Saboi Imboela

ZESCO SHOULD NOT INCREASE ELECTRICITY TARIFFS UNTIL THEY RELEASE THE STUDY ON COST REFLECTIVE TARIFFS

07/11/2019

The National Democratic Congress, NDC, is demanding the immediate publication of the Cost Reflective Study that was funded by Development Bank of Zambia and executed by Economic Consulting Associates of the United Kingdom.

It is worth noting that on Wednesday, 11th October 2017, by way of a ministerial statement, the former Minister of Energy, Honourable David Mabumba, announced in Parliament that the electricity cost of service and determination of economic cost of reflective tariff was launched on 13th April 2017. He said it was being undertaken by Economic Consulting Associates of the United Kingdom.

The Minister further announced 75% increase in electricity tariffs on residential customers, which subjected the already suffering masses to more misery, as the cost of living skyrocketed.

As though that was not enough, in December of 2018, ZESCO also made a proposal to the Energy Regulation Board, ERB, to increase the residential tariffs averaging 113% which they planned to implement before the end of 2019.

It is in view of this looming tariff hike that, as NDC, we strongly urge the government to produce the study on the cost reflective tariffs funded by DBZ before increasing the tariffs.

We believe that the results of the study will help in determining the actual cost of producing hydro, solar, wind, coal and thermal powered electricity; and by implication, how efficient this cost is compared to international benchmarks.

Based on the findings, stakeholders should then be allowed to negotiate the new cost reflective tariffs. ‘We are of the view that government has shelved the report because it was going to expose the inefficiency on the part of ZESCO, as this report would have brought to light the unnecessary cost centres within the management of ZESCO, mostly the wage bill that ZESCO incurs,’ NDC Director of Policy and Research Mr. Zuwa Sinkamba said.

‘The study would take into consideration; Performance Appraisal, Job Analysis and Job Evaluation. These tools would expose the many P.F cadres who are on ZESCO payroll,’ he further said.

The questions that we are asking are; Firstly, what necessitated the increase of operational costs from k2.2bn in 2013 to k13bn in 2018 while the Total Turnover increased from K2.3bn in 2013 to K9.5bn according to the proposal ZESCO presented to ERB? Secondly, why has government failed to share the findings of the study on cost reflective tariffs?

Issued by Saboi Imboela
Spokesperson- NDC

1 COMMENT

  1. Can the Energy Regulatory Board (ERB) update the public and key stakeholders on the status of the second Cost of Service Study (CoSS) which ERB had embarked on in 2017 with funding from the African Development Bank (AfDB). I read in a blog of the Policy Monitoring and Research Centre that this CoSS was suspended midway and that by the first quarter of 2019, ERB was still evaluating bids for a new consultant to undertake the CoSS. Why is ERB not providing transparent information on the status of the CoSS to Zambians and other key stakeholders.

    This second CoSS aimed at ensuring that ZESCO’s inefficiencies were not passed on to consumers. One of the tasks of the study was to conduct a detailed review of ZESCO’s cost structure by benchmarking with cost structures of similar efficient utilities with similar technical structures. The other tasks was to determine the appropriate structure and level of tariffs for each consumer category. This CoSS was then supposed to be the basis upon which to determine future tariff adjustments for various categories of consumers.

    ERB and ZESCO should know that without an independent CoSS, they cannot successfully negotiate or implement tariff hikes that will be widely acceptable by all stakeholders. ERB and ZESCO still operate under undue influence of the ruling political party interests. The cost structure of ERB and ZESCO is heavily determined by politically appointed board members and staff. Under these circumstances, ERB and ZESCO are afraid of conducting an independent CoSS as this study will expose how ZESCO and ERB is a milk cow of the ruling party in Zambia.

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