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Escom split to create two firms

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The split of Escom will result into two parastatal firms, one responsible for generation and the other responsible for transmission and distribution of electricity.

The restructuring of the organisation comes against the backdrop of surging public concerns over inefficiency saddling the parastatal electricity supplier.

Experts have attributed the persistent power problems in the country to monopoly of the electricity market by Escom which is currently responsible for every operation in the chain, namely generation, transmission and sale of electricity to customers.

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Now with the unbundling, Escom will shed off its generation operations to a new company.

Director of Energy in the Ministry of Energy, Mining and Natural Resources, Joseph Kalowekamo, said in the arrangement, the remnant Escom will be responsible for transmission and distribution of electricity.

It will be buying power from the new company and from independent power producers (IPPs), transmit it and sell it to customers.

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“The remnant Escom will enter into power purchase agreements (PPAs) with the new company and IPPs. This means that the new company and IPPs will always be on the run to ensure they supply the agreed-upon power to the remnant Escom, hence bringing in efficiency in the power market.

“If there is growth in power demand from customers, the remnant Escom will send out an ‘SOS’ to the power market, hence attracting more IPPs or private sector investment in the market,” said Kalowekamo in response to our emailed questionnaire on the unbundling process.

And against fears that the splitting of Escom could result into job losses, Kalowekamo assured that jobs would be secure or losses would only be minimal.

“What will happen is that the generation unit in Escom will be taken out to form a new company which will be a public company i.e. a parastatal just like the current Escom. The remnant Escom, composed of the transmission unit and distribution unit including customers etc, will remain.

“It can, therefore, be seen that the issue of employees losing their jobs is very minimal or does not arise at all. In fact, there will be job creation in the new company that will be established as it will need a new CEO [Chief Executive Officer], managers, accounts personnel, administrators etc. The government is treading carefully to minimise negative impacts of the whole exercise on Escom employees,” he said.

Government is unbundling Escom with technical and financial support from US$350 million Millennium Challenge Account- Malawi (MCA-M) under the project’s Power Market Re-Structuring component.

But Kalowekamo said the exercise is not MCA-M’s idea.

“An emphasis should be made that it is the Government of Malawi that made the decision to unbundle Escom and is implementing it (and not MCA-M or Escom),” he said.

Government says it is unbundling Escom to bring in efficiency in the power market and attract private sector participation particularly in generation of electricity.

The proposals to unbundle the organisation are contained in the National Energy Policy of 2003 and are backed by Energy Laws of 2004.

Kalowekamo said the proposals could not be implemented all this long because the clause in the law that supported the unbundling was frozen.

“But now the government, with full support of the Public Sector Reforms, is determined to unbundle Escom into two companies…” said Kalowekamo, adding that the processes are at an advanced stage.

It is expected that Escom should be unbundled by July 2016.

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