Chief Executive Officer for struggling State-run electricity distributor, Electricity Supply Corporation of Malawi (Escom) Kamkwamba Kumwenda Tuesday told journalists that the company is at the verge of collapsing if some quick policy changes, including upward tariffs adjustments, are not effected in the power sector.
Escom losses have accumulated to K112 billion since it was unbundled in 2018, a situation which has further choked operations of the ailing power utility company.
The loss is attributed to glaring mismatches between end-user tariffs and the cost Escom is paying for buying electricity from Energy Generation Company and some Independent Power Producers.
Figures presented show that in line with the current four-year tariff regime which ends in September 2022, Escom is charging consumers K104 per kilowatt hour on average, but is paying the producers about K140 per kilowatt hour.
Consequently, according to Kumwemnda, the company is unable to make fresh orders for essential items for new connections and maintenance, including poles and power lines.
“If I may say it now, Escom is slowly dying. Actually Escom is giving out free electricity which is not sustainable,” he said.
Among other things, Kumwenda lamented the option by IPPs to charge Escom in dollars, which he said is affecting the cost in the wake of volatility of the local currency, the Kwacha.
He said the remedy in the interim remains adopting an automatic price adjustment system for electricity tariffs to be reflective of periodic changes on the market.
Reacting in an interview Tuesday, Consumers Association of Malawi Executive Director John Kapito faulted Escom for what he called inefficiencies in its operations, hence the elevated losses.
He said the company will not be justified to raise tariffs in the interim as its service remains unsatisfactory.
“What we are getting from Escom, in fact, is not equivalent to what we are paying for. We are paying a higher tariff, yet the service we are getting is poor.
“In all fairness and if we are going to be honest, Escom does not deserve any increases in their tariffs unless they improve on service delivery,” Kapito said.
In 2020, the country saw the birth of the Power Market Limited to take over the single buyer function from Escom. The firm is responsible for negotiating deals with IPPs among other things.
The move was part of reforms in the country’s power sector under the $350.7 million (K242 billion) five-year Millennium Challenge Corporation (MCC) energy compact that was aimed at improving power generation, transmission and distribution infrastructure.