HARARE - Government is considering increasing electricity tariffs to make the price of power more “cost reflective”, Energy ministry’s permanent secretary Patterson Mbiriri said.
Zimbabwe is currently grappling with acute power cuts — as long as 18 hours a day — which have crippled both commercial and domestic consumers.
Mbiriri said the move is also part of strategies to attract more investors into the energy sector and ease load shedding.
“Our tariff regime is not rewarding enough and government has indicated that going forward electricity prices should be based on costs,” he told a consultative workshop on developing renewable energy feed-in tariffs for Zimbabwe’s electricity supply industry on Wednesday.
Mbiriri said that the tariff hike will take into consideration the country’s economic performance and consumers’ disposable income.
“People should be able to understand that it is better to have the power than not having it at all,” he added.
Zimbabwe’s electricity tariff is currently less than 10 cents compared to a regional average of 12 cents, a situation which has led to licensed independent power producers (IPPs) failing to bridge the supply deficit left by State-owned utility, Zesa Holdings (Zesa).
The country — with enough coal reserves to last the next 100 years — has internal generating capacity of about 1 200 megawatts (MW), far short of the 2 200MW national demand.
The southern African nation’s power stations are antiquated, built in the 1950s and designed for a smaller population, with little capacity added since independence in 1980.
In the past weeks, Zesa has intensified power cuts citing annual maintenance at Hwange Thermal Power Station and Kariba Hydro Power Station coupled with reduced electricity imports.
Most companies have been operating below capacity due to an insufficient and inconsistent supply of electricity, torching a heated confrontation between the power utility and the Confederation of
Zimbabwe Industries (CZI).
Industry, which is currently operating at 39,6 percent capacity utilisation has accused Zesa of impeding economic recovery through increasing tariffs while the hours of load shedding increased.
Hlanganiso Matangaidze, the Zimbabwe National Chamber of Commerce president expressed concern over the increase in loadsheding over the past few weeks saying it was detrimental to industry.
“At the moment only a few companies are operational as most companies closed shop due to operational challenges while capacity utilisation is very low.
“Increased load shedding is therefore a threat to the survival of those companies and we believe the power utility should at least spare industry from increased load shedding,” he said.
Farmer organisations in the country recently indicated that the irrigation of crops had been affected by lack of electricity while miners say they use a minimum of 5 000 litres of diesel to sustain their mining operations when they do not have electricity.
Consumers have not been spared and with increased load-shedding hours, most high density areas in the country are going for inordinately long periods in the dark.
Although the power sector reform process in the country is still on-going, progress has been constrained by the failure to establish a predictable and sustainable tariff-setting process.
Industry experts argue that whenever there is a significant gap between electricity prices and investment cost, it is imprudent to seek private sector investment on a nonrecourse project finance basis.
This is because existing assets will not be able to fetch prices that reflect their worth, while financial markets will not consider new project finance unless there is a predictable and sustainable revenue stream sufficient to cover the financing costs.
Government is however vigorously working on expanding Hwange Thermal Power Station units seven and eight and Kariba South Hydro Power Station for an additional 900MW, which is estimated to take up to 42 months.
China Machinery and Energy Corporation and Sino Hydro will undertake the expansions.