Call for power tariff reduction
Electricity Base Tariff Agreement had 3% for Aggreko
A call has been made for electricity tariffs to go down following the exit of Aggreko, which had a four-year contract with Electricity Supply Corporation of Malawi (Escom) under which it was supplying the utility body with 78 megawatts (mw) to the national grid through its diesel-powered generators.
The call by consumers and Parliamentary Committee on Natural Resources and Climate Change members has prompted the latter to summon Escom to explain how the three percent, which was factored in under the Base Tariff Agreement, would be used.
Monthly, Escom was paying Aggreko around K1 billion, which was drifted to consumers, hence the three percent.
Committee chairperson Werani Chilenga told The Daily Times that people have to feel that Aggreko is gone.
He said, as such, a reduction of electricity tariffs would be ideal.
“Aggreko is gone. Escom was paying Aggreko K1 billion, plus or minus, because we were paying per capacity not per energy supplied. That is, whether we were using the energy or not, Escom was still paying. It was called capacity charge. So, for Escom to recover that K1 billion it was billed, it was putting it on electricity tariffs. The tariffs we are paying per kilowatt-hour are billed as if Aggreko is still here.
“What we are saying is that Escom will have to remove that tariff or they should tell us what they are going to use it for, either they would give it to Egenco [Electricity Generation Company] to be buying gensets or electricity tariffs should go down a bit. As such, our position is that the tariff should go down so that Malawians should really feel that Aggreko is gone,” he said.
Similarly, Consumers Association of Malawi Executive Director John Kapito said they have already had talks with Malawi Energy Regulatory Authority (Mera) officials to remove the three percent.
“We are told that, shortly, they [Mera] will be removing it. It’s an issue we are following up keenly,” he said.
If the electricity tariff is slashed downwards by three percent, it means the price would go down from the current K104.46 per Kwh to K101.33/kWh.
Further, this means a person who was buying electricity worth K10,000 would be getting 111.3 Kwh from 108.2 Kwh.
Commenting on the matter, Escom Public Relations Manager Innocent Chitosi said they had written Mera for guidance.
“The regulator, Mera, is responsible for any movements in tariffs. We have since written them for their guidance. Any changes shall be communicated to our stakeholders,” he said.
Following approval of the third base tariff for 2018 to 2022 by Mera, Escom implemented a new tariff increase of 31 percent with effect from October 1 2018.
This increase moved the average tariff from K73.23/Khw to K95.15/kWh over a four-year periods.
Implementation of the base tariff was segmented into four annual tranches of 20 percent for the first year, seven percent for the second year, -3 percent for the third year and 10 percent for the final year.
The negative three percent was supposed to be effected in 2021 because it was the year Aggreko was supposed to exit the Malawi market but its contract was extended to 2022.
Now that it is gone, Mera, through its spokesperson Fitina Khonje, said Tuesday that the authority was in the process of assessing how Aggreko’s exit would affect electricity tariffs.
“We will announce the outcome of the assessment very soon. And you will note that we should have already implemented the fourth base tariff adjustment as well and this, too, has not been concluded yet. We still have to make a comprehensive assessment on the same,” she said.
The government contracted Aggreko in 2017 to complement power generation at a time water levels in Lake Malawi had gone down, a development which saw hydropower generating machines working at 60 to 70 percent of their capacity.