ERB Mustn’t Hike Power Tariffs Without Cost of Service Study, Insist CUTS

Diggers News , October 21, 2019

The Consumer Unity Trust Society (CUTS) has urged the Energy Regulation Board (ERB) to refrain from implementing any electricity tariff hikes in the absence of the Cost of Service Study results.

The ERB announced in a statement, Wednesday, that they had concluded the procurement process of a consultant for the Cost of Service Study.

The regulator settled for Energy Markets and Regulatory Consultants (EMRC), a UK company with presence in Europe, Asia, South America, and Africa, and was procured under the African Development Bank’s (AfDB) procurement guidelines at a total cost of US $592,120.

But in a statement, however, CUTS centre coordinator Chenai Mukumba stressed that the ERB must refrain from implementing any electricity tariff hikes in the absence of the Cost of Service Study results.

She also noted that the long-overdue Study must be concluded in an expeditious manner given its importance in finally determining the true cost of generating, transmitting and distributing electricity in Zambia.

“While this is, indeed, commendable, CUTS is concerned by the length of time it has taken to conclude this process. Indeed, stakeholders have been awaiting the Cost of Service Study since it was first announced by the Minister of Finance in 2017 during the 2018 National Budget address. While it is imperative that the ERB ensures that diligence be exercised in completing this task, we urge the ERB to ensure that it be completed in an expeditious manner. Given the current energy crisis that the country is facing, the importance of this study cannot be over-stated. It is imperative that a study that outlines the true cost of electricity be completed at the soonest to ensure that consumers only pay the true cost of their use of electricity. Consumers cannot be expected to carry the brunt of the cost of inefficiencies that exist within Zesco as well as the subsidies that are being provided to private companies such as the mines,” Mukumba stated.

“As we await the results of the Cost of Service Study, we reiterate that the ERB should refrain from implementing electricity tariff hikes in the absence of these results. Indeed, according to the statement issued on May 10, 2017, the ERB indicated that the next tariff increases would be undertaken on the basis of the Cost of Service Study.”

She further urged Zesco to undertake reforms so that the power utility would minimize its costs.

“In the meantime, we urge Zesco to undertake reforms within the institution to minimize their costs. Undertaking reforms, such as revising the condition on staff tariffs as was noted by the ERB, could serve to begin to address some of the concerns being raised by consumers,” Mukumba added.

She stated that the Study will be cardinal in outlining what kind of cost structure was necessary to ensure increased electricity access in the country.

“It is important to note that while there has been much discussion lately regarding the current status of load shedding, a significant amount of the population does not have access to electricity at all. It is this marginalized population that remains most in need of electricity and, thus, necessitate the Cost of Service Study so as to ensure that these consumers can also have access to electricity. Indeed, according to statistics, only 30 per cent of the population has access to electricity and in the rural areas, we see that this figure drops drastically to five per cent of the rural population having access to electricity. The Cost of Service Study will, therefore, be cardinal in outlining what kind of cost structure is necessary to ensure that we have increased electricity access in Zambia for all consumers,” stated Mukumba.

“In order to address our more immediate challenges, it is, indeed, common knowledge that Zambia is in discussions regarding tariff hikes on imported electricity from South Africa. As we proceed in these discussions, it is important that the ERB be as consultative and inclusive as possible. As in the past, CUTS will continue to monitor the impact of tariff rises on poverty and continue to engage on an incremental and equitable road map to moving to cost-reflective tariffs.”

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