ZESCO transmission lines

CENTRE for Trade Policy and Development (CTPD) has urged Government to urgently separate ZESCO into various entities to enable the utility firm become viable and attractive to investors.

CTPD director Isaac Mwaipopo says Government should find a lasting solution that will prevent ZESCO from becoming insolvent.

He said ZESCO should learn lessons from South Africa’ utility firms Eskom, which was facing challenges before government decided to separate the company in order to make it profitable.

“Eskom has been unbundled into three separate entities that is generation, transmission and distribution, but all falling under the Eskom Holdings. Zambia may need to start exploringsuch options going forward,” he said.

He said one of the challenges that impact negatively on state owned enterprises is sovereign guaranteed debts obligations and sometimes to sort out such challenges, the burden is often pushed towards the end-user.

“There is need for Zambia to effectively evaluate the real underlying challenges that are hindering the energy sub sector from thriving,” Mwaipopo said.

Mwaipopo said plans by ZESCO to increase electricity tariffs will further impact negatively on the economy adding that citizens are already subjected to various tax obligations owing to an increase in debt servicing on account of a rise in Government borrowing.

“It is becoming more clearer now that successive increases in electricity tariffs have not managed to address the actual bottlenecks and, if the country continues on this path, there is a risk that we might even be subsidizing operational deficiencies,” he said.

ZESCO has written to the Energy Regulation Board (ERB) proposing electricity tariffs increment of over 100%.

The state owned company noted that the prevailing macroeconomic conditions such as lending and exchange rates, are affecting the firms operational capacity.

The company states that part of the revenue that will be realized from the adjustments will go towards the expansion of the system, reinforcement, improvement in the quality of service and the ability to meet the anticipated demand from existing and new customers.

The utility company further submitted that the cost of power from new generation infrastructure is much higher than the cost of generation from the old depreciated power plants which resulted in an overall increase in the cost of generation adding that there is tariff difference between the cost of power purchases and end user tariffs which are not being moderated by tariff revision.

ZESCO added that the suspension of the Cost of Service Study (CoSS) which would have determined the benchmarks cost reflective tariffs, has necessitated the parastatal firm to make a tariff application.

Furthermore, ZESCO stated that the connection fees which have remained static since 2005 have had a negative impact on the operations of the company.

"According to ZESCO, the cost of connecting customers to the electricity grid has been on the rise over the past few years whilst its connection fees have remained the same since 2005. ZESCO stated that this has led to prospective customers paying non-cost reflective connection fees which have led to ZESCO subsidizing the cost of connections," the application states.

Meanwhile, the ERB has set April 23, 2019 as the deadline for making submissions on the matter.

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