BPC wants another price hike
Utility wants approval for 5 % increase BPC argues operational costs high
Botswana Power Corporations ( BPC) struggles to satisfy local electricity demand which is continually rising as the mining activity and domestic power use increases while the production costs remain high.
The corporation is currently requesting five percent increase on tariffs next year to cover up cost of supplying electricity. Presenting to Botswana Energy Regulatory Authority ( BERA) last week, BPC Chief Executive Officer, David Kgoboko said the corporation’s financial performance remains a challenge mainly due to non- cost reflective tariffs and due to the low availability of Morupule B power station. “We are doing Remedial works at Morupule power station to improve availability and we believe this will go a long way in improving power supply.“
The corporation just signed two PPAs for solar project and awarded a tender for a 50 mw solar plant to be built in Selibe Phikwe. BPC would like to offer competitive power tariffs and they will reduce the unit cost of the power plant.
However, Government continues to subsidise the corporation to cushion it against non- cost reflective tariffs.
BPC Chief Finance Officer, Oaitse Ramasedi said in prior years, BPC was constrained by cash position to undertake a robust preventative maintenance plan.
The maintenance plan cost was projected at P697 million compared to P432 million in the 2022/ 2023 financial year.
“Our infrastructure is very expensive, we are targeting to spend 432 million on the maintenance of our infrastructure, but we know that it is not enough so we will double our efforts.”
The total generation, transmission and distribution assets were valued at P19.5 billion at annual depreciation of P614 million in March 2021. Over the years, the corporation has seen growth in customers and electricity demand. Currently, there are 519 000 customers out of which 38 percent are domestic, 33 percent are commercial, 19 percent are mining industry and 10 percent is government office connections.
Ramasedi also highlighted that BPC ought to charge reflective costs but it is not doing that. He said currently, the cost of supplying electricity is P1, 40 thebe while the sales in 2020/ 21 are at P1, 26.
“In this financial year, we see the average cost is at P1.41 thebe and this will continue in 2023 where we are asking to increase the tariffs by five percent where our costs are at P1. 44 and we are asked to charge P1.40 thebe. This leads to under recovery of 4 thebe per unit. Post 2023/ 24, we believe we will be charging cost recovery.”
He said the corporation has been getting P500 million subvention from government but has been decreasing over the past five years and currently is at P300 million.
“The corporation requires minimum revenue increase by five percent and an additional P500 million consumer tariff subsidy from government to cover the cost reflective tariffs. BPC will continue to import power and feed some villages
which are off grid. But as time goes we will try to connect them to the grid if economics allow.”
According to Statistics Botswana report, the country imported 37.5 percent of total electricity distributed during the first quarter of 2021 with Eskom being the main source of imported electricity at 65.1 percent of total electricity imports. The Southern African Power Pool ( SAPP) accounted for 22.1 percent, while the remaining 7.4 and 5.4 percent were sourced from Manpower and Cross- border electricity markets.
Cross- border electricity markets is an arrangement whereby towns and villages along the border are supplied with electricity directly from neighbouring countries such as Namibia and Zambia.
Ramasedi said BPC has not been able to generate electricity as demanded by customers hence imported but they expect Morupule B remediation project to be complete by October upon which the corporation will have all units running but will remain with 10 percent of imports.