By Antonio Mwanza
Introduction
ZESCO has applied to the Energy Regulation Board (ERB) to approve a hike in electricity tariffs up to 75% across various consumer categories with an initial 50% increment potentially effective, 1st May, 2019.
As expected, this development has been met with uproar and negative criticism from the general public who feel that such a move will push the cost of doing business and the cost of living in an upward spiral.
The ERB has since organized public discussion forums to engage the public to get their views and sentiments over ZESCO’s application.
Before we condemn or applaud ZESCO’s application to ERB, it is important to analyse the facts and deal with the realities surrounding the electricity sector.
FACT No. 1
ZESCO is supplying power to us at a loss. ZESCO tariffs are not cost-reflective, meaning that the current tariffs are below the actual cost ZESCO is paying to generate, transmit and distribute electricity.
ZESCO is supplying power to consumers at 15 NGWEE per kilowatt hour while the actual cost is estimated to be around or above 30 NGWEE per kilowatt hour. Government is subsidising the rest of the cost. Like i earlier said: ZESCO is supplying power at a loss; in short, the current tariffs are uneconomical, not cost-reflective and unsustainable.
FACT No.2
Due to the non cost reflective tariffs ZESCO is failing to attract the envisaged private sector investment which is key in improving the generation, transmission and distribution of power to meet the ever increasing demand. No investor is willing to invest in a loss making venture.
FACT No.3
The demand for electricity is ever increasing. Zambia’s electricity demand is forecasted to be at 3000 MW by 2021 against an estimated capacity of 2971 by the same period. This demand is expected to continue and ZESCO will have no choice but to migrate to cost-reflective tariffs to attract private sector investment, increased generation capacity and to implement the much needed energy mix.
FACT No. 4
Any increase in the electricity tariffs will have an adverse effect on business and may eventually push the cost of living further high. It is in the view of the above that earlier, this year, His Excellency, President Edgar Chagwa halted ZESCO’s plan to increase electricity tariffs.
CONCLUSION
The current ZESCO tariffs are uneconomical, non cost reflective and totally unsustainable. Government cannot continue to subsidize ZESCO, it is simply unsustainable and economically imprudent.
The only way ZESCO can attract private sector investment and continue to improve its generation, transmission and distribution capacity as well as to implement its Energy Mix Program is to migrate to cost reflective tariffs.
However, it must be borne in mind that any tariff increment may disrupt business hence it must be done with caution and after ZESCO complete the Cost of Service Study which the African Development Bank has funded and is expected to be completed this year.
CEC makes a profit from on-selling Zesco-supplied power to the mines. So the tariffs may be just about right.
Antonio’s article adds no stimulating and alternative angle to the existing discourse…his article is so shallow it baffles me that it has been awarded the media space ….what percentage of this cost we are bearing is due to ZESCOs inefficiencies, wastage and bloated workforce ??? It is absurd to always talk of n0nsensical cost reflective tarrifs before seriously considering cost cutting, enhanced efficiencies and other austerity considerations …your costs will be reflective now but if u have say a bloated work force and unnecessary wastage inflation soon catches up and u will need “cost reflective” tarrifs in a short time
Antonio’s article adds no stimulating and alternative angle to the existing discourse…his article is so myopic it baffles me that it has been awarded the media space ….what percentage of this cost we are bearing is due to ZESCOs inefficiencies, wastage and bloated workforce ??? It is absurd to always talk of meaningless cost reflective tarrifs before seriously considering cost cutting, enhanced efficiencies and other austerity considerations …your costs will be reflective now but if u have say a bloated work force and unnecessary wastage inflation soon catches up and u will need “cost reflective” tarrifs in a short time
The article adds no stimulating and alternative angle to the existing discourse…his article is so shallow it baffles me that it has been awarded the media space ….what percentage of this cost we are bearing is due to ZESCOs inefficiencies, wastage and bloated workforce ??? It is absurd to always talk of cost reflective tarrifs before seriously considering cost cutting, enhanced efficiencies and other austerity considerations …your costs will be reflective now but if u have say a bloated work force and unnecessary wastage inflation soon catches up and u will need “cost reflective” tarrifs in a short time
ZESCO and GRZ are taking the lazy route of simply increasing tarrifs they have absolutely failed to attempt structural changes in the company not even the minutest they would rather be wasteful and engage caders bloating the workforce …and let us bear the cost of this wastefulness …u see the same with ESKOM in RSA under the Zuma regime ..now ZESCO is owing so much it’s now a major risk to the country’s economy …it’s being used as a conduit for so many illegalities can u imagine that the President even illegally signed off a $500 million bond for ZESCO organized by his lawyer friend which was later overturned by MoF …what other rot happens in this company that we don’t even know about …why should the bloated to management be bought new vehicles each worth over USD 150,000 and…
We all have seen it, they have been tried and tested, they are nothing but a bunch of parte after parte and only good at busitele music and dancing during elections, THEY ARE NOT ECONOMIC MANAGERS. unip was both freedom fighters and economic managers, mmd(Chiluba) was democrats and economic managers, mmd(mwanawasa) was economic managers , mmd(rupiah) was politicians and economic managers, pf (politicians) no economic data.
Do unto Zesco as you have done unto Zamtel then we will have more electricity to a point of massive competition and promotions and buy 5 get one free. Zesco will start begging us to buy Zambian.
Disband Zesco. Allow for more players and those tarrifs you want to hike now will be the thing of the past.
Redesign Zesco distribution network to allow for private sector participation.
Remove Government’s thick hands from Zesco coffers.
List Zesco and Zamtel at Luse and remove all cadre ceos.
Poor article no critical analysis why attempt to write articles if you don’t know how.
Mwanza please go back to your FDD. You just here to mess up our PF,just go, you dont mean well. You’ve been talking too much and stepping on people’s toes . Listen then talk.
This analysis by a KADA, the most deadly form of parasitic life, is not worth reading.
Have you now become a spokesperson for zesco since they seem to be paying you allowances for doing nothing.
Antonio’s article adds no stimulating and alternative angle to the existing discourse…his article is so shallow it baffles me that it has been awarded the media space ….what percentage of this cost we are bearing is due to ZESCOs inefficiencies, wastage and bloated workforce ??? It is absurd to always talk of n0n$ens1cal cost reflective tarrifs before seriously considering cost cutting, enhanced efficiencies and other austerity considerations …your costs will be reflective now but if u have say a bloated work force and unnecessary wastage inflation soon catches up and u will need “cost reflective” tarrifs in a short time
First and foremost, Zesco must clean house. It must reduce on its bloated workforce, reduce its overheads like fuel and maintenance for all its vehicle, cut down on salaries and allowances etc. Ba Antonio if like your boss chanda have nothing to say or do, dont bore us or think you’re talking to people who don’t have brains! Stop insulting our intelligence! SHUT UP
My Research lecturer at UNZA once to us that partial ***** is someone who speaks on things he has little understanding on. We know Zesco has capacity to lobby, argue and defend its policies. Now to see cadres giving impotent opinions on things they have little knowledge is strange.
Does it mean govt spokeswoman is toothless or Zesco PR staffs have failed?
We know Antonio is trying his best to protect that piece of chicken from falling off the mouth hence such amateur statements with little merit.
Antony you can do better.
First Publish the current Financial Report for ZESCO! We need to know the cashflow situation for ZESCO! We need to know the debt situation for ZESCO to see whether we are dealing with a viable company or a bankrupt one.
We also need to go back and ask ZESCO about what happened to the last so called cost-effective tariff hike of 75% we have had to endure. We need to be convinced how the proposed increment becomes another cost-reflective adjustment! Can the Economic Association of Zambia (EAZ) give us the impact assessment of the last tariff hike on the business and the economy! Let them also give a projected impact of the proposed tariff hike of 200%! We get the feeling that adjustment has already gone through because our units don’t last the whole month despite the…
We get the feeling that adjustment has already gone through because our units don’t last the whole month despite the loadshedding!
ZESCO’s financial woes cannot be solved by throwing money money at those problems! ZESCO needs unbundling and restructuring to make it lean and efficient! Masobela too much ba ZESCO! It’s not surprising that those who have nothing to do with ZESCO but are on ZESCO payroll are defending this illegality!
There you have it. The id!otic opposition are busy lying to gullible supporters that they can sort out the mismanagement but the truth is there for those with wisdom to see. Those tariff increments are inevitable if ZESCO is to survive and be a commercially viable entity.
SDtill 5ucking anointed one rod?
You are actually duller than Sharon and that’s an achievement.
As ZESCO goes, so the Economy!
ZESCO has destroyed our economy singlehandedly!
If Zesco is supplying electricity at a loss, why does it have such a bloated payroll filled with heaps of incompetent cadres?
Your comments on pricing have merit but the bigger issue is that Zesco has been mismanaged just like the rest of the Zambian economy under your clown-like rule.
There’s no other option of fixing the energy sector apart from Implementing cost reflective tariffs,
Cec currently sales power to the mines at 9.3 cents,
Zesco is buying power from maamba at almost 10 cents per kilowatt/hour but zesco sales it to domestic customers at less than 4 cents,
In 1975 zesco had 100,000 customers but now it has 1,000,000 customers with 150mw annual growth in demand for electricity,
Zesco cannot manage to meet this demand and needs independent power producers who can only invest if our tariffs are cost reflective,
It should be noted that you cannot build a power plant with local money from Banks with annual 15% loan interest, so we depend on foreign direct investment which comes cheaply but if the new tariffs are enforced, return on investment is only after…
Someone who understands what really is going on. Others just want to politicise the whole matter, thinking it’s mismanagement. ZESCO has a capable team and remunerates thousands of Zambians much more than a lot of multinational companies who send money to their host countries-let’s make our own companies work so Zambians can benefit.
Tell that to the mines. That’s just one area government should probably ‘ve traded off with mineral royalties. Leave the poor Zambian out of this for obvious reasons, one of which are inflationary connotations
PF Choking the economy as usual but u still have supporters who still cannot stomach PF’s total failure.
Antonio Mwanza a Unza graduate supporting this mismanagement. Don’t think that you are better or best in your thinking or in your mind. You are the worst if correct,you are dull. From my point of little knowledge, count how may employees of zesco get free units for electricity in there homes, some have even transferred the units in their business premises. Where is the cost of serving these units come from who pays it. (Tax payers money). Second, what has zesco achieved from the last adjustment, and what was the story or reasons of their last adjustment?. Is it different from what you are preaching or not? What cost saving has zesco done as a company that you Antonio has understand ,that has even increased MW to the nation grid? Are you aware that right now we are using less units…
There’re are idoits in PF but this Antonio beats them all, he islll
There’re are id.o..its in the Party but this Antonio beats them all, he islll
FACT 5: ZESCO is grossly overstaffed and poorly managed.
Cut out the fat then talk about tariff hikes to match the real cost of electricity… not the cost of maintaining many hundred if not thousands of workers in unnecessary, uneconomical jobs. Better is to let those workers go (and trim other extravagances!) before making millions of poor Zambians pay through higher prices! From there is when we can talk about “necessary” tariff hikes.
No wonder you couldn’t be employed even after leaving UNZA, you are indeed a dull boy! Yeah, only politics can sustain u because your level of analysing anything is beyond comprehension. No wonder they call u Mourinho!
Antonio, WTF you, arse l!cking hungry mongrel and son of many fathers, know about cash-flow, maintenance of distribution assets, maintenance of generating assets, staffing levels and business in general? Just shut that f@cking blabbing arshole of yours and enjoy proceeds of crime till they last.
How useless can Zesco be without water or rain.
Allow them to hike tarrifs to 1000%, they will still be useless without water and with Government cash cowing.
People will alway find alternative energy sources. The easiest is charcoal since most people can’t afford gas stoves and personal solar sources.
Charcoal burning worsen climate change through cutting of trees and carbon emissions. We blame Zesco for this. Then the ripple effect. More no rain. A self inflicted wound affair.
So Zesco needs to be in the forefront protecting the environment and conserving nature and stop being the culprit they are.
Be innovative, embrace technology and bring those tarrifs down.
Zesco’s structure and MO expired along time ago. Nkuwa has failed.
ZESCO is living above its means! Why do you keep a bloated payroll when you can’t afford it? By cutting unnecessary costs, your revenue will be able to cover essential expenses for you to be profitable! The tragedy of Africa is most of our people don’t understand simple business concepts and principles! And these are the chaps we get into decision making positions to make business decisions for the entire country. Any wonder why things are always going in reverse? We choose politicians to run our economy instead of economic managers! We have just been told Kariba water is at 7% now and despite assurances that they have paid ESCOM, loadshedding has gotten worse! We had to endure power outage from 06:00am to 02:00am the following day = 20 hours of no power! What is going on here? How…
How can a nation develop without power?
Dear Ka Antonio Mwanza Aya marubbish ukonda ku lemba yakuletelela. Don’t make make Zambians kick out with your bosses through a vote…. Useless Cadre
#dont take Zambians for granted you thieves ba koswe
The article could have done better Power and setting appropriate Global prices is critical to the success of the Zambia economy especially as it moves from these lustre economic growth levels One cannot down play the efficient pricing of electricity because of chiefly to what the writer has alluded to and its critical and central to the power sector performance and the economy s whole Cost reflectivity is Long Run Marginal Cost Activity a chase after the wind because prices move and never at any time will a utility in power deficit achieve cost reflectivity that is why the comment on efficiency from some people makes sense There must be observance of global guiding…
In the electricity sector, they don’t use marginal costing rather they use discounting cah Flow and weighted average costing,
This is to deal with the interest rate and inflation issues that there projects come with
even in these periods as you transition in setting of prices not only just for cost effective(cost recovery) but for broader economic investments decisions The goal is to optimise utilisation of those installed capacity at marginal (cost) and competitive prices ,grow it like in new builds for volumes and deal with some perceived efficiencies in the substantive upfront fixed costs ,that simply can be recouped by increasing tariffs superlatively that have reached a tipping point(cost reflective)
There will always be a conflict in promoting economic growth and society well-being depending where the price of power is set(below or above production cost) and GOV interventions like on the…
GOV interventions like on the Financial and Money markets cannot be ruled out or down played
for PUBLIC GOOD as Income levels rise up to pay in those PRICING TARIFF bands that Zesco has set there (life line Tariffs etc)Its a complement On Gov and its critical like excising monetary and fiscal policies
Its Good to observe also the Good strategy by Zesco in going power trading and that creates efficiencies and may benefit both the utility and the customers by Going DA NA YA in power Trading That will see prices go down (There will be Price discovery and people will Buy power that is cheaply and competitively priced ) from whoever The structure to discuss is another Topic
To…
To Conclude Tariffs have reached a Tipping point before a ” utility death spiral” as we call it and the solutions is in volumes and leveraging those Fixed costs and embark on a broader Financial Transformation Strategy That will make our utility perform and be profitable always for long-term forgetting the history now and strategise because setting prices and achieving efficiencies must be complementary but we often fall for the easier but its easier said than done also
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To Conclude Tariffs have reached a Tipping point before a ” utility death spiral” as we call it There is therefore to engage in Financial Transformation strategy and see those efficiencies in the Utility EBDIT Grow the business segments (equity/employees) and capacities like in new build (PP or in BOOT) etc and position for long-term forgetting the now but focusing on the future
The solutions in making a trans-formative gains or profits or dividends does not simply result simply by offloading skilled money power but rather optimizing that and by nature of the power sector you will still need those expertise gone over a learning curve It’s not about eminent downsizing of employees and segments but how you profit from them innovatively
Our utility is not immune from effects of death spiral resulting from those eminent price (not Multi yearly marginal increments ) It must strive to increase its customer base from now 1 million further to have numbers of customers per costs that will sustain long-term avoiding a case of reduction of customers to self-generation…
and further from successive increments of tariffs
The case of Germany in 2014 with E O N losing $3.6 billion in tariff hikes ,though different technologies, is a case in example
The utilities in California also in 2014 , with regulatory support from the ,worked together to prevent utilities from collapsing as a result of threats of death spiral resulting in Tariff hikes
Its also beyond Jianxi electric socialist utility but technically achievable
Antonio, what cost saving measures has Zesco undertaken to try and lessen the burden it currently carries? You can hike the tariffs hundred fold destroy people’s businesses to satisfy the fat payroll of undeserving caders zesco currently has. Economically there has to an equilibrium where both supply and demand for electricity agree and Zesco need to look into all factors and aspects to find this equilibrium. Zesco has been a source of funds for PF appeasement of caders and campaigns It is full of incompetent caders who lack vision, plans and direction. Allow other investors to invest in power generation to compete with Zesco and you will see where zesco will languish. Chilanga cement had that monopoly once but today because of dangonte the cost of cement have been driven down.
Antonia, what cost saving measures has Zesco undertaken to lessen the burden it currently Carries, especially with the caders you have on payroll? You can hike the tariff all you want but as long as Zesco doesn’t change the system it uses to manage it’s resources nothing will change and later on you will still be asking for more tariff hikes. You can liken this to a saying give someone a fish and they are fine for that day but teach someone how to fish and you would have sustained that person for life. Bring another investor in energy generation that will compete with Zesco just as it was with Chilanga cement by bringing in dangote it’s monopolistic power ended and cost of cement was driven down. Monopolistic companies make abnormal profits that just makes me wonder why Zesco is in…
Knowledge is power, it is important that we accept the fact that as a country we need to understand through research on the root cause to the power shortages and load-shedding. Zambia has been expriencing low rainfall due to climate change which has been a topic of the day, as we are all aware that water is life and fuel to our day to day life, it has really affected the most needed developmental projects, agriculture etc, and let to the increase on electricity tariffs due to the low water levels. Country Men and Women we should put this in our mind that Zambia is a landlocked, meaning that our country is surrounded by other countries and that in an event that we are in need of water we might admire other countries which are near by the oceans for the example Mozambique etc. However…
Alangizi
Is hydro the only source of power generation available to man in this era or age?. Come on boss stop shielding the incompetence of this government. We are already in the mess and can’t keep crying over spilt milk, what we need to see in this government is decisive action to avoid future occurrences of the same by having sustainable long term plans being implimented as well as an effective and efficient corrective action that ensures businesses of people don’t go into oblivion in the short run. The state of affairs right now in Zambia are really shameful and very disrespectful to the people of Zambia.
If hydro which is dependent on water is what Zambia keeps looking at then brace yourselves for more or worse similar occurrences in future. This situation is a lesson to is all to look into diversifying into other power generating means apart from hydro. If this government needs to plan effectively for the future let them not look further than to man called Joseph in the book Genesis in the Bible who managed a world catastrophe admirably. Joseph firstly relied on God, worked justly with integrity, focus and dedication, and never showed partiality.
Knowledge is power, explains why you are so weak.
All goes with research and find the lasting solution to every economical challenge, therefore it is ideal developing a long term strategic plan which will be a road map and a guide towards electricity and other challenges the country is facing. As Zambians it is our duty to build our country and this can only be done by putting our political affliations aside. The current government is trying to fight hard by offering the solution as well as resolving the issues of electricity and others, therefore the need to appreciate the efforts the government has offered and still offering to our country Zambia. The Government is therefore focusing on cultivating and developing the best in every Zambian citizen by creating a Zambia of abundance, opportunity and prosperity through hard work and…
Public utility companies cannot charge economic tariffs because the existing legal framework considers them as a public good. In other words, some of the taxes paid by the public must be channeled to the public utilities in order for the public utilities to remain operational and efficient in meeting public demand. Never say profit. To beak even, extravaganza must be eliminated. This whole issue of so-called economic tariffs has arisen principally because of drought and lack of preparedness for drought. There is need to diversify the energy bouquet away from over-reliance on hydro-power to include solar power, solar power, wind power, thermo power, atom power, etc. Remember to continue fighting wastage, fraud and corrupt everywhere.
Why ZESCO makes losses as a monopoly is baffling.One of the reasons govts world over setup monopolies is when that particular monopoly will have greater economies of scale ( i.e have cost advantage over others or be able to produce a unit of product cheaply than it’s competitors) thus transferring the benefits ( low production costs) in form of low prices to the consumer.Is this the premise on which ZESCO as a monopoly was founded by an Act of Parliament?If it does have cost advantage over it’s competitors,why is it always applying for upward tariff adjustment to ERB?
Secondly, why would ZESCO sell a unit of it’s energy at half it’s production cost?If govt has been subsidizing the other half, then it has been wrongly implementing the subsidy because ZESCO,all things being equal,must…
because ZESCO,all things being equal,must have been originally created to be a natural monopoly.
NB
This was meant to be a comment and not a reply
Ka mwanza talks about cost of generating power as if ZESCO uses imported fossil fuels to generate power…….
no it does not , it uses water from the Zambezi , which when it is there is free….
To renew the turbines , PF have already borrowed a lot of money.