Zera to au­dit Zesa

Chronicle (Zimbabwe) - - Business - Harare Bureau

ZIM­BABWE En­ergy Reg­u­la­tory Au­thor­ity will in­sti­tute an in­de­pen­dent au­dit of the cost struc­ture and op­er­a­tions of Zesa to de­ter­mine whether the util­ity is pass­ing the cost of its in­ef­fi­cien­cies to con­sumers.

Zera act­ing chief ex­ec­u­tive En­gi­neer Misheck Siyakat­shana said the reg­u­la­tor had al­ready started re­view­ing sub­mis­sions by in­ter­na­tional con­sul­tants for the ten­der to carry out the cost and op­er­a­tions au­dit of Zesa.

“The re­sults of the re­view will be pre­sented to the Min­istry of En­ergy and Power Devel­op­ment who will de­cide on the course of ac­tion as the share­holder,” he said.

Over the past five years, the Gov­ern­ment and Zera have only al­lowed mar­ginal in­crease in power tar­iff to avoid crip­pling busi­nesses.

The au­dit comes af­ter Zera re­jected a pro­posal by Zesa, in July this year, to hike power tar­iffs by 49 per­cent to in­crease rev­enue in­flow to fund op­er­a­tions, fi­nance main­te­nance works and bankroll cap­i­tal in­ten­sive projects.

Zesa, owed over $1 bil­lion in ar­rears by con­sumers, would have hiked tar­iffs from an av­er­age 9,83c/kWh to 14,69c/kWh if the re­quest had been granted. It was feared hik­ing tar­iffs would lead to a wave of price in­creases. Avail­able re­search find­ings show that elec­tric­ity is a ma­jor cost to pro­duc­tion in vir­tu­ally all sec­tors of the econ­omy ac­count­ing for 20 per­cent of pro­duc­tion cost in farm­ing and agri­cul­ture, 16 per­cent in in­sti­tu­tions, 15 per­cent in in­dus­try and 11 per­cent in com­mer­cial ac­tiv­i­ties.

Mr Siyakat­shana said there was con­cern from var­i­ous quar­ters, in­clud­ing Gov­ern­ment, that pos­si­ble in­ef­fi­cien­cies within Zesa could be the rea­son for high cost of power and sus­tained de­mands to raise tar­iffs.

“The re­view was com­mis­sioned (by Zim­babwe En­ergy Reg­u­la­tory Au­thor­ity) fol­low­ing con­cerns from var­i­ous stake­hold­ers; Con­fed­er­a­tion of Zim­babwe In­dus­tries, Cham­ber of Mines, con­sumer groups and most im­por­tantly Gov­ern­ment it­self that there could be in­ef­fi­cien­cies in both the struc­ture and op­er­a­tions of Zesa Hold­ings and its sub­sidiaries,” he said.

“The Zim­babwe En­ergy Reg­u­la­tory Au­thor­ity is cur­rently procur­ing in­de­pen­dent in­ter­na­tional con­sul­tants to ex­am­ine and re­view the cost struc­ture and op­er­a­tions of Zesa with a view to iden­tify ar­eas of cost sav­ing and ef­fi­ciency im­prove­ment,” Mr Siyakat­shana said on Fri­day last week.

Zesa’s power tar­iffs are con­sid­ered a ma­jor cost driver to busi­nesses in Zim­babwe. Cost of power is one of many fac­tors cited in stud­ies meant to im­prove the coun­try’s ease of do­ing busi­ness con­di­tions with a view to rais­ing the com­pet­i­tive­ness of lo­cal in­dus­try and com­pa­nies to global stan­dards.

“Gov­ern­ment is con­cerned there could be in­ef­fi­cien­cies in Zesa and wanted an in­de­pen­dent con­sul­tant to go through the cost struc­ture op­er­a­tions of Zesa. Gov­ern­ment, as share­holder, will de­cide what to do,” he said.

While a study by Na­tional Eco­nomic Con­sul­ta­tive Fo­rum found out that the av­er­age cost of pro­duc­ing elec­tric­ity from the power util­ity’s hy­dro and ther­mal power sta­tions is higher com­pared to other re­gional coun­tries, due to the age­ing equip­ment, in­ef­fi­cien­cies were also cited as a fac­tor.

Of­fi­cial sta­tis­tics show that Zesa’s av­er­age cost of pro­duc­ing elec­tric­ity be­tween 2009 and 2016 has ranged be­tween 9,65c per kilo­watt hour and 14,62c/kWh while the tar­iff ranged from 7,53c/kWh and 9,86c/kWh.

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