Expert warns on power buyer model

Government and stakeholders in  the power sector have been asked to exercise caution on wholesale power price, non-payment rate and independence of the regulator if the chosen single buyer model as  a means of operationalising the power reforms is to be a success.

Following the liberalisation of the economy in the early 1990s, Malawi has continued to suffer crippling electricity shortages due to failure of the State-owned power company, the Electricity Supply Corporation of Malawi (Escom) to generate and supply power to meet the ever-growing demand.

In response to the crisis, government in 1998 initiated reforms in the power sector by corporatising. In 2003, government published a National Energy Policy with a view to further reform and liberalise the power sector and solve the country’s power shortages.

This was followed by enactment of a package of energy laws in 2004. Almost 13 years later, the reforms envisaged in the National Energy Policy are yet to be fully implemented and naturally the power crisis continues.

Government has finally chosen the single buyer model as the new structure of the Malawian power sector with hope that through liberalisation, it will be able to attract private investment which will help the economy to grow.

But energy law expert, Tisungane Makato in his paper tilted The Malawian power crisis: Can Single buyer model be the solution? has said the success of the model will largely depend on how government will behave.

Makato said attitude towards wholesale power prices will have a significant impact on the success of the model.

He said: “The best cause of action for government is to be prepared to let the charging of cost- reflective prices. If it is of the view that the rates are too high, making grid power inaccessible to poor customers, it can design a well thought out subsidy programme to assist them.”

On the non-payment rate, Makato said reduction of non-payment rate will ensure that generators are able to meet their debt payment obligations, maintain plants and also have a huge impact on the success of the model.

With regard to independence of the regulator, he said strength and independence of the energy regulator will also have an impact on the success of the model.

“Freedom and strength to withstand political interference will enable the effective regulation of the industry which will result in increased interest from private investors,” he said.

Responding to an e-mailed questionnaire on Wednesday, Ministry of Natural Resources Energy and Mining spokesperson Ayam Maeresa said government welcomes constructive suggestions from the industry players that would make the power market better.

He said as government looks forward to the establishment of the Single Buyer and Market Operator in Escom, it is open to all available options to implement the best.

“It is interesting and encouraging to see that the industry is keenly following developments in the power market. We take feedback positively and we can assure the public that we would consider such feedback. It is such kind of pointers that would assist the country to come up with the best option that will create fertile ground for the growth of the power sector, provide value for money for investors and offer consumers affordable power,” he said.

Meanwhile, government is yet to identify four Independent power producers (IPPs) out of the 17 that were shortlisted to feed to national grid.