Escom should justify high tariffs

Half the time they live without power, yet at the end of every month, they get ever-rising electricity bills for such a poor service.

That is the sad story of Malawian electricity consumers (both industrial and domestic/households) who, in the name of liberalisation of energy prices, are paying through the nose for the power they buy from the sole power utility, the Electricity Supply Corporation of Malawi (Escom).

Everything started in May 2012 when government, through the Malawi Energy Regulatory Authority (Mera), introduced the automatic pricing mechanism (APM) for fuel and automatic tariff adjustment formula (Ataf) for electricity.

In principle, the idea to have consumers pay for the full cost of the services they get makes sense. But in reality, the rate of the changes in the upward trend of the tariffs has squeezed consumers dry with high fuel prices and electricity tariffs being the order of the day whereas individuals’ incomes have mostly remained stagnant.

To illustrate the trend in the rising electricity tariffs over the past 12 months by 84 percent, one electricity consumer living in a medium density residential area in Blantyre told me that before the implementation of the Ataf in May 2012, he used to pay a monthly post-paid bill of about K4 000 (about $10) for his family of five. However, when the Ataf started showing its effect, the monthly bills started growing to about K8 000 (about $20) and last month he paid K15 000 (about $37). Ironically, his income has remained static.

Now, in a country where the cost of living keeps rising, with the Centre for Social Concern (CfSC), in its recent Basket of Consumer Needs pegging it at K102 461 per month for a family of six against a minimum wage of K8 400 (about $21) over the same period, one can easily see the misery through which poor households are going through.

Of course, some can argue that the minimum wage applies to the lowest paid, especially in the informal sector including domestic workers, but still very few people in the formal sector earn a net of K102 461 (about $253) per month to afford the rising cost of electricity, water, food and telecommunications, among others.

Every business venture wants to make profits and give its shareholders their investment’s worth in form of dividends, among others. Escom is wholly owned by the Malawi Government. It is also the only player in the electricity supply business monopolising the generation, transmission and distribution businesses.

It is ironic that at the time consumers are being asked to pay for the full-cost recovery for electricity, the service remains poor with never-ending schedules of load-shedding and unplanned intermittent power outages.

In fact, in 2009, Malawi had 63 days of power outages in a year (365 days), accounting for the worst reliability record of the 24 sub-Saharan African countries sampled, according to a report of the Millennium Challenge Account Malawi Office. This lack of reliable power source deters investments in the manufacturing and mining sectors besides lowering social returns.

Escom is using the same old story of “we sell electricity at below production cost” to justify the ever-increasing tariffs. The new tariffs are said to be reflecting the cost of production or they are closer to that.

I find this argument wanting. It does not make sense to me as a consumer. It only makes sense to Escom and its close associates who keep churning out this thread of argument.

When all is said and done, I see Escom pushing its inefficiencies to the consumer by asking the consumer to pay more as a cover-up.

And where is the Malawi Energy Regulatory Authority (Mera), as a regulator, in all this? Mera is supposed to bring in new players in the energy sector to end Escom’s monopoly.

These high tariffs are here to stay as economists say that prices are sticky going downwards. But consumers need a stronger Mera to protect them from the Big Brother Escom which seems to be too big to be controlled by its regulator.

Yes, I see Escom as bigger than Mera because, for example, when the sole power utility justified its 29 percent increase in tariffs against the principles of the Ataf, Mera as the regulating body, did not react as it should have, yet principles of Aftaf entail that tariffs be adjusted either upwards or downwards whenever there is a five percent (minus/plus) change in variables such as the inflation or exchange rate.

Ironically, as Escom was raising its tariffs when the kwacha was appreciating, the same regulator, Mera, reduced pump prices for diesel and petrol! Talk of double standards.