Mera approves 25% electricity increase
The Malawi Regulatory Authority (Mera) has been forced to approve a 25 percent increase in the price of electricity days after the regulatory authority rejected Escom’s Power Purchase Agreement in which the tariff increase was among several proposes.
This means that when the stand by generators arrive in the country and are installed next month as promised by President Peter Mutharika, Malawians will start paying K73.23 per kWh up from about K58.80 per kWh.
The tariff hike, is expected to worsen people’s already dire situations and cut their planned spending during the festive season.
Mid this month, Escom, reinstated the contract to supply stand by generators under a lease agreement framework awarded to Aggreko Power Solutions.
The South African based firm had won the US$74 million contract after it took part in a restricted tender early this year.
But an investigation by the Office of the Director of Public Procurement (ODPP) found that the process was manipulated to give Aggreko the unfair advantage and halted the whole process and subsequently stopped Escom from signing the contract.
But Escom this week disregarded the ODPP’s findings and quietly gave Aggreko the contract back to supply the generators even before the Malawi Energy Regulatory Authority (Mera) endorses the PPA as mandated by law.
In the PPA with Aggreko that Escom asked the Mera board to endorse, Escom agreed to be responsible for the provision of fuel to the sites.
Another issue that shocked the Mera Board, when they met and refused to endorse the agreement, was Escom’s agreement to pay for the cost of shipping the generators on behalf of Aggreko
The board had questioned Escom on why Escom should sign an agreement with Nocma when Aggreko is supposed to enter into such an arrangement with suppliers, and finally, why Escom should buy electricity from Aggreko at 0.12 cents per Kwh for two years.
But in the letter which approved the tariff increase, Mera said the extra ordinary board meeting “held on 22 November 2017 considered your revised submission including explanations on the issues that the Board had raised with respect to the PPA for procurement of 78 Megawatts of emergency power.having considered the financial model provided by Escom and upoun consideration of the revised PPA as well as the explanations and information provided by Escom, the Mera Board resolved as follows;
The PPA between Aggreko and Escom be approved with an end user tariff of K73.23 per kWh representing a tariff increase of 24.67 percent on the basis that the generators will be running for six hours.”
Mera also approved the Escom proposal to be responsible for fuel supply and restricted Escom to only do that for three months from the commencement date.
“The Board is of the view that Escom is not the best placed to manage the risk associated with fuel supply since its mandate is to procure power, transmit it and distribute to customers and consumers,” said Mera in the letter which we have seen.
They also asked Escom to ensure that before the PPA is signed with Aggreko, the documents such as the Connection Agreement and the Fuel Supply Agreement “accompanying the PPA are in place.”
“Provisions on importation and exportation of equipment should reflect the intention of the parties where Escom’s role would be merely facilitative of the process and not to take it’s a contractual obligation,” reads the letter in part.
Aggreko has already been given a go ahead by the Ministry of Energy despite that Mera is yet to give them a generation license to operate.
Escom CEO Allexon Chiwaya’s phone was off last evening when Malawi News tried to get hold of him.
The latest conduct by Escom is also not surprising because the power grid has been mismanaged which has sapped an already fragile economy over the years.
Currently Malawi’s installed electricity capacity is 282.5 MW compared to estimated demand of 344 MW, and only nine percent of the 16 million population has access to electricity with many relying on firewood and charcoal for energy.
But in recent months, power outages have gotten worse with most households going without electricity for more 20 hours.
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