiency benefits. The resulting establishment costs; executive management cost including the obligatory fleet of Toyota VXs will be loaded onto electricity tariff. Such costs are unnecessary and avoidable. They run counter to the objective of making electricity affordable to poor consumers,” reads the letter in part.

Bailey said the direct consequence of the current management structure of the power sector is higher than necessary cross-subsidy from electricity consumers or direct subsidy from tax payers adding that the unnecessary tax burden must be avoided.

He said the approach to management of the power sector in Malawi is not in line with regional best practice noting that South Africa has installed capacity of 40,000 MW, Zambia 2,800MW, Zimbabwe 2,500MW, Kenya 2,351MW and Tanzania 1,504MW against Malawi’s ‘paltry 351 MW’.

“What we have created in Malawi is an uncompetitive power sector with 3 separate state owned monopolies. What this means is that institutional cost of these three entities will be passed on to consumers and make power supply cost much higher than what it should otherwise be.”

“The most rational and sensible thing to do at this time is to maintain power generation, transmission and distribution as division under a unified Escom. Malawi’s current and medium term power sector outlook does not warrant the operationalization of Power Market Ltd,” advises Bailey.

“Malawi’s power sector focus is wrong. Instead of working to increase installed Base Load generation capacity, build and reinforce transmission lines, substations and transformers to end the daily load shedding we have been suffering for years, astonishingly the powers that be are instituting measures to increase power supply transaction costs.”

“The current and medium-term status of the power sector in Malawi does not warrant the fragmentation of the power utility. The priority should be to strengthen ESCOM, to restore the professionalism that it was renowned for up to 1994, not the licensing of Power Market Ltd. The application must therefore not be approved.”

“The license application should be revisited sometime in the future when we have increased power supply to fuel growth in the economy and there are a number of IPP operating in the power generation space. The Malawi Power sector conditions at this time does not warrant the operationalization of new state-owned entity,” reads part of the letter by Bailey.

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Dr. Asiyati Lorraine Chiweza
Dr. Asiyati Lorraine Chiweza
10 months ago

I find what this guy is saying to be quite interesting and insightful from both and economics and transaction cost perspective. Infact when the initial proposals were made by USA, I do recall quite a number of local players raised an alarm about the reliability of the proposals. I am also reliably informed that Tanzania tried the strategy and lost a lot of money and did not hesitate to cancel the contract and they are still fighting the case in court. The same guys later came to put up a bid in Malawi. I have been following the results of… Read more »

Concerned citizen
11 months ago

Our country has dragged its feet when it comes to power generation. This is a major contributor to our countries total lack of development. A whole country on generating 300MWs? 56 years of independence?

Total lack of any vision, even countries who have passed through war are better off.

As a country we emphasis on consumption as compared to production. This is evidenced by our rediculously low generation capacity.

Our power could not even power on serious mine.

Where there is no vision, people perish.

mtete
mtete
11 months ago

The USA doesn’t pour money into anything unless it smells good returns. Nobody has this far elaborated on “who owns Egenco” which, incidentally was being chaired by Chief Secretary Muhara.
Bailey is a very experienced energy economist who was at one time Malawi Government Energy Advisor, a competent one at that.
What I pick in his brief to MERA is that Malawi, with it’s partry 350 installed capacity is much too small to be broken up into som many parts the consequence of which is to burden the end user.
Again, who owns Egenco?

Banda
Banda
11 months ago

Maximum generating capacity of 351mw and now only producing 200mw and Government wishes to open another separate pedastel Government organisation to run electricty. He is right stop the laziness in Government operations who close in the afternoon.So many boards and discussions nothing gets done we need entrepreneurs with drive.

Kelvin
Kelvin
11 months ago

That’s why HE LC appointed you to the board regardless of your nationality… Cadets cried foul as they are used to being employed without experience and qualifications,.. Kudos for your advise and continue this selfless act!

Analyst
Analyst
11 months ago

Uku ndiye kufuna kuyambana ndi USA. The unbundling was their brainchild and they pushed it through their Millenium Challenge. Uyu mu Jamaican akungofuna Rukuru Power Company Limited yakeyo ilowemo bwino. Be careful with this Jamaican. He should be talking about his MRA not ESCOM or Egenco.

mtete
mtete
11 months ago
Reply to  Analyst

Would you have loved to be advised by a white European rather than a black Jamaican?

Citizen
11 months ago
Reply to  Analyst

Who told you that everything that comes from USA is the best and should be adopted? Do you have any idea of the meaning of the event which took place on July 6, 1964? (Independence?). Think independently and become a real analyst.

Chintemwende
Chintemwende
11 months ago

Uku ndiye kuyankhula kwamzeru

katayeni chitutu
katayeni chitutu
11 months ago

welcome development,company imeneyi a DPP amangofuna kuti aziberako ndarama komaso kuti ayikeko azibale awo.Magetsi ake amodzi koma ma company mbweee,konko Egenco,Escom kubwera inaso koma DPP…

Adzonzi
Adzonzi
11 months ago

I love his line of argument. Egenco needs to be under ESCOM and reduce all those operational costs. The should invest more on increasing the power generation and not sharing the little that is there, 351. We can not be talking about courting investors with such power generation.

atonga
atonga
11 months ago
Reply to  Adzonzi

yes i like the argument …..what is needed is to increase power generation

monosile
monosile
11 months ago

The wife looks younger why ?

Kenako Zizu
Kenako Zizu
11 months ago
Reply to  monosile

She is not as young. You should see her in person. But she is a beautiful Kenyan wifeJoin the discussion…

Kholowa mkabudula
Kholowa mkabudula
11 months ago
Reply to  monosile

Nanunso mkaxi amachepa?

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