The politics of ZESA electricity tariff hikes

Sep 1, 2011

The Zimbabwe Electricity Supply Authority just can't win. The monopoly for many years has been falling ever further behind in its ability to supply the country's electricity needs, a problem which now results in frequent and and long power cuts. At least part of the reason for this state of affairs is that the tariffs it is allowed to charge are below its costs of production and delivery of electricity, an inherently unsustainable situation. Yet increasing tariffs by 31% as it now seeks to do is perhaps unsustainable for other reasons, a catch 22 situation for ZESA.

Electricity, like maize, sugar, salt, fuel and other such basics of modern urban life, is deeply 'political.' A shortage of any of these products, or pricing that puts them out of the reach of most consumers, has the potential to cause political arrest. Severe power cuts have in recent months contributed to riots in Senegal and Malawi, and are the cause of deep unhappiness in Tanzania, Nigeria, Uganda and many other countries.

Energy infrastructure that for decades hasn't been developed and maintained as it should is the main cause of the power deficit in most of these countries. But in almost all of them, the power sector is under government control and is heavily subsidized, to keep electricity relatively affordable. But these subsidies do not cover the expensive development of new power generation capacity, nor the maintenance of existing infrastructure. Sooner or later, therefore, something has to give. The electricity problems so many of these countries are experiencing today is the accumulated result of this 'politicization' of energy.

In Zimbabwe\s case, ZESA like all other sectors of the economy fell further behind during the country's recent, several-years economic crisis. Even the basic subsidies of previous years could no longer be maintained, nor did the country have the money to consistently import electricity from neighbors when they had surpluses. Many consumers fell behind on their bills during the crazy hyperinflation era of 2006/8. When the Zim dollar was abandoned in favor of the US dollar as the country's legal tender, it became impossible to calculate who owed ZESA how much, severely compounding the utility's problems in serving its basic function. ZESA is said to be owed US $100 million by consumers, and is itself said to owe various creditors $900 million.

When utilities like ZESA request approval to charge cost-recovery tariffs, it inevitably is partly a deeply political issue. Rarely is what they request granted, meaning the problems of the power sector keep on accumulating to crisis level, which is where they have reached in Zimbabwe, but also in many other countries with slightly different versions of the same problem.

The long-accumulating crisis has reached breaking point now for Zimbabwe. The government would like to appease a restless, economically struggling population just beginning to see the early benefits of economic normalization. But that government simply can't afford subsidizing ZESA, and many power plants are sorely, urgently in need of maintenance and renovation.

Hence the approval of ZESA's requested 31% tariff increase, from an average of 7.53 US cents USc9.83 a kilowatt. The news of the increase has predictably caused an uproar, even threats of protests from consumers already battling to get by from month to month. Apart from the direct shock they will experience in higher electricity bills, an increase in the cost of electricity will have far-reaching effects on the costs of many other goods and services. It is easy to see how the cost of electricity is a deeply political issue, and why governments treat this issue with great caution.

Fortunately, there are several large new power generation investments in the pipeline. If they are realized, in the next three years Zimbabwe should easily exceed its current 2000MWA power needs, of which it is said to currently supplies about half of, leading to the current crisis. But homeowners, business and industry, all already battling to get back to a new post-economic crisis 'normal,' are not impressed by plans of what will happen in two or three years time. Their concerns for reliable power are immediate.

The unprecedented 31% tariff increase, and its approval, are not the only signs of how desperate the situation is. ZESA has also embarked on a controversial gambit for companies to pay a special 'double normal' tariff in exchange for uninterrupted electricity supply.

According to this new stunt, if a company 'volunteers' to pay 13 cents/KWA, they will be exempted from highly disruptive, unpredictable and often long and frequent load-shedding. If they choose to pay the regular present 7 cents/KWA, then like now, they will be subject to planned, energy-rationing power cuts at any time.

"It's either we enter into the higher 13cents per kilowatt an hour tariff deal or we suffer serious load shedding. ZESA has given us a notice of load shedding of between five to 14 hours a day,"said the MD of a cement factory.

Sound like a deal? Or just pure and simple blackmail? A little bit of both perhaps?

The present crisis was utterly predictable and unavoidable, for any one who has followed Zimbabwe's politics of electricity over the last few years.

Perhaps one lesson learned is that it is better to allow tariff increases at regular, smaller intervals that allow consumers to gradually adjust their electricity habits and budgets, than put them off until a huge increase that creates social, economic and political havoc is unavoidable, as seems to be the case now

It looks like plans are well under way to deal with the basic infrastructural and supply problems in the next couple of years, which is good. But if the right managerial, attitude and political lessons are not learned, the problems that have caused today's power crisis could be repeated in a few years as the power needs keeping going up, but everything about electricity costing remains so deeply political.


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