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Stalemate on electricity deal

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Malawians will have to live with the endless power outages as well as exorbitant electricity tariffs following revelations that discussions between Electricity Supply Corporation of Malawi (Escom) and prospective Independent Power Producers (IPPs) on generation of electricity have reached a stalemate.

Government signed a Memorandum of Understanding (MoU) with 17 IPPs agreeing on areas of collaboration in power generation in 2011 but up to now none of them has signed a Power Purchase Agreement (PPA) with Escom making it impossible for them to enter the country’s power sector.

Government says the IPPs are proposing almost a 39.5 percent higher selling tariff rate than the power utility body sells its consumers.

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The IPPs are proposing to generate power from solar as well as coal and are asking for a tariff range of between 18 and 22 cents per kilowatt per hour while Escom is currently selling at 8.7 cents per kilowatt per hour.

Deputy Director for Energy, Joseph Kalowekamo, explained that Escom has to buy power at a rate they are comfortable with and will generate profit but the IPPs are demanding a selling tariff that is way above what Escom offers its customers.

“Only one out of the 17 has signed a Terms Shoot, which is a minor agreement preceding the PPA so far but are far from agreeing what quantity of power they will be selling, and at how much to Escom,” said Kalowekamo.

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Atlas Energy, a solar power producer, is the only IPP waiting to sign a Power Purchase Agreement (PPA) with Escom after successfully going through all the required processes.

The company signed an MoU with the government on February 10, 2015 for an immediate power production of 40 MW, with a 200 MW pipeline to be built later.

The current legislation gives power to Escom to negotiate terms with IPPs despite being an interested part.

This has raised suspicions that the sole power utility company might deliberately be delaying the process of engaging IPPs to enjoy monopoly until its unbundling.

Escom Public Relations Officer was yet to respond to our questionnaire.

On his part, Malawi Energy Regulatory Authority (Mera) Board Chair, Dingiswayo Jere, said a framework is being developed proposing that the regulator should assume the responsibility of negotiating with IPPs.

“Despite being an interested party, the current legislation favours Escom since it is a sole operator. The framework which is under formulation is proposing shifting this task to Mera like it is done in other countries,” said Jere.

The framework, he said will also define whether IPPs should be parietals or those from the private sector.

“Country should have an off taker to generate power, while another company will buy the power and sell it to customers. The framework will also contain all the details to be followed by

IPPs entering the power sector,” said Jere.

Among others Atlas Energy, CTI Africa LLC, JCM Clean Power Development, Africa Energy and Power Corporation, CDC Group, Bua Hydro power and Ulalo Capital Investments are currently negotiating with Escom at various stages.

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