Electricity Tariff Increase Was Unavoidable, Moagi Explains
Mbongeni Mguni | Monday March 30, 2020 18:15
News on Wednesday that electricity tariffs would go up on April 1, was greeted with outrage by consumers, who said the increment was ill-timed as households and the general economy reel under the impact of the Coronavirus.
Briefing journalists on Thursday, Moagi explained that non-cost reflective local electricity tariffs set against high import power costs were weighing on the Corporation. Local tariffs are approximately six US cents per kilowatt hour compared to 16 US cents in countries like Namibia.
The Corporation, meanwhile, imports up to 50% of the country’s electricity requirements at any given time, as the main power station, Morupule B, continues with its remediation programme.
Moagi said the power utility was presently incurring costs of up to P250 million per month importing power from neighbouring countries, while local tariffs remain among the region’s lowest.
“It is a coincidence that this increment comes during the Coronavirus crisis but the approval was long done,” he said. “We did not back down from announcing the increment because power runs everything and if we had backed down, it would have been more detrimental to the economy.”
According to the Minister, the BPC had requested a subsidy of P900 million this year, which would have lowered the size of the tariff increase. However, government could only accommodate support of P500 million. “A few years ago, the BPC was getting up to P2.1 billion in subsidies and these have been falling, in fact by about 111% over the years,” he said.
“Government is taking a decisive step to move towards a cost reflective utility that can stand on its own and even go to financial institutions to borrow for its own sustenance.
“Subsidies have been going down while operational costs at BPC, including maintenance and inflation have kept going up. “Without cost reflective tariffs, in the future we run the risk of power outages, long recovery periods after faults and even load-shedding.”
The minister expressed concern that the ongoing remediation at Morupule B would be adversely affected by the 18-country travel ban announced recently to curb the Coronavirus. The contractor conducting the remediation is from China, which is amongst countries on the travel ban. The contractor is also using imported Chinese parts for the remediation.
“The first unit under remediation was scheduled to be complete by September 2020 with a three month testing period.
“We have not quantified the extent of the impact but there will be an impact.
“We are still pushing for that September date and are hopeful,” Moagi told Monitor Business. More output from Morupule B means less pressure on tariffs, as prices of imported power fluctuate according to demand in those countries. Eskom tariffs to Botswana can vary from R1.12 per kilowatt hour to R2.50 per kilowatt hour, BPC officials say.