Zesco tariffs up 25p.c.
27th July 2010
By Business ReporterELECTRICITY tariffs have been increased by an average 25.6 per cent, with tariffs for residential customers going up by 41 per cent with effect from Sunday next week, Energy Regulation Board (ERB) chairperson, Sikota Wina has announced.
And the board has decided to convert the uneconomic Zesco staff tariffs to pre-paid residential tariffs because the company failed to implement a directive issued last year and in 2007, failure to which ERB would enforce other regulatory sanctions against the utility.
At a Press briefing in Lusaka yesterday, Mr Wina said the board took into consideration many factors in arriving at the 25.6 per cent against the 36 per cent that Zesco applied for, as the utility failed to implement certain directives by ERB.
He said Zesco applied for 69 per cent increase for residential consumers, but the board reduced it to 41 per cent. This translates into an increment of K373 per kilowatt hour.
The company had also applied for a 41 per cent hike in tariffs for commercial customers, but the board approved only 27 per cent, which came to K338.44 per kilowatts hour.
For the services tariffs, Zesco applied for 49 per cent, but ERB approved 33 per cent increment.
However, the ERB awarded more than what Zesco applied for in tariffs for large and small power consumers.
While Zesco applied for 14 and six per cent increases for small power and large power consumers, respectively, the board increased tariffs by 15 and 12 per cent, respectively.
This translates into increases by K208.32 and K320.54 per kilowatts hour for the small power and large power consumers, respectively.
Mr Wina said while the justifications by Zesco to increase tariffs by the margins proposed were varied, the board had taken into account social impacts of the tariffs and failure by the company to implement certain measures and directives in line with key performance indicators (KPIs).
Zesco was ordered to abolish the staff tariffs in 2007 and 2009, but the management did not implement the directive. Therefore, the ERB has decided to convert the tariffs into pre-paid residential rates equivalent.
“This means that if Zesco continues to charge the uneconomic staff tariff, the utility will forego an estimated revenue of K3 billion,” he said.
The measure would ensure that the company bears the costs of the uneconomic staff tariff instead of burdening consumers.
Among other measures, the ERB had disallowed Zesco donations amounting to K9.5 billion, entertainment costs worth K436 million and costs relating to the running of Zesco United Football Club amounting to K4.7 billion.
“Our role has been that of a balancing act to arrive at a tariff that addresses Zesco’s financial viability objectives as well as safeguarding the consumer interests,” he said.
The ERB chief said the increase meant that Zesco would be able to generate adequate resources to operate commercially and profitably, but the utility must re-engineer its internal business processes and transform itself into a fully-fledged commercial entity.
The Government should recapitalise the company while Zesco must reduce the staff costs, which are high at 51 per cent compared to the international industry standard of 30 per cent.
The company’s trade receivables are also high, and the Government should consider liquidating the debts that it owes the utility.
[Times of Zambia]
