Hiked power tariff coming

Hiked power tariff coming


The Tanzania`s power utility company (Tanesco) has submitted to the Energy and Water Utilities Regulatory Authority (Ewura) an application for a 40 per cent tariff adjustment for the transitory period 2008-2009.

This is partly due to World Bank and IMF pressure on the Tanzanian government to remove subsidies on the energy sector, starting with the next financial year.

Talking to journalists in Dar es Salaam yesterday, the company`s Managing Director,Dr. Idris Rashid said:
``The new charges will enable the company set its steady tariffs based on costs reflecting efficient sustainable provision of services under its responsibility.``

He said the newly proposed tariffs would permit Tanesco to meet its operating costs for power generation, transmission, distribution plus a targeted allowance for capital expenditures.

According to Dr. Rashid, last year`s records from Tanesco audited accounts indicate that the firm was under-recovering its cost of services by 118 per cent.

``And if the company were to fully recover its costs of service, last year�s tariff would have increased by 118 percent.``

He, however, said: ``Tanesco is cognizant that the proposed increase is high and will have an adverse impact on its customers, hence has explored with the government alternatives that could reduce the impact of the tariff increase.``

``There is no way we must operate our company commercially rather than before. This will make us deliver improved and competitive services to our customers,`` he added.

``The average tariff in the year 2006 was 84/- per Kwh whereby the average cost was 183/- per Kwh, 99/- was under-recovery and the loss was 183 bn/-,`` Dr. Rashid said.

He added that the accumulated loss up to 2006 was 677 bn/- due to heavy use of higher cost thermoelectric generation caused by drought.

During the first nine months of 2007, the company`s loss amounted to 58 bn/-.

``Shortfall are either covered by bank borrowing, late payments to suppliers and direct or indirect subsidy from the Government budget.

Collected revenues are insufficient to achieve improvement required in our power facilities; and performance of the company is below industrial standards,`` he said.

Starting this year`s financial budget, the government will not subsidize Tanesco for operating costs, except 18bn/- for part of IPTL capacity charges.

He said the average cost per unit for the past three years had not been verging, making Tanesco unable to raise enough money to meet its exact cost of service.

He said the skyrocketing of petroleum products and inflation would make Tanesco have periodic adjustments on its tariffs.

``Under this new proposed adjustment, we want to have bi-annual adjustment to cover fuel costs, exchange rates and annual adjustment to cover inflation rates.``

``Even the new proposed 40 per cent tariffs will not make Tanesco meet its operation costs but rather it will continue adjusting over time,`` Dr. Idris Rashid said.

He said time had come for the public and customers to pay real tariff`s charges and make the company provide improved services by improving its infrastructures and meet the customer`s demands.

Over dependency on hydro generation, inability to connect new customers, poor quality of supply, poor customer services, dilapidated and overloaded network as well as vandalism and energy theft were some of the key challenges locking the company to prosper. Other challenges include corruption and high material costs.

The company`s management also appealed to Ewura to provide guidance on establishing a steady state tariff setting system that will allow Tanesco to recover both operating and capital costs based on efficient operations as well as return on investment.

On the service line charges, Dr. Rashid said the proposed charges would remain intact as material costs have increased by over 100 per cent.

``For the past four years, Tanesco has not increased its service line connection charges and material costs have increased by over 100 per cent.

All these costs are not covered by tariffs and the company is obliged to recover the full cost from its customers.``

He said the price of service line materials had increased due to higher shipment and other transportation costs, inflation, exchange rate changes and metal prices.

``With exception of energy meters, customers could opt to purchase materials and Tanesco would charge labour costs only. Tanesco will be providing standards and specifications,`` he said.

From November 19 - 23, this year Tanesco will be undergoing public hearing on the new proposed tariffs and service line charges across the country.

The public hearing is aimed at informing its customers and the public on reasons behind the newly proposed tariffs which waits for Ewura`s approval for implementations.

It is barely a week since Tanesco hiked 100 per cent of its service line connection charges to its new customers; a move that hit a snag as Ewura intervened; asking the power utility firm to provide through explanation over the new charges increase.

Source: Guardian, 20/11/2007