Source: Zesa threatens load-shedding – Sunday News Jul 31, 2016

Roberta Katunga Senior Business Reporter—
POWER utility company Zesa has threatened to reintroduce load shedding after energy regulator, Zimbabwe Energy Regulatory Authority (Zera) turned down the company’s proposed 13,6 percent tarrif increase, officials have said. They added that the company was now pinning its hopes on the Government getting a “proper” costing and generation structure which might influence Zera to rethink the decision. Zera has invited bids for companies to carry out an independent review of the operation and cost structure of Zesa and its subsidiaries.

Zera recently announced that it turned down a request by Zesa to approve a power increase from 9,86c/kWh to 11,2c/kWh. Zesa business planning and development manager Mr Patrick Chivaura told business leaders in Bulawayo during the Confederation of Zimbabwe Industries conference that ended in the city on Friday that his company would have to load-shed hence private companies must quickly move in to fill in the gap by investing in their own power plants.

“The regulator rejected our tariff application saying our tariffs are too high, if our tariffs are too high, then industry must maybe invest in its own plants,” said Mr Chivaura.

However, Zesa has since the beginning of the year improved in power generation, resulting in no load- shedding for both domestic and industrial customers. Late last year, Zesa was implementing tight load- shedding which in some cases saw areas going for more than 20 hours a day without electricity.

The improvement was on the back of a deal with South African power company Eskom to provide power to Zimbabwe on a pre-paid facility. At its best, Zimbabwe only produces 1 300 megawatts against a national demand of 2 000MW of electricity at peak consumption and covers the deficit through imports.

In an interview, Zesa board chairman Dr Herbert Murerwa said the company was now waiting to prove its case for tariff increase from the recommendations of the international consultant.

“Energy is a commodity that is important and the cost of production of that energy has to be taken into account. This is a commodity that the country cannot run out of. We are waiting for the recommendations of the independent consultant,” said Dr Murerwa, a former Minister of Finance. It has also emerged that Zesa was pinning to finance most of its capital expenditure from the tariff increase. Zesa spokesman Mr Fullard Gwasira revealed that Capex budgeted for this year was $1,498 billion against power generation of 11,440GWh.

Capital expenditure, or Capex, are funds used by a company to acquire or upgrade physical assets such as property, industrial buildings or equipment. It is often used to undertake new projects or investments by the firm.

“Zesa is still importing power from Eskom as prepaid electricity just like we are doing in our homes and ZETDC prepays power imports worth $6,6 million a month to Eskom alone. While our 2016 tariff application has not been approved, Zera does acknowledge the fact that there has been a change in the generation mix,” said Mr Gwasira.

He said changes in the generation mix would put a strain on the utility especially in the immediate term before they realise any cost savings given the fact that the last tariff increase was in 2012. Mr Gwasira said the tariff increase rejection would impact negatively on maintenance and Capex.

“The fact that Zesa has been able to keep the lights on for the past four years despite not having a tariff increase reflects the efficiency interventions which management has been able to put in place over the years,” he said.

According to Zesa’s financial report, the power utility is set to record a decrease in revenue. The report, seen by Sunday News showed a forecasted revenue of $781 886 718 against expenditure of $954 995 514 at 9,86c/kWh tariff as compared to last year’s audited revenue of $851 271 331. If Zesa had been granted a tariff of 11,2c/kWh, forecasted revenue for the year would have been $901 938 903.