Whilst consumers, particularly households, believe the cost of electricity is high, high local generation costs and escalating imports, mean the current tariffs are a fraction of the true cost paid by the Botswana Power Corporation (BPC).
Government has thus been pouring in billions of pula over the years to plug the gap and restrain tariff adjustments from what they need to be to reach cost-reflective level.
On Tuesday, Bogolo Kenewendo, the Minerals and Energy minister, said figures from the Botswana Power Corporation (BPC) indicate that to meet the electricity utility’s revenue requirements for 2025–2026, tariffs would have to rise by 38%.
“The current electricity tariffs are highly subsidised by the government,” the minister told Parliament. “Clearly, this is becoming increasingly unsustainable. “Therefore, there is a need to migrate to cost-reflective tariffs for the sustainability of the electricity sector. “In this regard, BERA conducted a Cost of Service Study in 2024, which the ministry will consider as the basis for migrating to cost-reflective tariffs.”
BERA is the regulator of electricity tariffs in the country. In the financial year ended March 2023, the BPC was selling its electricity for 32 thebe less than the cost of generating and importing it, despite tariff increases of 10%, 22%, and three percent in April 2018, April 2020, and April 2021 respectively.
For the 2023–2024 and 2024–2025 financial years, the BPC had asked BERA for tariff increases of five percent for each year. The non-cost reflective tariffs contributed to a loss at the BPC of P498.3 million for the year ended March 2023, from a loss of P650.4 million in the year to March 2022.
Kenewendo told legislators that as at November 2024, the BPC had an assessed revenue requirement of about P8.65 billion for the 2025–2026 financial year, against a projected revenue of P5.24 billion before any adjustment and subsidy. The estimated shortfall for 2025–2026, estimated as at November 2024, was thus more than P3.4 billion.
For the upcoming financial year, the BPC has an approved subsidy of P1.2 billion. The minister explained that a theoretical tariff increase of 38% would raise P1.93 billion meaning a further shortfall of P278 million.
Part of the BPC’s challenges come from escalating prices of imported electricity from the region. Kenewendo estimated that the unit costs of imported power increased by 166% last year, with imports accounting for 35% of local electricity demand.
“This scenario will continue to obtain until completion of the ongoing Morupule B defects remediation project which is expected to be accomplished at the end of 2027. “The situation is further exacerbated by non-cost reflective tariffs charged on our customers,” she said.
Cost reflective tariffs have remained an elusive task for the BPC and government over the decades, due to the difficulty of protecting the most vulnerable in society, while ensuring the targeted, capable consumers are identified. In addition, policymakers have experienced difficulties balancing between the need to ensure economic growth through stable affordable electricity and helping to wean off the BPC.
Local generation is seen as a key target for moving towards cost-reflective tariffs. However, Morupule B has not operated at full capacity since commissioning in 2012, due to frequent breakdowns.
The main baseload power station is presently experiencing more difficulties with its single operating unit, which since the weekend has seen planned supply restrictions across the country.
