At a time government is courting Independent Power Producers (IPPs) to increase power supply, former chief executive officer of Electricity Supply Corporation of Malawi (Escom) Kandi Padambo has advised on the need to exercise caution when engaging IPPs.
He said in an interview yesterday it is critical that the deals entered into are in the best interest of consumers not to be burdened with increased prices.
What has been the bone of contention over the years is the price at which Escom will be buying power from IPPs, which most experts have argued is on the higher side, a development that could compel the sole power supply to pass on the burden to the consumers.
Currently, government has signed over 36 memoranda of understanding (MoUs) with IPPs, and thus far, five of them have signed term sheets, a precursor to signing power purchase agreements (PPAs), according to the Ministry of Natural Resources, Energy and Mining.
Padambo said that while Malawi needs IPPs, especially in areas of generation capacity, the price of electricity must be at fair value between a willing buyer and a willing seller.
He said: “IPPs should generally be welcome particularly in the areas of generation capacity expansion and diversification of our power sources. Competition always benefits the customer.
“However, that competition must be if the consumer is to really benefit. If Escom buys the electricity from the IPPs other than as a willing buyer, we may not see the benefits of that policy.”genuine and not artificial
Padambo said he knows of a power purchase agreement which had terms that were so skewed against Escom and Malawi that it had to be rescinded for renegotiation.
Consumers Association of Malawi (Cama) executive director John Kapito yesterday decried the level of transparency involved in negotiating the deals, saying Malawi may end up signing deals that would cost the nation in the near future.
“The IPPs formula has not been exciting at all because it is a bit secretive,” he said.
But Malawi Energy Regulatory Authority (Mera) spokesperson Fitina Khonje said the regulator has since developed monitoring mechanisms to ensure that pricing of IPPs do not stifle the consumer.
“As a regulator, we have developed a tariff methodology, which will enable us to monitor pricing of electricity between Escom and IPPs from its initial stages to the time agreements are signed,” she said.