Friday, February 23, 2024

ZESCO, CEC ink 13 year new Bulk Supply Agreement

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A 13 year Bulk Supply Agreement between ZESCO and the Copperbelt Energy Corporation has been signed effective 1st April 2022.

This Agreement was signed for two years after the expiry of the Bulk Supply Agreement between the two institutions that had been existence from 21st November 1997 to 31st March 2020.

Zesco Managing Director Victor Mapani told a Media briefing that the tenure of the agreement has been set at 13 years making it a delicate balance between having an adequate period of time to cover long term investments and giving the two parties the flexibility to get back to the table and iron out any matters that may arise.

He also said that the agreement contains newly agreed and more cost reflective energy and demand charges payable by CEC for its power purchases from Zesco.

Eng. Mapani said this agreement also contains clear terms of supply for each party to supply power to customers within the country across each other’s network.

He said the agreement also allows either party to develop power generation, transmission,distribution and supply infrastructure and does away with teritorial exclusivity clauses that existed in the previous agreement and opens up the Zambian electricity sector industry to competition.

Mr Mapani said the allowable power and outage hours for both parties were adjusted to 120 hours over five years from 144 and 180 for Zesco and CEC respectively.

The expiry of the old Bulk Supply Agreement was preceded by unsuccessful attempts to negotiate a successor agreement which was followed by a two-year period of trade on disputed terms between the two parties.

Zesco Managing Director Victor Mapani
Zesco Managing Director Victor Mapani

In recognition of the unsustainable nature of the relationship, the two parties resumed negotiations in January 2022 with a view of having an agreement in place effective 1st April 2022.

Some of the major items that have been addressed in the new Bulk Supply Agreement are as follows;

The Tenure of the agreement has been set at 13 years.

This term is a delicate balance between having an adequate period of time to cover long term investments and giving the two parties the flexibility to get back to the table and iron out any matters that may arise; within a reasonable period.

The just signed Bulk Supply Agreement contains newly agreed and cost reflective Energy and Demand charges payable by CEC for power purchases from ZESCO, and reciprocal tariffs for Transmission Use of the System, Domestic Wheeling and International Wheeling.

In addition, the Bulk Supply Agreement allows and contains clear terms of supply for either party to party power to customers within the country across each other’s network.

The agreement also allows either party to develop power generation, transmission, distribution and supply infrastructure, in any part of the country.

Therefore, this does away with the territorial exclusivily clauses that existed in the previous agreement, and opens up the Zambian Electricity sector industry to competition, as envisioned by the ongoing reforms in the energy sector such as the development of the open access framework.

The allowable power and outage hours for both parties were adjusted to 120hrs over five years from 144hrs and 180hrs for ZESCO and CEC respectively.

This reflects increasing operating efficiency by both parties.

This supply limit in the bulk supply agreement was also adjusted, to reflect CEC’s expected level of consumption.

Unlike the old Bulk Supply Agreement, the new agreement contains tariff adjustment provisions that can be used by the two parties to adjust the tariff if necessary, during the term of the agreement.

These provisions are in addition to the annual indexation of tariffs that adjusts them for the inflationary effects.

Further, thus Bulk Supply Agreement also demands the setting up of payment security by the two parties in order to reduce the risks of non-payment for the services rendered.

5 COMMENTS

  1. Lungu was not in office in 1997 when the deal was signed. Try to be objective instead of being caderistic.

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    • I hope there will be no investigation after Upnd leaves office. These lengthy agreements are problematic because with time situations change thus making the agreement unfavourable for one or both parties.

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  2. Unfortunately the BSA has been put in place without first addressing fundamental issues that are the source of disagreements between CEC and Zesco. Zesco must only retain its generation function. As long as it also goes on the market to try and compete with CEC there’ll always be conflicts, apart from the rigidity of tariffs. CEC doesn’t generate power, therefore it can’t compete with its source, Zesco. Zesco can’t supply power to the Northern region were 50% of its power is consumed unless it uses CEC infrastructure. So it’ll be prudent for Zesco to just remain with the generation function & bulk supply so that other players can compete at retail stage. Alternatively Zesco must acquire CEC

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