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BPC to receive P1bn subsidy

MBONGENI MGUNI
Out of the red: The BPC argues that cost-reflective tariffs will reduce the need for huge subsidies PIC: PHATSIMO KAPENG
The Botswana Power Corporation (BPC) is set to receive P1 billion in tariff subsidies over the next two financial years, before a possible government support cut off , BusinessWeek has established.

Mineral Resources, Green Technology and Energy Security ministry proposals placed before Parliament on Wednesday, indicate that P500 million has been planned for 2021/22 and another P500 million for 2022/23.

The Botswana Energy Regulatory Authority (BERA), meanwhile, is due to present the ministry with the BPC’s request for a five and four percent average tariff increase to cover the same period. Authorities believe that between the tariff requests, the subsidy support and the finalisation of Morupule B’s rehabilitation, the BPC will be able to stand on its own after the 2022/23 financial year, relieving government of its weight. According to figures laid before Parliament, minister Lefoko Moagi is proposing that the BPC be funded with P1 billion for the remaining fiscal years of NDP 11, which cover the period April 2021 and March 2023.

Originally, the BPC was due to receive about P10 billion in tariff support over NDP 11, which covers the period April 2017 to March 2023. However, the latest figures show that government has more than halved this allocation to a total of P4.66 billion. Of this figure, the BPC has already received P3.66 billion, which includes P500 million committed to the Corporation in the current financial year.

Moagi previously told BusinessWeek that the BPC had actually requested P900 million in tariff support for the current financial year, 2020/21.

“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 in a briefing earlier this year. 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 BPC, meanwhile, took its case for cost reflective tariffs to BERA’s first ever public hearing on

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electricity held in Gaborone on Monday. The BPC, which received a 22% average increase in March, has applied for five, five and four percent increases for 2020/21, 2021/22 and 2022/23 respectively. The BPC says it will need another four percent increase in 2023/24.

Under its government-approved Masa 2020 strategy, the BPC should have reached cost-reflective tariffs this year and been able to significantly reduce the need for government subsidy support. “The tariff proposal for financial year ending 31 March 2021 is based on computations which consider achievement of the BPC MASA 2020 strategy and progressive reduction in consumer tariff subsidy as evidenced by the 22% tariff increase effective 1st April 2020,” the Corporation told BERA.

“This increase nonetheless, will not yield an immediate increase in revenue till recovery of the economy from the Covid-19 impact as the Corporation’s revenue is a function of tariff and energy consumption.

“For the financial year 2020/21, due to impact of Covid-19, revenue is projected to reduce by P323 million or eight percent compared to the budget.” BERA CEO, Rose Seretse told BusinessWeek the BPC’s request and public feedback would be analysed, with recommendations ultimately reaching the parent ministry soon. “The next step is to analyse the information provided by BPC and come up with recommendations which we will table before the board and then take to the Ministry,” she said.

“I am hoping this will be within a week.”The BPC’s tariff request and the subsidies it is still to receive will rub consumers the wrong way, many of whom believe they are bearing the cost of the Corporation’s failure to complete Morupule B on time and within budget.

The BPC has run losses of hundreds of millions of Pula since 2009, largely due to the failure to complete Morupule B on time, which in turn forced the Corporation to increasingly rely on costly imported electricity and even costlier local diesel generation. Earlier this year, Moagi told BusinessWeek the power utility was incurring costs of up to P250 million per month importing power from neighbouring countries.



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