Power tariffs to nearly double by 2018
Mbongeni Mguni | Friday March 28, 2014 14:29
The Corporation’s CEO, Jacob Raleru told BusinessWeek recently that a blueprint was in place for the BPC to move to cost-reflective tariffs.
“We have a plan and according to it, the financial situation of the BPC is expected to turn around by 2018/19 and by that time we expect cost reflective tariffs if everything goes according to plan,” he said in response to enquiries during a media brief.
“We expect inflation adjusted tariffs around that time.”
At present, the Ministry of Minerals, Energy and Water Resources estimates that tariffs are, on average, 50 thebe below being cost reflective. Independent figures made available to BusinessWeek indicate that over the years, the gap between BPC’s costs of supplying a unit of power and its actual sale price have risen from 14 thebe in 2008/09 to 28 thebe 2011/12 and finally 50 thebe in 2014/15.
At present, the BPC charges about 57 thebe per kilowatt-hour (kWh) for domestic consumption below 200 kilowatts per hour (kWh) which increases to 75 thebe if consumption rises above 200kWh.
A kilowatt-hour, also called a unit of power, is the basic guide for pricing electricity.
Using the ministry’s estimates, were electricity tariffs to become cost reflective immediately, domestic consumers would be paying P1.07 thebe per unit to 200kWh.
Despite the gulf between current pricing and cost reflective tariffs, the adjustment due after April 01 will only add 2.85 thebe to domestic tariffs although an increase to the fixed administration fee is also expected.
This week, insiders close to the BPC said the tariff blueprint would hardly be worth the paper it was printed on if government chose not to honour the planned adjustments.
“It will be up to the ministry to approve the individual adjustments each year of the plan, even when the energy and water regulatory authority is up and running,” said one insider.
“The BPC knows that it is statutorily required to operate as a going concern and part of this is cost-recovery on the product it is selling.
“While the tariff adjustment plan realises the fact that subsidies are unsustainable, it will be up to government to stick to the agreed increments.”
Among its numerous duties, the Botswana Energy and Water Regulatory Authority (BEWRA) is expected to play a central role in tariff awards for both electricity and water. Although the Authority’s enabling bill is only due before parliament in July, most analysts believe the decisive powers to award increases will remain vested in government and Cabinet.
The BPC has fingered non-cost reflective tariffs as the source of many of its woes, saying the situation places operational pressures on the Corporation, limiting core roles such as generation, distribution and maintenance.
Besides higher unit costs associated with costly power from Morupule B, pressure on the BPC’s tariffs has come primarily from costly electricity imports from Eskom and the region.
BPC executives, including CEO Raleru, have repeatedly stressed that the power coming out of Morupule B will be costly due to higher operating and maintenance costs.
Apart from the high cost of importing power, the generation and transmission costs associated with Morupule B are among drivers of the higher operating costs projected.
While the Corporation paid P1.74 billion for power imports and purchases in the 2011/12 financial year, analysts estimate the figure has significantly risen since then as the BPC has been forced to participate in auctions for power following the expiry of contract supplies.
The BPC has also absorbed the costly power sourced from Orapa and Matshelagabedi plants which are estimated to consume diesel worth P220,000 every hour in supply the Corporation with 160MW.