Power Tarrifs to raise to Save Tanesco

August · 2013-01-28T00:01:47+00:00

Dar es Salaam. Tanzanian consumers are bracing for a sharp rise in the price of electricity next week as regulators announce higher tariffs to offset Tanescos swelling debt. Regulators Ewura say they may announce the price change as early as tomorrow morning. Trend data indicates at the very least, consumers are looking at a 20 per cent increment. While the International Monetary Fund (IMF) says a price revision is long overdue, wananchi are readying themselves for additional shocks to their battered January wallets. Many are not amused. The increase will make life much harder for poor people, said Halima Mgangi, a single mother who lives in Mbagala, Dar es Salaam. The cost of everything will go up, and some [firms] might even have to lay off employees. I just hope the tariff stays the same, for all our sakes. Ms Mgangi is unlikely to get her wish. Ewura is on record saying it would approve a 29.5 per cent tariff increase so tomorrow; unit costs may skip by up to Sh12 per kilowatt-hour (kWh). Tanesco has always said it wants consumers to pay a lot more. The embattled utility is cracking under the pressure of its mounting operating losses. Couple this with the firms patchy, inefficient revenue collection system and you have the makings of a crumbling power supply company. Last January Tanesco executives filed an emergency petition with Ewura asking for an upwards price revision of around 155 per cent. A subsequent cost of service study recommended the proposed increments be introduced over the space of several years to avoid triggering a consumer revolt. Consequently, the regulators knocked that down to 40 per cent and gave Tanesco the green light, with explicit provisions for another tariff adjustment on January 1 this year. Based on the study, average retail tariff for 2012 is estimated at Sh253.76/kWh, in 2013 is Sh265.65/kWh, in 2014 is Sh268.03/kWh and in 2015 is Sh291.19/kWh, Ewura noted in a related policy paper. This week, the regulators told The Citizen on Sunday that a review of the price of electricity is in the works, but refused tosay which way they are leaning. Between today and Monday, youll get all the relevant details, Ewura spokesperson Titus Kaguo told this reported on Wednesday. His boss Haruna Masebu says Tanzanians should expect a verdict before January is done. Well have a decision on Tanescos application for a price increase by the end of the month, he said. The Ewura director general told this reporter they are putting final touches on a report which will be out before the end of this month. Recent Tanesco petitions for power tariff bumps were triggered by the droughts of 2011 which severely curtailed hydropower production. The beleaguered utility was forced to switch to independent power producers who use heavy fuels and diesel, with catastrophic consequences for its already porous coffers. Two years later, emergency electricity has proven to be prohibitively expensive and has left Tanesco reeling from escalating production costs. Currently, the firm says it spends Sh8.32 billion to generate electricity every day. Tanesco cited this as the reason for requesting a massive overhaul of the power pricing structure last year. The tariff raise Tanesco squeezed from Ewura last year has done little to balance out its skewed finances. The IMF notes: Despite the 40 per cent tariff increase [last year], Tanescos arrears to suppliers reached an estimated $252 million as of the end of October 2012. For activist Renatus Mkinga, these random surcharges are an affront on common sense. Tanesco is simply inefficient, he says, and its executives need to get their house in order. The looming increase is unworkable in his opinion. Tanesco needs to get leaner, it must become less dependent on government handouts, he said. Economist Honest Ngowi believes Tanzania will be worse off if Ewura gives in to Tanescos demands for higher electricity charges. Any increase will be inflationary, he said, and will reduce the countrys competitiveness and affect the value of the shilling as well as the environment, among others. To rein in its spiralling costs, Tanesco could do other things like improve its revenue collection, or trimming its cost of business, according to Dr Ngowi. The firm should also be pursuing organic growth, he said. This will allow Tanesco to spread out its fixed costs across a wider client base.

Thread starter August
Start date Jan 28, 2013

August

JF-Expert Member

Jan 28, 2013

mawenge

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Power Tarrifs to raise to Save Tanesco

August

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mawenge

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