Zimbabwean power utility Zesa Holdings is considering further tariff increases to recoup losses and supply more stable electricity to consumers, despite a recent increase.
The Zimbabwe Energy Regulatory Authority recently awarded a US$0.02 per kilowatt hour tariff increase to the Zimbabwe Electricity Transmission Distribution Company (ZETDC), the distribution arm of Zesa. This comes as ZETDC has reported that the utility has lost about US$3 billion over the past quarter century, or US$120 million annually, due to under-charging consumers for power.
The average price per kilowatt hour for electricity in the region is US$0.1254, but locally, Zesa was charging US$0.10, leaving it operating at a loss. With the recent increase, Zesa is now charging US$0.12 per kilowatt-hour, which is still below the regional average.
“We are a regulated authority, and even with the tariff that we were awarded, let me say we are not yet there,” ZETDC acting managing director Abel Gurupira said at a recent breakfast seminar in Bulawayo. “We are almost 79%. The tariff has been so suppressed; this leads to difficulties in the recapitalisation of Zesa. We have aged machinery. We saw it fitting that we structure everything. We have been driving this vehicle since the 1930s or 1940s.”
“We need a mind-set shift to say Zesa is government so everything from the government must be cheap,” Gurupira added. “This business of the vehicle will collapse, then we will realise that what is better is to have the right price with stable electricity or to have erratic delivery of electricity at a cheap price.”
Zesa has also been plagued by challenges such as low water levels at Kariba South Hydro Power Station, the nation’s largest power generation source, due to the effects of the impending El Nino drought. The power utility is looking to charge cost-effective prices to stay afloat and deliver electricity more regularly.
Gurupira said that Zesa needs US$2.8 billion for rehabilitation and repowering, maintenance, and the construction of Hwange Units 1 to 6. “Unfortunately, the country has ceased to be credit worthy,” he said. “Who will want to invest when you cannot recoup? We have lost almost US$3.7 billion because of below costs tariff.”
Current power shortages are, however, temporary, as Hwange unit 7 is undergoing its 30-day mandatory maintenance process, which will be followed by unit 8.
Experts say that while it is key for Zesa to remain operational, the tariffs are beyond the reach of most customers.