OP discusses BPC tariffs hike

MBONGENI MGUNI
Staff Writer | Wednesday February 17, 2010 00:00

 

For nearly three years, the BPC has returned losses to its sole shareholder, government, owing mainly to the increasing costs of supplies, material and operations set against virtually static tariffs. While the corporation's rising expenses have been driven by its mandate to electrify the country, government has been hesitant to authorise an onerous tariff increase to households and industry.

The power utility last had a tariff increase in January 2008, when government authorised an average seven percent increase for domestic and industrial tariffs. Describing the BPC as 'broke,' permanent secretary in the Ministry of Minerals, Energy and Water Resources, Gabaake Gabaake revealed that a possible tariff increase for the BPC was being discussed in the Office of the President.'I went to the Office of the President today and we are trying to put through a case to say tariffs must go up. There are intricacies that we must jumble about with because the reality is that the BPC is broke.

'I'm not sure whether the money to help the BPC will come through tariffs or from capital investment by government,' the permanent secretary said in Gaborone yesterday.

Wary of the expected outrage at the tariff hike, Gabaake was quick to defend the impending action, pointing out that Botswana's electricity tariffs were the lowest in the region, lower even than coastal nations which have an abundance of hydro-energy.

'BPC's tariffs are the lowest in SADC and possibly even the world. There's a need for tariffs that are cost effective - because power is cheap, it does not mean that producing it is cheap for the economy; someone is paying.

'The case for a tariff increase is quite obvious. This move could have perceived consequences for the economy and the socio-economic development of citizens, but I believe doing the opposite is what has a negative effect.

'If the country does not carry the cost of power, in the future, we will have the problem of load shedding which is then costly to the economy,' he said. The permanent secretary revealed that estimates of the revenue the BPC has lost through load shedding are 'horrific.'

The BPC's customer base has grown in leaps and bounds over the years and was estimated above 200, 000 by last year. The growth, which also includes the Rural Electrification project, means additional spending on human resources, supplies, materials and operations, which are skewed against stagnant tariffs.

For 2007/08, the Corporation attributed P85.8 million loss to 'the inability to obtain an adjustment of electricity tariffs,' in the face of increasing commodity prices in global markets. Last year's recession also impacted negatively on the BPC's books, as major consumers in the mining industry, shut down, suspended and/or streamlined operations.

BPC's financial woes come as government plans to 'strictly enforce' a requirement that parastatals pay 25 percent of their profits to government. For consumers, however, a tariff increase will be the latest instalment of a tragedy that began with the hiking of Value Added Tax and the absence of a civil service salary review. Emerging from last year's economic crunch, consumers have increasingly found themselves bearing the brunt of the nation's recovery initiatives.

However, whatever tariff the BPC is able to push through the Office of the President may pale in comparison to the anticipated double digit increases being requested by Eskom. The National Electricity Regulator of South Africa is scheduled to, next month, make a determination on Eskom's application.