* Electricity is one of the triggers for the high cost of living in the country
* It is important for Government to find alternative ways on how it can ensure removal of unnecessary costs
* Creation of the single buyer, Power Market Limited is an insult and lack of sensitivity by Government
* It is to create unnecessary and unjustified cost for the supply of electricity
By Duncan Mlanjira
Consumers Association of Malawi (CAMA) has warned government against implementing the establishment of an independent parastatal out of Electricity Supply Corporation of Malawi (ESCOM), saying the operations of this single buyer will demand a higher increase in electricity tariff which will hurt the consumer even more.
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CAMA maintains that “electricity is one of the triggers for the high cost of living in the country and it is important for Government to find alternative ways on how it can ensure removal of unnecessary costs that would inflate its higher tariffs”.
CAMA says the creation of the single buyer, named Power Market Limited, “is an insult and lack of sensitivity by Government to create unnecessary and unjustified cost for the supply of electricity”.
“PML is an institution whose creation and establishment is to punish consumers with higher electricity tariffs which in turn will have huge implications on the already higher cost of living.
“Consumers will fight any attempt to have electricity tariffs increased for the establishment of an institution that does not add value to the supply of electricity.
CAMA Executive Director, John Kapito
“We urge Government to consider the plight and challenges that Malawians are going through economically and socially.”
ESCOM was un-bundled a few years ago, which created a new entity, Electricity Generation Company (EGENCO) leaving out the functions of the Single Buyer (SB), the Systems and Market Operator (SMO) to ESCOM — which resulted in four licences placed within ESCOM.
These are Single Buyer; Systems & Market Operator; Transmission and Distributions as provided for in the Electricity (amendment) Act 2016.
CAMA’s executive director John Kapito says: “The functions placed to ESCOM under this Electricity Act of 2016 are both technical and administrative and that separating them by creating a new licensee would demand huge tariff increases to maintain such high cost independent institution.
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“Currently, consumers are paying K2 per kilowatt for the functions of the Single Buyer and the decision by the Government to create an independent parastatal for the function of the single buyer will demand a higher electricity tariff increase for the operations of the single buyer, this added cost can be avoided as it is going to push up electricity tariffs which many Malawians are already struggling to afford.
“The establishment of an independent single buyer from ESCOM does not make any economic and social justification as its function is largely more administrative which can remain within ESCOM without opting to increase tariffs because of the creation of an independent irrelevant Single Buyer.”
Yet ESCOM advices customers to save money
Kapito maintains ESCOM has got the capacity both technical and administratively to handle the Single Buyer function, saying Public Sector Reforms “are intended to bring efficiencies and reduce the cost of doing business”.
“Therefore, the establishment of Power Market Limited creates a huge cost for the supply of electricity which can be avoided if left within ESCOM as the operations of Power Market Limited do not require a full independent institution.
“If the decision to take away the license of the single buyer from ESCOM is as a result of ESCOM’s inefficiencies, the best that Government can do is to bring in better systems and reforms for ESCOM to operate efficiently.
“The efficiency of ESCOM will not be improved by creating unnecessary institutions that will hurt consumers.
“Consumers in Malawi are already paying high tariffs for inefficient delivery of electricity and water services and it is unfair for Government to begin creating unnecessary institutions and continue to pass on such unnecessary costs to consumers.
In 2020, ESCOM Staff Union (ESU) issued a petition to the Ministry of Labour reporting that they are in dispute with its executive management over further unbundling of the power utility by setting up the Power Market Limited.
According to the Union in the October 2020 petition, setting up PML was illegal as it contravened Section 4 (2) of the amended Electricity Act (2016), that says: “A holder of a transmission licence before commencement of this Act, shall hold simultaneously licences for distribution, imports, exports, system and market operator and single buyer”.
The Union is of the strong view that the first unbundling process, that involved delinking power generation from ESCOM and setting up the EGENCO, resulted in a financially weaker ESCOM and increased in electricity tariff for the customer.
And with this further unbundling of SBF, it was set to increase overhead costs in the power sector and further increase the cost of supplying power to the customer, “which was unstainable”.
“The Union is aware that these steps will either lead to tariff increases — which most Malawians cannot afford — or will lead to job losses of our members,” said the petition that was copied to the then ESCOM’s Chief Executive Officer, Allexon Chiwaya; ESCOM Board and Comptroller of Statutory Corporations.
Former Energy Minister Newton Kambala
Soon after his appointment as Minister of Energy in 2020, Newton Kambala visited ESCOM Power Station at Chichiri in Blantyre on a familiarization tour as well as for a comprehensive meeting with members of management and thereafter he told the media that Corporation was owing banks and other suppliers over K40 billion due to among other things, inadequate revenue generation caused mainly by low power generation as well as effects of CoVID-19 pandemic.
One of the suppliers ESCOM owed money to at that time was EGENCO and when asked if this company was necessary, Kambala had said there was need to assess if EGENCO was indeed serving its purpose well.
He had said the idea to delink ESCOM’s services was necessary at the point it was initiated but government might consider to evaluate if EGENCO is still needed.
However, Government went ahead to appoint a board of directors for EGENCO that has Secretary to the President and Cabinet, Zanga-Zanga Chikhosi as the chairperson with Betty Mahuka, Oswin Kasunda, Henry Kadzakumanja, Arthur Mandambwe and Evans Msiska as other members are.
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The best that Government can do now is to make sure that they have good systems put in place that will help ESCOM to work effectively rather than bringing in solutions that will punish Consumers, what we are paying now is enough for us as Consumers to get good services from ESCOM….Ziganizo zokomera andale anzanu takana