High power tariffs to stay -Tanesco

The Tanzania Electric Supply Company (TANESCO) has said it will not reduce power charges even if the controversial power purchase contracts are reviewed.

The contested Power Purchase Agreements are those of Richmond, Songas and IPTL. Tanesco pays almost half of its 30bn/- monthly income to service the agreements.

Speaking to The Guardian in an exclusive interview yesterday, Tanesco Managing Director Dr Idris Rashid said the power utility firm would never lower power tariffs.
``However, I would make sure that the tariffs were not hiked further,`` he told The Guardian.

He called on Tanesco customers to understand that the decision to hike power tariffs was in no way related to the Richmond or IPTL saga.

``We were forced to hike the tariffs so as to meet operational costs,`` he said, adding, ``after all, the 152m/- paid daily to Richmond as capacity charges comes from the government.``

Dr Rashid said that it was not possible for Tanesco to reduce electricity charges because the prices of oil and gas remained high and rainfall was not enough to ensure constant power supply.

``Tanzanians should demonstrate so that the prices of oil and gas are reduced. That is the only way we can reduce our operational costs, hence lower tariffs,`` he said.

He said that even if the Richmond/Dowans contract was terminated today, the prices of electricity would remain intact as there was no connection between Tanesco`s operations and the Richmond contract.

On Saturday, university students staged countrywide protests demanding that TANESCO reduces electricity charges due to the 152m/- controversially paid to Richmond, a briefcase firm, on daily basis, a cost that was being passed on to consumers.

The Secretary General of the Tanzania Higher Learning Institutions Organization (TAHLISO), Mtatiro Julius, said the aim of the protest marches was to compel the government to reduce power tariffs as they were too high for the majority.

``The government is taking a wrong track by continuing to milk its citizens, who are largely poor. They must be given time to strive for better living conditions and not struggle to pay for inflated power charges,`` he said.

The opposition CUF members also demonstrated in Dar es Salaam on Sunday to pressure the government to reduce the hiked power tariffs.

Tanesco hiked the power tariffs by 23 percent last year for the 2008/9 period, after originally demanding a 40 percent electricity charges rise, which it still insists.

The power utility firm also hiked by 100 percent its service line connection charges to new customers.

It demanded that without the proposed 40 per cent increment, Tanesco would fail to roll out and connect power to its domestic and commercial customers.

However, reports have indicated that Tanesco may run bankrupt unless the major contracts it entered with foreign companies are reviewed.

According to the East African Business Week, Tanesco�s monthly collection is put at 30 billion shillings ($29m) but it is required to pay capacity charges to the tune of 14 billion shillings ($13m) monthly.

At the centre of controversy is the contract between Tanesco and Richmond Development Company (RDC), now Dowans, whereby Tanesco is to cough up $54 million annually.

Another controversial contract is that of Independent Power Tanzania Ltd (IPTL) whereby Tanesco pays IPTL $4.6 million a month, approximately $55.2 million a year and according to the contract, if Tanesco fails to foot the bill, the Treasury is committed to pay.

Total capacity charges over the 20-year life of the Power Purchase Agreement (PPA) are $672 million, excluding the cost of power generation.

The Tanesco-Songas is another controversial contract whereby its PPA requires Tanesco to pay $6.5 million as capacity charges on a monthly basis. Such PPA is also bleeding Tanesco�s financial resources.

According to the paper, the Tanzania government is facing a $27 million IPTL lawsuit in the US over �unpaid� capacity charges. The suit was filed at the United States District Court, Southern District of New York.

When contacted for comments on the issue yesterday, Professor Mwesiga Baregu of the University of Dar es Salaam said the government should review the whole thing in regard to power as well as rural electrification.

``It is not about the price, but rather about the whole system in regard to electricity. The report indicated that the amount paid was more than the power supply, which means something ought to be done to put things right.

The Energy and Water Utility Regulatory Authority should ensure that the price is affordable.

Failure to do so will mean that people will fail to afford it, thus cease to use electricity,� said Professor Baregu.

The Director of the Legal and Human Rights Centre Director Hellen Kijo Bisimba said it was sad to note that the government was yet to act even after knowing the source of the power tariff problem.

``The government should act immediately to solve the problem once and for all. We now know the source of the problem. The more the delay, the more people will suffer, ``said Bisimba.

For his part, Haruna Masebu, head of the Energy and Water Utility Regulatory Authority (Ewura) said it was too early to say whether the power tariffs would go down.

``It is too early to say anything. Following the release of the Richmond Report, a special government committee is working on the findings.

We will decide on the appropriate move once the report is handed over to us,`` said Masebu.

SOURCE: The Guardian, 25/2/2008