By Chimwemwe Mangazi and William Kumwembe:
The establishment and rolling out of the Power Market Limited (PML)—an independent entity that performs the single buyer function within electricity supply chain—in 2020, has, yet again, sparked debate with commentators calling for a review of the position.
The firm’s establishment 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 aimed at improving power generation, transmission and distribution infrastructure.
It entails scrapping off of Electricity Supply Corporation of Malawi (Escom)’s role as a single-buyer with its task limited to distribution and transmission.
But debate has re-ensued over the move, which commentators feel needs a review.
In a paper, former Escom chief executive officer Kandi Padambo, an accountant by profession, argues that it would be ideal for the holder of power transmission license to simultaneously hold licenses for distribution, imports, exports system and market operator and single buyer.
“Because the transmission network is owned and operated by the national utility, the independent power producers, with hydro or coal-fired plants, solar or wind farms, have to connect to the transmission network at various points,” he says.
In a recent interview, Escom Chairperson Fredrick Changaya indicated that moving the function to PML would only push prices of electricity up.
Malawi Energy Regulatory Authority licensed PML as a single buyer following the passing of the Electricity Amendment Act of 2016.
The regulator said in a statement late last year that the move was aimed at attracting private sector investment into the energy sector and promoting efficiency at various levels of the industry.
Parliamentary Committee on Natural Resources and Climate Change has continually backed the position.
In an interview Sunday, the committee’s chairperson Werani Chilenga maintained that the move was aimed at bridging the gap between electricity producers and distributors.
“When the single buyer system was created in the Act in 2016, it has been with Escom but illegally that is the reason the Malawi Energy Regulatory Authority (Mera) granted PML a license and that was to instill confidence in IPPs in the country’s power generation systems,” Chilenga said.
He added that the committee will soon present a report to Parliament on the conduct of Escom to cling to the single power marketing system illegally.
Meanwhile, in the paper, Padambo says the challenges in the sector are perpetuated by poor governance, political interference and failure by sector players to implement mechanisms for sustainable cost reflective pricing.
Among other things, he holds that the multi-billion Kwacha trade debt that Escom apparently owes the Electricity Generation Company (Egenco) may have nothing to do with the performances of the two companies but a mismatch between the wholesale price charged by Egenco and the regulated retail price at which Escom sold to its customers.
For years, there has been a glaring mismatch between electricity supply and demand in the country.
Before the temporal suspension of the 130-megawatts (mw) Kapichira Hydropower station which was damaged by heavy rain early this year, the country faced a 358 MW power generation deficit as electricity demand is projected at about 800mw compared a 441.95mw.