The regulator argues that the firm did not take into account all infrastructure cost incurred
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The State-run power utility company had proposed to cut the cost of electricity supply by at least 9 per cent come 2017 as it gradually shed off reliance on the unpredictable hydropower generation shifting to use of natural gas
Dar es Salaam. A state regulatory agency has blocked a 7.9 per cent electricity tariff reduction plan by Tanzania Electric Supply Company (Tanesco), dashing hope by consumers for cheap power driven by huge gas discoveries.
Tanesco proposed to cut the cost of electricity supply by at least 9 per cent come 2017 as it gradually shed off reliance on the unpredictable hydropower generation.
The company’s low tariff plan was also projected on the coming into play of its own cheap gas-powered plants expected to save billions of shillings currently being paid in capacity charges to independent power producers. The power utility pays over Sh35 billion every month to a couple of private companies in capacity charges alone.
But that plan has been crushed and will not materialise any time soon, as the Energy and Water Regulatory Authority (Ewura) yesterday said Tanesco’s optimistic tariff outlook could not be fully proven.
Ewura director general Felix Ngamlagosi said they were suspending the 7.9 per cent reduction proposal until a proper cost-analysis study of the investments in gas infrastructure is done.
“Tanesco’s tariff reduction plan was based on a calculation of the interim gas prices but they overlooked other matrix such as investment on gas infrastructure,” Ngamlagosi said.
He said the completion of the major natural gas pipeline from Mtwara that would be used to generate low cost power from the Kinyerezi plants was only one aspect of the matter.
He spoke during a press conference in Dar es Salaam where Ewura granted a minimal reduction of electricity cost by 1 per cent, and also scrapped off the monthly service charge of Sh5,520 to low power consumers.
“It is true that power generation cost will go down, but their proposal is on hold because the current gas price used is an interim as TPDC (Tanzania Petroleum Development Corporation) continue commissioning some if its projects.
“This means the gas pipeline project is not yet 100 per cent complete until later this year when total investment cost will be calculated to determine the real price for the natural gas,” said Mr Ngamlagosi. He directed Tanesco to submit a new proposal by August this year.
The 1 per cent relief took effect yesterday. Announcing the new tariffs, Mr Ngamlagosi said the current prices have gone down by between Sh2 to Sh6 (1.5 per cent to 2.4 per cent), depending on the category of the consumers.
There are five electricity consumer groups, namely D1 who are the lowest consumers using up to 75 units, T1 who use above the 75 units, T2 who are medium industries using more than 7500 units and T3 who include those connected to medium and high voltage and buying electricity in bulk. According to Ewura, the Sh100 per unit for small consumers has remained unchanged while medium consumers (T1) will now pay Sh292 down from Sh298 per unit.
Others are Sh195 from Sh200 for medium industries, Sh157 from Sh159 for large industries (connected to medium voltage) and Sh152 from Sh156 per unit for those connected to high voltage and buying the power in bulk.
Consumers will also not be required to pay Sh5,000 that was mandatory when applying for power supply. However, there will now be a re-connection fee of Sh7,000 for faults of any kind.
On the dropped monthly service fees of Sh5,250, Tanesco’s deputy managing director Decklan Mhaiki noted there has been a long standing complaint by consumer on the cost they saw as needless.
According to Mr Mhaiki, this move would see Tanesco lose income of Sh76.4 billion yearly collected from 1,123,442 (T1) consumers.
Tanesco has however retained Sh14, 233 service fee charged on medium industries (T2) and Sh16, 769 and Sh16, 550 for medium and high voltage users.
Mr Ngamlagosi pointed that in order to maintain affordable electricity charges, Tanesco should ensure they give priority to low-cost electricity generators.
“This means that Tanesco should ensure that the national grid is first fed with power from least cost power producers,” he said.
Joy to consumers
Domestic consumers were quick yesterday to welcome the drop, saying even though minimal, it was still positive. They were particularly happy at the decision to drop the monthly service charge.
They urged Tanesco to ensure reliability of the service. Theresia Chilambo and Emma Seguni of Dar es Salaam said that electricity cost was still high for many households.
“Some consumers usually buy electric and use it for more than three months, it was inconvenient for them when they buy new units only to be surcharged,” Ms Chilambo said.
