The Reserve Bank of Zimbabwe (RBZ) has shot down a proposal by ZESA Holdings for businesses to wholly pay electricity tariff in United States dollar following the government’s policy to align tariff payment with the foreign retention threshold.
ZESA believes a 100% US$ payment tariff would ensure the country enjoys a steady supply of electricity.
But RBZ governor John Mangudya told Business Times there is a need to balance what businesses get and what they have to pay for electricity.
“ZESA proposed a 100% payment in US$ but industry can only pay in US$ to the extent of their US$ retention for example the exporters can only pay 75% in US$ and the rest in local currency while those US$ domestic sales can pay 85% in US$ and the balance in RTGS.
“That’s the policy and we are sticking to that stance,” Mangudya said.
ZESA, which charges an average of US$0.1221 per kilowatt hour, or Zimbabwe dollar equivalent, generates less than 500 megawatts (MW) a day against a national demand of 2 500MW.
To cover for the shortfall, ZESA imports electricity from regional power utilities and has imposed a crippling unscheduled load shedding lasting more than 12 hours daily.
The rolling power cuts have forced companies to use backup diesel generators, which are expensive to run.
ZESA has, however, argued that getting 100% forex from commercial consumers would ensure that consumers get uninterrupted electricity supply as it will be able to import electricity and also import critical parts to maintain its electricity distribution network.
ZESA is battling low electricity generation from its power stations in Kariba, Hwange, Bulawayo, Harare and Munyati.
While low water levels at Kariba Dam has resulted in Kariba South Hydroelectric Power Station generating less than 400MW from a possible 1 050MW, thermal power stations in Hwange, Bulawayo, Munyati and Harare have outlived their lifespan.
The obsolete equipment at the thermal power stations has resulted in low power generation.
Zimbabwe Electricity Transmission and Distribution Company acting MD Howard Choga said a cost-reflective tariff remained key in the efficient distribution of electricity.
“There is a need for a glide path to cost reflectivity, 100% payment of electricity in US$, deduct electricity bills amount – before 75% surrender ratio, recapitalise the industry network reinforcement and rehabilitation for the good operation of the power utility.
“With these probable solutions implemented, this could see the power utility performing well. We hope the authorities will take these recommendations to improve the running of the company,” Choga said.
ZESA wants forex to boost its purse so that it could meet the growing demand for electricity fuelled by a mining economy that is targeting $12bn annual production this year.
It also wants forex to import electricity on its own without looking for funding from the Treasury.
The power utility said a huge backlog of distribution network maintenance has built over the years arising from insufficient revenue generation capacity from a below-cost of supply tariff.
A number of customers are now resorting to solar power and gas resulting in ZESA losing a potential revenue of US$1m per month.
ZESA is battling a myriad of challenges including frequency faults emanating from aged power distribution infrastructure that has reached the end of its designed economic life.
The power utility distribution network is currently experiencing over 106 000 faults per year.
“We need over US$32m to replace over 4000 vandalised and faulty transformers adding the power utility faces challenges of theft of copper conductors on old power lines and breakdowns at the aged Hwange Thermal Power plant which is causing power supply shortfalls resulting in load shedding,” Choga said.
On Monday, Zimbabwe Power Company production figures stood at 638MW against a demand of 1800MW.
Despite the current performance, Choga is optimistic that the electricity supply will improve from June going forward.
“Holding all other things constant, there will be a supply-demand balance in the second half of 2023. We are expecting Kariba South to generate around 775MW from the current 350MW following an anticipated water level improvement from May,” Choga said.
“Also we are expecting Hwange 7 and 8 to add 600MW to the current 324 to reach above 1000MW.”