Power Consumers In Southern And West Africa Face New Wave Of Tariff Hikes

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Consumers in key Southern and western Africa economies are facing a fresh wave of power tariff hikes as utilities battled the effects of costly supplies.

In a latest move, South Africa’s energy regulator on March 2 allowed state-owned power firm Eskom to raise tariffs by 9.4 percent in the 2016/17 budget.

“The energy regulator decided that the average tariff for standard tariff customers be increased by 9.4 pct for the 2016/17 financial year only,” Reuters quoted the regulator’s Chairman Jacob Modise as having told a media briefing.

“We are giving them half of what they had asked for.”

Eskom had in November 2015 requested the National Energy Regulator of South Africa (Nersa) to allow it to recover 22.8 billion rand ($1.5 billion) in costs from 2013/14 when it ran expensive diesel plants and brought more green power to keep the lights on.

The decision by the regulator means that Eskom will be allowed to claw back a total of 11.2

Still in Southern Africa, another country Zambia also still considers raising power tariffs to help match-up the cost of supplies, despite having shelved previous plans to more than triple them in 2016.

“We are trying to balance economic issues with social issues and clearly the political leadership feels if there are public complaints, we have to respond,” Zambia Energy Minister Dora Siliya said in an interview with Bloomberg in Johannesburg on February 17,2017.

“Now, that does not in any way mean that we have shifted from the idea of moving the tariffs from cost-reflective levels — no. We just said that maybe we need to do it in another way and move them progressively.”

State Influence

State-owned electricity supplier Zesco Ltd. withdrew its application to increase charges for households, businesses and factories in February, after the regulator approved it in December. The move was meant to help the company pay for emergency imports as the southern African nation faces a supply deficit, as well as to attract private investment in generation.

Power consumers in West Africa have also been subjected to a fresh round of increased power tariffs.

Ghana’s power regulator hiked power tariffs effective December 14, 2015 in an attempt to lure private investors to help plug a supply shortfall of up to 500 megawatts (MW).

In its first major tariff change since 2013, Ghana’s Public Utilities Regulatory Commission (PURC) increased electricity prices by 59.2 percent, depending on usage. It based the decision on a shift from a cheaper hydro-dominated generation mix to thermal power.

“The significant change and the increasing dependency on thermal generation has greatly impacted the cost of electricity generation by the utilities service providers,” it said on December 8.

Another West Africa nation Nigeria on December 21, 2015 increased tariff on electricity but removed fixed charges on all consumers.

The Nigerian Electricity Regulatory Commission (NERC) said that under the new tariff regime, electricity consumers would only pay for what they consume from month to month.

The tariff hikes reflect Africa’s energy woes amid concerns that the continent’s dire energy situation may frustrate the realization of growth targets if not well addressed — and fast.

“Sub-Saharan Africa is desperately short of electricity. Installed grid-based capacity is around 90 gigawatts (GW), which is less than the capacity in South Korea where the population is only five per cent that of sub-Saharan Africa,” the Africa Progress Panel (APP), chaired by former UN Secretary-General Kofi Annan, said in a 2015 report.

Africa is presently the world’s most energy-deficient region despite its dreams of industrial growth.

“Moreover, South Africa alone accounts for around half of power-generation capacity. With 12 per cent of the world’s population, the region accounts for 1.8 per cent of world capacity for generating electricity and the share is shrinking,” the panel says.

Installed capacity figures understate Africa’s energy deficit, experts with the APP say, even as the continent looks to energy-intensive industrialisation to bolster its growth.

“At any one time, as much as one-quarter of that capacity is not operational. In terms of real output, South Korea generates over three times as much electricity as dub-Saharan Africa. As such comparisons suggest, most of the region’s grids operate on a very small scale,” the panel says.

Energy Disparity

Around 30 countries in the region have grid-connected power systems smaller than 500 MW, while another 13 have systems smaller than 100MW. By comparison, a single large-scale power plant in the United Kingdom generates 2,000MW.

It is not just comparisons with the rich world that highlight the gap. Nigeria has almost twice as many people as Vietnam but generates less than one-quarter of the electricity that Vietnam generates. The disparity within Africa is equally marked. South Africa consumes nine times more energy than Nigeria, despite having just one-third of the population.

“Over the past 10 years, sub-Saharan Africa’s GDP has increased by five per cent to six per cent annually. The tide of wealth is rising but per capita use of electricity has stagnated. Nigeria has outperformed India on economic growth and produces almost as much economic output per person. Yet India’s consumption per capita remains significantly higher than that of Nigeria” the APP says.

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