K35 billion unpaid arrears by BWB choke ESCOM

* The unpaid debts have made ESCOM to incur K87 billion in additional costs, which has affected its revenue

* As a result of the revenue deficit in the year 2018-2022 base tarrif period, ESCOM underperformed in some of key performance indicators

By Steven Mkweteza, Correspondent

Electricity Supply Corporation of Malawi ( ESCOM) says it is has been struggling to execute some of its operations due to the K35 billion debt which the Blantyre Water Board (BWB) has owed the corporation in unpaid arrears.

ESCOM’s Chief Operations Officer, Maxwell Mulimakwenda made the revelation in Blantyre on Monday during a public hearing on the 2023-2027 electricity tarrif base adjustment.

He further said the unpaid debts have made ESCOM to incur K87 billion in additional costs, which has affected its revenue and that as a result of the revenue deficit in the year 2018-2022 base tarrif period, the statutory company underperformed in some of the key performance indicators.

“These include among others, new connections, adherence to customer service and implementation of some planned investments or projects,” he said. “This is because we priotised paying generators and independents power producers (IPPS) while our operations suffered.”

He further said that the sector has reported a total revenue deficit of K99.18 bilion in the period of July 2018 to December 2022.

Mulimakwenda added ESCOM has so far been engaging with BWB but to no avail, saying: “The delays to recover the debt has indeed negatively affected our operations and subsequently made us fail to meet connection targets in the 2018-2022 tarrif period.

“That is alot of money which is just idle. It would have been put to some use,” he said, adding that the poor performance was also mainly due to financing arrangements.

According to Mulimakwenda, the fresh electricity tarrif adjustment application — proposed at 69.7 and to be effected in phases in the next four years — would see 30% of the tarrif go into total revenue collection.

He also emphasized that ESCOM has not had tariff adjustment since March 2021 although significant economic changes have happened, saying: “This 69.7% is in our view a very reasonable tariff hike proposal. — we need revenues to allow us to be buying power so that there is no loadshedding in the country.”

Recently, the Parliamentary Committees have pledged to help the ESCOM) to recover about K40 billion that government Ministries, Departments and Agencies (MDA’s) owe it — with BWB topping at K35 bilion is owed by BWB.

The fresh electricity tarrif hike proposal comes against a background of water boards implementing an average 59% tarrif hike effected from June 1 this year.

Meanwhile, in his reaction to the announcement of the electricity hike, Consumers Association of Malawi (CAMA) Executive Director, John Kapito — who attended the public hearing — challenged ESCOM to explain on the motive behind the proposal — describing it as a huge burden pressed on Malawians.

He encouraged consumers and stakeholders to reject the proposed tariff adjustment, saying if ESCOM needs to hike the tariffs, it should never go beyond 46%.

“This application by ESCOM is coming at a time when we had another base tariff where ESCOM did not perform. So the argument is that, what is it that they are demanding for when they failed to perform in the past?

“When you read their document presented to MERA, you will see that they are just playing with the mind of the consumer, they are not going to achieve anything.

“So they should either maintain whatever they had before with no tariff increase, or they should reapply and show all the key performance indicators and explain how they will achieve them.

“We must say no to this application. The maximum they can go is 46 percent,” he said while also taking a swipe at Electricity Generation Company (EGENCO) that it is contributing to the high proposed tariffs and it is time for to start lobbying its dissolution.

He said EGENCO’s existence is just a waste of the taxpayer’s money and was optimistic that dissolving it would minimise some expenditures thereby relieving Malawians from paying exorbitant electricity tariffs.

The proposed tariff increase will see consumers paying an average of K177.26 per kilowatt hour (kWh) from the current average of K104.46/kWh.

“The first application by ESCOM was about 99% and just by dissolving Power Market Limited (PML), the tariff has now gone to 69.7%. The more you take out EGENCO you will see that the tariff will come to 35%.

“What we are doing now is just funding institutions. We just need to collapse them and make one institution, the cost will be reduced. We have an EGENCO that is not adding value and we are saying let us have only one institution and they can have departments therein,” he said.

The public hearing continued today in Mzuzu after Blantyre and Lilongwe and MERA Chief Executive Officer, Henry Kachaje said settle for a better decision based on recommendations from the three sessions.—Additional reporting by Duncan Mlanjira, Maravi Express