ALL YOU NEED TO KNOW ABOUT ZESCO’S TARRIF ADJUSTMENT PROPOSAL

ZESCO Limited submitted an emergency tariff adjustment proposal to the Energy Regulation Board (ERB) for approval. At the Emergency tariff hearing ERB Chairman James Banda confirmed Zesco’s Application for a tariff as Zambia faced 16 hours of loadshedding resulting from a power deficit of 950MW. The proposed change, excluding Power Purchase Agreement (PPA) customers, is under consideration for a 9-month period.

ERB Chairman, Dr. James Banda indicated “No decision has been made and the public input is invited. ERB prioritises transparency, inclusivity, and clarity. The Board will carefully evaluate submissions and challenges before deciding on acceptance, rejection, or modification. Public input is welcome, guiding a fair and informed outcome."

This analysis prints ZESCO's emergency tariff proposal, presented at the ERB's public hearing yesterday at Mulungushi International Conference Centre, with virtual input accommodated. We unpack the potential tariff economic impact for households, businesses and social service facilities.

WHY THIS EMERGENCY TARIFF ADJUSTMENT

-       Power deficit of (950 MW) leading to 16 hours load shedding daily currently.

-       Deficit expected to widen by 300MW as Kariba complex will shut down in September 2024 due to water depletion

ZESCO’S PLAN

-       Power imports from Southern African Power Pool (SAPP)

-       Deploy diesel generators on vital load

 

WHY DOESN’T ZESCO FOOT BILL

-       ZESCO's current revenues below cost of implementing the plan. Hence, this is meant to partially meet the cost of the 300MW power purchases.

HOW LONG WILL BE IN EFFECT IF GRANTED?

-       During the emergency period [Know one Knows when it will end, bet is on having enough rains]

-       Reviewed every 3 months by ERB

WHAT DOES ZESCO INTEND TO DO WITH THE ESTIMATED US$14 MILLION MONTHLY

-       Raise about US$14 million monthly to contribute towards the procurement of the additional 300MW. See cost estimates below

o   150MW from South Africa (US$12.9 million monthly)

o   50MW from SAPP (US$5 million monthly); and

o   12.1MW from small in-land diesel generators (US$6.4 million and operational costs of US$ 1.6 million monthly)

o   285MW Solar PV, equivalent to 57MW of firm power (US$285 million).

EXPECTED OUTCOMES OF THE TARIFF

-       Power import to plug the yet to widen as Kariba Shuts down and Maamba goes for maintenance in September.

-       Compel consumers move to renewable energy solutions such as solar and gas.

-       Maintain the life line target to provide relief to the low-income households

-       Support SMEs through a tariff reduction from K0.78/kWh to K0.62/kWh for the first 100 units

-       Use saved power for the real economy

-       Deploy diesel generators to secure power supply to for selected critical loads such as government hospitals, utilities, pumping stations, security wings

HOUSEHOLDS TARIFF PROPOSAL

-       Tariff band to increase from 4 to 6

-       No change to the first 100kWh at K0.44/kWh to support low-income households

-       Adjust for customers consuming above 200kWh per month

-       730,000 accounting for 56% of the total residential customers use less than 200kWh and will not be affected.

-       570,000 accounting for 44% of total will be affected

-       Customers that consume above 500KWh account for 5-7% of the customer base and consume about 24% of power produced.

COMMERCIAL TARIFFS

-       Reduce by 21% for consumption below 100 units

-       Increase by 38% for consumption exceeding 500 units

-       The proposed adjustments will affect 24% of commercial consumers, with a combined consumption of 33MW.

-       Weighted tariff shift from K1.7/kWh to K2.2/kWh

SOCIAL TARIFFS

-       No change of social tariffs

-       Hospitals, Government Clinics, Government Schools, Old people’s homes, Orphanages, Street Lighting and Churches.

WATER PUMPING STATIONS

-       No change to water pumping stations for Water Utilities.

MAXIMUM DEMAND TARIFF

-       To maintain the current structure for MD1, MD2, and MD3

-       introduce a Two- Tier tariff system

o   Maintaining current tariffs for 70% of the total electricity consumed in a month,

o   while the 30% will be subjected to the proposed emergency tariff of US¢14.5/kWh.

-        No change for customers with active partial Emergency Power Supply Agreements (PSAs) with ZESCO