Sometime in 2011 ZESA got a tariff review request approved and that was the last time. The price that they reviewed upwards to was 9.86 US cents per kWh – which is the price that has been in effect to this present day. Since 2016 ZESA has been on a quest to get their tariff review requests approved. ZERA and the Ministry of Energy & Development have repeatedly rejected their requests for many reasons. Some of the reasons are the possible backlash of such hikes and the delicate nature of the economy. In 2016 they requested for a 46% price hike, made another request in 2017 and they again made a request in December 2018 r to increase it to 14.6 US cents per kWh – all requests were turned down.
Why Is ZESA So Insistent?
The latest 30% increase they are insisting on will see electricity now costing 12.82 US cents (32.05 RTGS cents) per kWh. The broad areas they cite are diesel & coal and transmission & distribution infrastructure. They say that owing to the spike in the prices of diesel and coal it has become unsustainable to still use the current tariff. They also highlight that for them to realize significant revenue they must regularly do maintenance work for their transmission and distribution infrastructure. If they don’t increase their tariffs, more frequent interruptions in power availability for consumers will be the order of the day. All of this will be caused by limited maintenance work. They also have been grappling with the scourge of vandalism which further heightens the need for regular maintenance, repairs or even replacements.
They go on to explain that their revenues have been going down due to these issues. The Zimbabwe Electricity Transmission & Distribution company used to rake in at least a billion dollars in annual revenue. However, last year their revenue was just over 800 million USD with projections indicating a further decrease this year.
Essentially they are saying operating costs have sharply gone up whilst revenue is going down. They are also haunted by the issue of defaulters with over a billion dollars in unpaid dues.
Technically, these are valid points. The biggest challenge is that effecting a price hike won’t be received well by people.
The MPS Again Once Is Being Used As A Basis
This time around ZESA’s request has an additional basis which is that of the basic interbank exchange rate of 1 USD: 2.5 RTGS$ announced by the RBZ governor. They, like every other service provider, need to adjust prices to reflect the status quo. Though the insinuation is that it’s only an adjustment or realignment it’s in actual fact a price increase.
People Aren’t Ready For A Price Hike
Remember we are talking of people who are still trying to find their footing with respect to fuel price increases, commodity price increases and the introduction of the RTGS$ framework. Some people can no longer afford to consistently pay for electricity resorting rather to solar and wood energy. We cannot ignore the fact that most of the industries that are actually functioning rely on electricity for production purposes. An electricity tariff increase will culminate in the burden being placed on the end-users of locally produced products or services through price hikes. The problems will become overwhelming for the general citizen who is already struggling to make ends meet.
What’s The Best Way Forward?
So we have established that ZESA does, to some degree, have a valid case for how problematic their current operating framework is. However, there are various schools of thought that are advocating a different approach to addressing the challenges being faced. Instead of a tariff hike, they are saying there are two areas which if addressed will eliminate the need for the hike.
An Argument For Addressing Power Leakages
The CEO of ZESA Holdings does point out that there are energy losses currently being incurred in the transmission and distribution process. He says they are losing as much as 16% of energy due to power leakages – that’s a serious problem. If those power leakages are curbed it’s quite apparent that’ll have a positive impact on the service provider’s cash flow and ability to deliver quality service.
An Argument For Wage Adjustments
I remember back in 2016 some issues got media attention pertaining to how the top management at ZESA was getting very high remuneration packages. It started a heated debate on the need for wage packages to be reviewed and also the downsizings of staff as there were too many redundancies in the human resources. I believe if audits are done and decisive action steps are taken, a lot of money can be unlocked and redirected to what’s really pertinent i.e. power transmission and distribution.
Zimbabweans have had enough of price hikes; it’s simply overwhelming. I’m sure most people would agree that at least ZESA has alternative routes it can take to promote the sustainability of its operations. Kindly share with us your comments below.
Zera should just let zesa have their tariff increase. Let everyone who has justification to hike prices do so. Then we just experience the economic pain all at once.
Business is tough so we definitely understand your argument. The only thing worse than expensive electricity is no electricity due to viability challenges.