Escom taken to task on tariff

Electricity Supply Corporation of Malawi (Escom) yesterday was at pains to justify its 60 percent four-year electricity tariff hike plan, prompting stakeholders to accuse the power utility of pushing its inefficiencies to consumers.

But Escom chief executive officer Allexon Chiwaya maintained that the proposal to raise the tariff is justified as Escom plans to undertake investments over the stated period. He also said the cost-reflective tariff model it intends to adopt seeks to improve the electricity supply situation.

He said Escom plans to invest K157 billion during the new four-year base tariff period.

Said Chiwaya: “We want to upgrade several existing transmission lines from wooden to steel towers to minimise downtime, substations to accommodate demand growth in water pumping and commission new transmission lines and substations to accommodate load growth.

“Other than this, we did a cost of service study to determine how much it costs Escom to produce electricity. As such, we want to engage on a cost-reflective model without which, investors may not come to invest in Malawi since investors invest where there is a return. We also want to carry on our work with reflective costs as it was revealed the company produces below cost.”

In his response to concerns from industrial and domestic consumers during the first public hearing on the tariff hike application organised by Malawi Energy Regulatory Authority (Mera) in Blantyre, Chiwaya said Escom’s share of the end-user tariff is 37 percent of the total K43 per unit; adding that the company has also budgeted for a minimum of three percent margin for bad debts for the four-year period.

But Malawi Confederation of Chambers of Commerce and Industry (MCCCI) chief executive officer Chancellor Kaferapanjira said the overheads, especially those associated with staff, that have remained a major component of the costs for each function should not be passed on to the end-user customers.

He also said provision for bad debts, resulting from Escom’s inability to collect debts from government ministries, departments and agencies (MDAs) and some private sector players, should not burden end-user consumers with a higher tariff.

Said Kaferapanjira: “The worst thing is that these provisions have been made despite Escom proposing to install prepaid meters in government institutions and all private sector organisations during the base tariff implementation period.

“Escom further projects bad debts to increase by three percent annually such that there is a huge jump in projection. This is, therefore, questionable and a major concern to us.”

Chipping in, Consumers Association of Malawi (Cama) executive director John Kapito called for serious reforms within Escom if stakeholders are to appreciate the real cost of power generation and distribution.

He said: “Media reports are revealing rampant corruption, theft, State capture and poor management which are the major sources of delivery failures crippling Escom’s operations and, therefore, distorting the true cost of doing business.

“We see that it is only fair that electricity tariffs must be increased based on country needs and expectations and not driven by donor and external financial providers.

“Escom must, therefore, provide realistic, achievable performance indicators that must be approved and monitored by the regulator and consumers.”

One of the participants at the forum, Soustain Chigaru also wondered why Escom budgeted for bad debt which it claims is incurred through illegal connections when it has put in place what it is calling strict measures to curb the malpractice and introducing a prepaid system for all electricity users.

Mera director of economic regulation Eunice Potani has since said the regulator would consider the adjustments proposed by Escom if the State power utility, a quasi monopoly, demonstrates commitment on the plans and projects outlined in the proposal.

She said: “What we are saying is Escom is only presenting its path. It is only at the point when the projects take off when we will enforce these tariffs. Consumers will thus only be allowed to pay for the agreed tariff once the projects take off.”

In recent months, Escom has been in the news for all the wrong reasons. In June, its board chairperson Thom Mpinganjira admitted blatant abuse of procurement procedures that has cost the State-owned enterprise dearly.

Last week, revelations of theft of 3.8 million litres of diesel valued at K1.9 billion meant for the running of diesel-powered generators to boost power production and supply came to the fore after Vice-President Saulos Chilima raised the issue during a United Transformation Movement (UTM) rally in Blantyre on July 29.

And on Saturday, the parastatal’s director of administration and human resources Dafter Namandwa quantified the losses to illegal connections to be around K1 billion monthly.