MERA CEO Henry Kachaje
* The Authority believes that granting this tariff adjustment will enable the power sector to realise enough revenues
* For investment, system maintainance, operations and other appropriate costs to sustain provision of services to customers
By Levison Lester, MANA
Malawi Energy Regulatory Authority (MERA) has agreed to the proposal by Electricity Supply Corporation of Malawi (ESCOM) to raise the electricity tariffs to 50.8% — effective September 1.
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Speaking in Lilongwe during a press briefing on Friday, MERA Chief Executive Officer, Henry Kachaje said the adjustment will be done in phases for four years.
“Based on total revenue requirement calculations for tariff period at K1.72 trillion tackled with estimation for energy that will be billed to end user customers at 9.9 billion units, the average end user tariff fees of K157.50 per killowatt hour,” he said. “At the current average tariff of K104.46 per killowatt hour, this has been translated into average tariff increase of 50.8%.”
Kachaje further said the adjustment is justifiable, saying it will improve high quality service delivery to ESCOM customers: “The Authority believes that granting this tariff adjustment will enable the power sector to realise enough revenues for investment, system maintainance, operations and other appropriate costs to sustain provision of services to customers.”
Meanwhile, MERA has urged all licensees in ESCOM to open an operationalised individual operating accounts within the first three months of this new tariff base.
In June, when MERA announced that it was reviewing ESCOM’s proposal application, the Authority said this was for the period 2023 to 2027 and is a successor base tariff to the one that was implemented from 2018 to 2022.
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MERA said the new application is a significant reduction from the 99.9% that ESCOM and the Power Market Limited (PML) jointly asked before PML was dissolved.
It further said this in line with the 2017 Tariff Methodology, that once every four years, ESCOM submits a base tariff application to MERA for consideration and approval, adding that the tariff application contains revenue requirement (RR) for a four-year period to finance operational and capital requirements.
In a statement, MERA further said application has been revised by ESCOM to align with the new market structure, following Government’s decision to dissolve PML and transfer the Single Buyer function back to ESCOM.
MERA further said the base tariff application for the 2023-2027 period has been prepared in the context of Power Sector Reforms being implemented by the Government of Malawi following the enactment of the Electricity Amendment Act in 2016.
“The main objective of the reforms is to provide a conducive environment for private sector participation in the electricity sector, especially in generation,” the statement said in June. “The reforms culminated into unbundling of generation from ESCOM and the subsequent formation of the Electricity Generation Company (EGENCO) which took over generation assets formally owned by ESCOM.
“The other key component of the reforms was the establishment of single buyer and SMO licensees to perform various activities in the electricity supply chain. As a result of these reforms, the country is now able to procure generation from independent power producers (IPPs) to supplement Government efforts in increasing power supply in the country.”
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In building the 2023-27 business plans, which have informed the proposed tariff adjustment, MERA said ESCOM carefully took into account suggestions and proposals from its large customers and key stakeholders such as the Ministry of Energy, the Energy Regulator (MERA), Malawi Confederation of Chambers of Commerce and Industry (MCCCI), Economists Association of Malawi (ECAMA), Society of Accountants in Malawi (SOCAM), Consumers Association of Malawi (CAMA), Miners Association, industrial customers (Illovo, Blantyre Water Board), Hard talk Energy, Sunbird Hotels etc.
“ESCOM also regularly gathers feedback from customers through ESCOM’s customer service outlets as well as from social media platforms. The common themes from the feedback received from our customers and stakeholders which have formed the basis of the priorities and objectives of the 2023-27 revenue requirement determination and submission.”
The total cost to deliver on customer and stakeholder priorities over the four years (2023-2027) is MK1.846,67 trillion which comprise power purchase costs (MK915.31 billion), single buyer licensee costs (MK22.49 billion), transmission licensee costs (MK95.00 billion), system and market operator licensee costs (MK40.68 billion), distribution licensee costs (MK552.09 billion), stabilization fund (MK74.14 billion), levies (MK93.28 billion) and bad debts (MK53.68 billion).
The planned power procurements in the fourth base tariff are planned to be sourced from hydro, Malawi-Mozambique (MA-MO) Interconnector, thermal and solar in which EGENCO will contribute 60%, MO-MA 30%, and others 10% of the generation capacity for the country.
The power purchase costs have considered revised tariffs for the EGENCO hydro and thermal power plants, interconnector, and IPP tariffs. The power purchase costs for EGENCO are based on a capacity and energy tariff split with the ratio of 65% (capacity) and 35% (energy).—Additional reporting by Duncan Mlanjira, Maravi Express
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