INDUSTRIALISTS say the recently effected electricity tariff increase is a positive development if it guarantees constant electricity supply in the country.
Private sector players have constantly underscored that running enterprises on generators was highly unsustainable, emphasising that they could do all things necessary to normalize power supply including conforming to a higher cost reflective tariff.
They have been on record saying it will be fair to pay a cost-reflective power tariff of up to 14 US cents per kilowatt-hour to guarantee a constant supply of electricity in the country while questioning the rationality of instances where the power utility (ZETDC) imports electricity at higher prices only to be consumed at a lower price locally.
On the other hand, Zimbabwe Electricity Transmission and Distribution Company (ZETDC) had long been advocating for a cost-reflective tariff of between 12, 3 US cents, and 15 US cents per kilowatt-hour (kWh) for the organisation to operate optimally, considering the need to service debt and other operational challenges.
Zimbabwe Energy Regulatory Authority (ZERA) on Tuesday awarded a 2 US cents per kilowatt-hour (kWh) tariff increase to the ZETDC from 10, 63 US cents per kWh which was previously approved in October 2019, meaning a kWh now costs USc12, 63.
The regulatory authority has expressed optimism in the tariff increase saying it will go a long way in enhancing the ZETDC’s ability to service loans extended for the recent upgrades of Hwange Thermal Power Station units 7 and 8 as well as Kariba Hydro Power Station.
The tariff increase is also expected to help ZETDC in curbing instances of severe power outages, reminiscent of those experienced between December 2022 and the first quarter of this year, as it will be sufficiently funded to import electricity from the Southern African Power Pool (SAPP).
Medium Enterprise business owner Ishmael Kachikira indicated that electricity energy was the most viable option to use for industry operations compared to the pricey diesel generators alternative.
“The electricity tariff adjustment is positive news to the business community since it capacitates ZETDC with enough funds to ensure a constant supply of power, our expectation is if the tariff goes up we have a guaranteed supply of power.
“We have come to this position because what we cannot afford is to continue operating on generators, we need electricity, it remains the cheapest form of power, so what I can tell is that even if the tariff is increased it will still be way cheaper than operating on generators,” said Kachikira.
Economist Doubt Chiorora indicated that a cost-reflective tariff was one of the major panaceas to the recurrent and troubling electricity challenges experienced in Zimbabwe.
He said a higher electricity tariff did not compare to the high costs incurred when using generators, further adding that firms like mines could not sustain on diesel-powered generators.
“We cannot continue operating on generators like indicated if you run your business using your generators you will be using 30-40 kilowatt-hour which is unsustainable.
“There are some businesses right now that run very big plants, they cannot use generators or solar they need power and for that to happen the tariff must go up,” he said.
Earlier this week ZERA Board Chairman, David Madzikanda said the tariff increase award was a mechanism to maintain the value of tariffs which had continuously succumbed to erosion due to the changes in the exchange rate movements and inflation.
“The number one issue of concern is that of debt service, you know we have Hwange 7 and 8 units which were recently commissioned in addition to Kariba units’ upgrades.
“We have to be able to pay back those loans, it is important that we do not default on the loans. There are also operations and maintenance obligations that are a concern. All these were taken into consideration in the award of the tariff increase.
“With these tariff adjustments we hope that ZETDC will be in a position to complement their internal capacity with resources that are available in the region, we have the Southern African Power Pool, where we get support in times of crisis and need.
“Unlike before we could not easily get the support because financially we were not in a position to pay, we actually owe these neighbouring utilities huge sums of money,” said Mr Madzikanda.
According to ZETDC its cash flows were in a dire position given that the firm is saddled with a major debt from imported power, where it was importing at an average cost of 10, 9 cents kWh but selling locally at a clear loss position.
Electricidade de Moçambique (EDM), Hidroeléctrica de Cahora Bassa (HCB), Zambia Electricity Supply Corporation (ZESCO), and Eskom from South Africa are the major suppliers of electricity to Zimbabwe.