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World Bank report backs electricity tariff increase

IN SHORT SUPPLY —Electricity

John Kapito

By Wezzie Gausi

A 2022 Malawi Cost of Service and Tariff Study by the World Bank and Malawi Energy Regulatory Authority (Mera) released in February shows that the power tariff charged by the Electricity Supply Corporation of Malawi (Escom) is on the lower side.

The report, whose main objective was to detail the build-up of the Revenue Requirement (RR) for the tariff application, indicates that energy purchase by 2020-21 was supposed to be at K142.85 per kilowatt per hour (kWh) but Escom was purchasing the energy at K81.02 per kWh.

The report further shows that in the year 2021-22 the energy was supposed to be bought at K138.26 but Escom was buying at K81.02 per Kwh while in 2022-23 Escom was supposed to be purchasing the energy at K158.11 but it is purchasing at K96.77 which is below the required price.

The report further shows that between 2019 and 2021, poor revenue collection and low profitability have negatively affected Escom’s liquidity impacting, on payments to suppliers as payable days have increased from 240 in 2020 to almost one year in 2021.

“Lower payables is important for sustainable long-term supply chain management, but reducing payables in the short term will also negatively affect the cash balance available like debt service,” the report says.

Escom Chief Executive Officer Kamkwamba Kumwenda confirmed the World Bank report and said that from 2018 to 2022 Escom has been in financial constraints due to supply constraints and failure to operate in accordance with regulatory requirements as well as tariff methodology.

He said, for instance, during that period there was an over-stated projected power sale by 44 percent.

“The amount billed by Independent Power Producers could not be passed on to end user customers. The 2018- 22 tariff had factored in measured energy, while Egenco billed Escom installed available capacity.

“By October 2018 to March 2022, Egenco bill is K260.1 billion whereas what is dispatched and therefore provided for in the tariff line is K178.8 billion,” Kumwenda said.

Consumer Association of Malawi Executive Director John Kapito said the report by the World Bank on electricity is an economic massacre to this nation.

“I have seen the report by the bank and it is something that this country cannot go with.

The issue of electricity is not there for Escom to make profits but rather to attract investors that will develop this nation,” Kapito said.

Early this week Escom proposed that electricity tariff should be hiked from the current K104 kWh to K207 kWh.

The electricity supplier has submitted the proposal to Malawi Energy Regulatory Authority for approval.

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