Conclude cost of service study, State told

WE expect Government to conclude the Cost of Service (CoS) study this year so that consumers are aware of the true cost of producing electricity and stop subsidising inefficiencies of Zesco, the Consumer Unity and Trust Society (CUTS) has said.

The society has also appealed to the Energy Regulation Board (ERB) to stick to its commitment of undertaking bi-monthly fuel pump price reviews if such a decision is to truly benefit the consumer.

In its report dubbed “2017 consumer perspectives,” centre coordinator Chenai Mukumba noted that due to the phased increase in electricity tariffs by 75 percent last year, Small and Medium Enterprises (SMEs) were hard hit as their cost of production skyrocketed.

“Tough decisions were made in 2017 when the Government removed subsidies from the fuel and electricity sub-sectors which in turn saw a hike in price for these two commodities. This was very difficult for consumers but necessary according to Government. “The energy sector also saw changes when the Government resolved to hike electricity tariffs by 75 percent to be done in two phases. The tariffs of electricity were increased by 50 per cent in May of 2017 and later increased by 25 per cent in September 2017. While the Government ensured a life-line tariff of 200 units, there was a significant complaint from SMEs who noted that this meant an increase in production costs,” Ms. Makumba said.

She said concluding the CoS this year would help consumers know the true cost of producing electricity. “In 2018 we expect that the Government will conclude with the Cost of Service study. This study will ensure that as consumers, we are aware of the true cost of producing electricity and that we do not subsidize inefficiencies of ZESCO.

“In light of the findings of the study, it is likely that we will see another change in the cost of electricity this year. We hope that the change of electricity tariffs will be across and inclusive of all sectors, particularly the mining sector,” she said.

And Ms. Makumba appealed to ERB to stay true to its commitment to ensure a bi-monthly review of the cost of fuel to benefit the Zambians when the cost of fuel on the international market and the strength of the Kwacha is in their favour.

“As a result of the bi-monthly annual review, consumers were met with both increases and decreases in the price of fuel during the year. Unfortunately, while the increase in the price of fuel was accompanied by an increase in the price of transportation, these price changes were not reflected in the transportation sector when fuel prices reduced and as such consumers were adversely affected.

“In 2018 we urge the ERB to stick to its commitment of undertaking bi-monthly reviews of the cost of fuel. For this process to truly benefit the consumer, it is important that the ERB sticks to this policy commitment so that consumers can benefit when the performance of the Kwacha and the international price of oil is in their favour,” she said.