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).
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.Follow and Subscribe Nyasa TV :