Cabinet has directed Zesco Limited to immediately migrate to cost-reflective electricity tariffs as a way of speeding up power project development.
Acting chief government spokesperson Vincent Mwale said investments in power generation projects are not moving because investors cannot get a good return on their investments.
Mr Mwale said this in Lusaka yesterday during a media briefing on deliberations and decisions of the 16th special Cabinet meeting.
According to the statement, a cost-reflective tariff is one which reflects the true cost of supplying electricity and removes the reliance on State subsidies to cover the variance between the current tariff and the true cost of supply of electricity.
Mr Mwale, who is Minister of Youth and Sport, said the measure will accelerate investment in the sector.
“As per the provisions of the energy regulation Act No. 436 of 1995, Zesco will apply to the Energy Regulation Board (ERB), which shall determine the level at which the migration to cost-reflectivity will begin. This will, however, be done in cognisance of Cabinet’s directive to protect the poor,” he said.
Below is the full statement
CABINET DECISIONS: 16TH CABINET (SPECIAL) MEETING
LUSAKA (FRIDAY, August 14th,, 2015:
(a) Power Crisis Mitigation Measures: Under this Item, Cabinet approved:
Background
Zambia is currently experiencing a power deficit of 560 MW due to the low rainfall experienced during 2014/2015 rain season. The power deficit has resulted in ZESCO effecting a stringent load shedding regime in order to preserve water in the dams thus avoiding a complete shutdown of the generating plants.
This situation has arisen due to the fact that the country over the years did not take concrete steps to diversify the country’s generation mix to avoid adverse effects of the changing climatic conditions that have made droughts more frequent. Further, the prevailing low electricity tariffs which makes Zambia currently have the lowest tariff in the region, at an average of US$c5.64 per Kilowatt Hour compared to an average of US$c10 per Kilowatt Hour in the SADC Region, has inhibited investment in power generation. More than 7 years ago, Cabinet made a decision to move tariffs to cost reflective levels but this was not implemented. The then Cabinet decision was taken after the Cost of Service Study of 2006 that was conducted by the Energy Regulation Board (ERB) showed that all consumer categories were paying for power below the cost of production.
The 34th Meeting of SADC Ministers responsible for Energy held in South Africa on 24th July, 2015 resolved that all SADC countries should have cost reflective electricity tariffs by 31st December, 2019. In view of this situation, Cabinet at its 16th Special Meeting held on 13th August, 2015, resolved as follows:
(i) that despite the need to have cost reflective tariffs, residential customers, especially the poor ought to be protected. Therefore the lifeline tariff (Tariff Category R1 for residential) will be increased by 5 times from 100 to 500 Kilowatt Hours (kWh) per month. The current tariff of 15 Ngwee per kWh will remain. This translates to just under US$c2 per kWh. This will be made possible by reserving an amount of power from the old power stations, namely Kafue Gorge, Kariba and Victoria Falls for residential consumers. The R1 tariff of 500 kWh/month will enable low income households to use electricity for their necessities;
(ii) that the migration to cost reflective electricity tariffs begins immediately as a way to speed up power project development. Currently investments in power generation projects are not moving because investors cannot get a good return on their investments. This measure will therefore accelerate investment in the sector. As per the provisions of the Energy Regulation Act No. 436 of 1995, ZESCO Limited will apply to the Energy Regulation Board which shall determine the level at which the migration to cost reflectivity will begin. This will however be done in cognizance of Cabinet’s directive to protect the poor;
(iii) all new industrial and mining customers to pay cost reflective tariffs based on power from new generation plants;
(iv) for ZESCO to contract emergency power from the private sector in the short term in order to mitigate load shedding and provide the much needed additional electricity to the economy. A selective tender process for companies with capacity to supply emergency power within the shortest time period will be undertaken;
(v) that Bulk Supply Agreements (BSAs) signed between ZESCO Limited and Bulk consumers be reviewed to allow for constant adjustment of electricity tariffs for these consumer categories just as the case is for residential and other customers. Should the need be, this will be achieved by enacting appropriate legislation. Members of the public may wish to know that during the privatisation process, the Government had used low electricity tariffs as an incentive to lure foreign firms to take over ownership of the local mining companies. This measure was intended to ensure that the mining companies remained viable with the view to boost economic growth in the country. The copper prices were relatively low on the global market at US$2,000/tonne compared to the current copper prices which stand at US$5,000/tonne. In view of the rising cost of producing power, Government is no longer in a position to continue offering this incentive;
(vi) have all Power Purchase Agreements (PPAs) regulated and set by the Energy Regulatory Board (ERB) in accordance with the Pricing Model approved by the ERB as a way to ensure transparent and uniform tariffs for each category of consumers; and
(vii) have Government provide guarantees on behalf of ZESCO Limited to underlay Independent Power Producers’ Power (IPPs) Purchase Agreements (PPAs) until tariffs reach cost reflective levels.
In conjunction with the above measures, Cabinet directed the Ministry of Mines, Energy & Water Development to expedite investments in other sources of energy like solar which can be developed quickly and are not subjected to climatic changes. These will be in addition to the following projects which are already under development or in final stages of planning:
- Maamba Coal Power station that will produce 150 Megawatts (MW) by the end of 2015, 150 MW in 2016 and a further 300 MW under its Phase 2 development, giving a total of 600 MW.
- Expansion of Ndola Energy Power Plant that uses Heavy Fuel Oil (HFO) by another 50 MW to bring the total to 100 MW. This will be done within 12 months from now (2016).
- EMCO Coal Power Plant that will produce 300 MW by 2017
- Kafue Gorge Lower Hydro Power Project that will produce 750 MW by 2019.
- Batoka Gorge Hydro Power Plant that will have a total installed capacity of 2,400 MW, of which 1,200 MW will be for Zambia and the other 1,200 MW for Zimbabwe, This project is expected to come on board by 2022.
___________________________________________________________
Issued by:
Hon. Vincent Mwale
MINISTER OF YOUTH AND SPORT
ACTING CHIEF GOVERNMENT SPOKESPERSON
Vincent nikawolala. Wait when upnd forms government. We will sort you out
In 2050? Just go back to tumfweko you muppet!
stop quoting articles and lay out plausible solutions.
This is just another scam to rip off customers. Zesco will increase tariffs but there will still be 12 hour blackouts because power stations take 4 – 8 years to develop. Tariff increases will not solve the current problems. PFools will just use the excess cash from Zesco for their campaigns next year. That’s why Zesco is full of cadres.
Zambians don’t earn as much as their counterparts in some SADC countries. If we have to compare, let us compare all related aspects. Govt has been sleeping for many years, why should the change be overnight. unless salaries will be increased immediately as well. Please plan things not always being reactive and choosing easy way out of passing the problem to the public.
You dont earn as much but you are the first ones to complain about luxuries like DSTV when they are increased, you pay the highest fuel at the pump and mobile phone rates are the highest in this selfsame SADC region….the problem is with previous and current govts they should have increased all this when it was happy days when they price of copper was high…but they thought it was going to last forever….constantly misappropriating funds , praying in church for the best but not planing for the worst.
The selfsame way I’ve been telling Zambians for years on this platform to invest in alternative energy like solar is also what is going to happen with our dependence on maize instead diet diversification….it only takes another poor rainfall next season. Zambians never plan ..our…
Please PF dont blame God for no rain!!! kariba dam has enough water to generate power for 3yrs!!! the problem is ma dizzy!…..
@Ndobo, where is Kambwili, is he drunk, why allow this ka mu colored to be yapping and publishing classified Cabinet Meeting agendas? Uyu Youth Mwale need to be smart and work from background, an MMD MP behaving like Chellah?
@Nostra
you are right,,,,,kikikiki uyu youth vincent Mwale should know better!,,,,, youth boss kambwili has alot of `fights` against the post, against ba kachema, against kabimba, against tag team HH-GBM,,,etc
Seven years ago the “reflective tariff was approved by mmd cabinet but it failed, willfuly, to implement what they approved! Glaring incompetence of African rulers. Otherwise we would not subjected to current 8hours damaging long load shedding currently.
ba nostradamus ati ka mu colored, yet you are the one who likes these descendants of neanderthals very much. I just dont get it, how can a normal erect human being like a pure african decide to mate with a neanderthal descendant. ninshi mwatemelwa bakolwe so???
Kambwili would have been begging white pipo for help if it was him.
And I quote “The copper prices were relatively low on the global market at US$2,000/tonne compared to the current copper prices which stand at US$5,000/tonne. In view of the rising cost of producing power, Government is no longer in a position to continue offering this incentive;” Please please please dont turn around once you are threatened with job losses by the mines you must stand your ground not the way you did with taxes that you have shifted from mines to us. A way of achieving win win situations is have ROUND table discussions before your pronouncements.
They are a clueless bunch..when they removed subsidies on fuel they stated it was not right for the taxpayer to pay for mines but they lamentably failed to remove subsidies on energy which these Global Mining Conglomerates enjoy due to developmental agreements they signed and still do behind our backs.
The fact that we let dull politicians negotiate with the smart business savvy mines is our downfall as they put political agenda before common sense and business sense…sadly again its the docile Zambian taxpayer who is bear the cost of this.
This uneducated coloured son of a mwenye monkey is talking rubbish!!!
Price reflectivity should NOT only be restricted to ZESCO. To reflect a LEVEL playfield, even farmers should be charging economic reflective prices for their maize, mealie meal, vegetables, fruit, etc. It is FOOLISH of this ka ma Coloured monkey with a tail to think his PF Govt can control prices of selective commodities and not others!!
The PF idi.ots have NO IDEA of resolvng Energy Crisis – you can tell fro the SH.IT from IDI.OTS like Mwale a half Mwenye and Half Muntu!! Just let HH rule this country – we wont eat this foolish self claimed Humbleness from Chakolwas. In a crisis like this one, we need HH’s vision and courage which these monkeys will never ever have.
Imwe ba kwindi!!!! U must know tht its u that made this ka vincent to start yapping!!! U think u sorting issues by buying pipo from opposition parties? Its a mistake! Even if uyu jemmason give jobs to opposition members,the fact remains the fact that we re tired of his mouth full of empty promises!!!!!! 2016 we sort u out ba cheeta,ba pomboo!! Maggots!!!
Mwale Why all this jargon to confuse the docile Zambian masses? Simply state tariffs in Zambia are too low to attract investors in the sector AND now we are going to increase electricity…if your dull lazy boss had any sense he would not have had put a tariff freeze on via his silly directives a few months ago.
This govt is utterly clueless, a cabinet full of empty tins and headed by a lazy drunk bum called Edgar…this is a reactive govt which mends its roof when its raining heavily with dangerous lightening strikes all over the place!!
how will the poor manage under rural electrification program? there is no government in the world that does not subsidize for its citizens. Fuel subsidize removed, maize subsidizes removed, how much have we saved? soon it will be water. We are in trouble.
Your Rural Electrification Program is poorly managed and the poor will do okay as they have done for years…Yes there is no govt that does not subsidise but prudent govts do not subsidise energy its not sustainable…all the money that was saved from fuel subsidises has been cancelled out due to a bloated civil service, bankrolling loss making Parastatals, poor leadership, recklessness etc.
Wake up!!
In comparison to other SADC countries Zambia’s cost of living is extremely high hence the fact that we seem to have lower wages. Go to SA you find things a lot cheaper. Yes Zambia is a landlocked country so we get produce from outside the country and this bumps up prices of commodities. Sadly even cheap quality goods from outside, once they hit our markets, suddenly become expensive.
However, being landlocked is no excuse. We have no manufacturing industry to speak of as we seem to prefer to buy from outside. Some foodstuffs that we are eating have a detrimental effect on health hence the increase in some cancers etc because of chemicals and preservatives. Why can’t we be more self reliant?
Very well said. I am shocked by how our palates have suddenly acquired the South African stamp. A certain supermarket director even had the nerve to claim he imports everything because no one can supply enough locally. I think they should be given a period to change this by making their requirements public and allowing local producers and suppliers to gradually increase their production to eventually become majority suppliers and shaping policies that will encourage productivity and perhaps work with seed development financiers on a fund to set up manufacturing plants. We can’t be importing bread, fruit, vegetables, pies, jam, peanuts etc. when we used to supply ourselves.
Our local farmers are not consistent if you are going to supply a big hypermarket shopping chain like Shoprite, Gamestores, Walmart etc…these chains can not afford you supply to be irregular; when you agree to supply Beefsteak tomatoes they should consistent as the chains have standards.
The onus on is on the Gov’t and Farmers Union to liaise with these chains so as our commercial farmers can also join this lucrative club
but eating standardized food stuffs means, you have genetically engineered the food products to come up with the same genetic make up giving you the same consistent shape and size. Pa last, everyone will be eating the same potato genetically for decades to come. And obviously this is not the way nature intended it to be. I agree with constant volume supply of food but not standardized food in terms of size, appearance etc as is required often by these large supermarkets like walmart, shoprite. This is much more harmful not only to the human beings that consume such food but the environment in which they are grown.
When is Honourable kambwili going to be a mature minded person? I also doubt the mental capability of the one who gave this incapable human being a task of speaking on behalf of the ZAMBIANS.
Yet ZESCO is quietly building a state of the art power station in Freedom Park to power up Mukuba Mall where anyone on that grid never experiences load shedding while the rest of the town awaits being asked to pay more for intermittent supply. Many of the compounds don’t have electricity. This supply hierarchy continues across the country. Its own Directors don’t experience load shedding. Pick n choose. Where will people find money to pay when the salaries are the same, currency has devalued, family budgets are strained and most of their days are spent without electricity which is killing businesses. Tough all round.
Ba minister don’t bit about the bush, in short electricity will be increased to cover the cost of production, period! the question is GRZ is are they ready to give salaries that will match the high cost of living? if yes, then kudos to PF, if no then be ready for a showdown with the workers and the citizens. Between GRZ and the people, one will loose the fight.
(i) that despite the need to have cost reflective tariffs, residential customers, especially the poor ought to be protected. Therefore the lifeline tariff (Tariff Category R1 for residential) will be increased by 5 times from 100 to 500 Kilowatt Hours (kWh) per month.
(iii) all new industrial and mining customers to pay cost reflective tariffs based on power from new generation plants;
yes they will pay but the industrial guys will pass on the cost to the consumers, the very poor you are trying to protect.
Now let the game begin. When ZESCO applied for tariff increase, this vision less government declined and instead imposed a freeze.
Now Electricity, Charcoal, Fuel and salaries of ministers and MPs go up; yet salaries for workers and farmers produce will only be considered in 2016.
The government should surely start soul searching. I might seriously start DE-campaigning the PF and will ask all Students, Unions, Churches, NGOs to join me. I think the honey moon for PF is over. We need to get to the villages to ensure all Zambians demand that the government starts working.
The only solution lies in breaking up Zesco and sell the units. At the moment Zesco buys party regalia for the ruling party leaving no money for investment . MDs are not interviewed but a minister just dreams of some cadre and bang…we have a new md
Zesco, please. You sent a message yesterday that Kabangwe load shedding is from 8 to 16 today 15th August. It is now after 18 and we don’t have power from morning
Lungu in slowest, he is saying that, We are sharing electricity with Malawi and countries in the Sadic,
On the expense of our people, vision less person, Zambia , we are a laughing stock sure
Gideon, my brother, vote wisely next year. They don’t even know who is in charge. That’s your president bane
The Bible tells us Christians that Egypy saved in the seven years of plenty, for the seven years of shortages. We squander in the years of plenty, and now we panic. Will we ever learn?
Sorry, read Egypt, and not Egypy. Thanks.
Mr Mwale, these changes should not be introduced without proper consideration. Zesco is a parastatal established to facilitate power supply at a price affordable to ordinary Zambians. There is a drive to implement rural electrification, while ignoring the demand such electrification generates. In an election year, there should be a costed manifesto to address the deficiencies seen in the current policies, including the investment shortfalls in electricity generation. The problem I see lies in the argument for increasing tariffs in favour of suppliers. Our people are extremely poor and earn less than the lowest paid in the developed countries. It is hard to compare returns on investment when people are not paid adequately for their services and produce, i.e. workers and farmers. Look at…
One of the disadvantages of Electricity generation from coal is that it consumes a lot of water that is turned into steam to turn the turbines. This has led to reduction of water levels and tables in places where such electricity is produced. Maamba will use water from the Kariba the same source of water for the hydro power generation by ZESCO that is already experiencing low water levels. This will only compound the problem of low water levels and underproduction of electricity unless Maamba uses a different type and a water sparing technology to produce their electricity. I wonder whether this potential problem has been considered by those concerned with this project?
Really. is that true? Where does Botswana get its water from because it
relies on Thermal power?
Drums of War: The Botswana Thermal Power Stations too depend on water supply according to my readings. For example, the M’mamabula Thermal Power Station that becomes operation in 2018 will depend on water supply from Dilkgathong Dam, the biggest dam project in Botswana on the Shashe River. Let me add a disclaimer that I am no expert in this field and my knowledge is from my readings. I have read about the disturbance of water levels and river flows as one environmental adverse effect of thermal power generation. If this is accurate, then Kariba which is experiencing low water levels from natural causes will experience an additional strain from thermal power generation thereby compounding or creating a perpetual problem to adequately generate power by ZESCO on the Kariba North. What do…
The last sentence that has been cut was; What do experts out there say?