The Energy Regulation Board (ERB) announced an upward adjustment in electricity tariffs in a move aimed at increasing investment in power generation.
The upward adjustment follows an application by the country’s power utility, Zesco Limited, which applied for an upward adjustment in August this year in accordance with the country’s law.
The power utility had claimed that the country requires cost-reflective tariffs in order to attract private investors.
But the Economic Association of Zambia (EAZ) said the move to increase electricity tariffs will send more people into poverty.
Chrispin Mphuka, the president of the association while acknowledging that having cost-reflective tariffs was good in the short-term, said the move increased poverty levels among people in the long-term.
Yusuf Dodia, the chairperson of the Private Sector Development Association said the move will increase the cost of production and affect the manufacturing sector in the country.
According to him, the decision to increase tariffs will exacerbate the challenges faced by manufacturers who are already bearing the brunt of power deficits, adding that this will result in increased prices of commodities.
The electricity tariffs have been increased from an average of 6.02 U.S. cents per kilowatt hour to an average of 10.35 cents per kilowatt hour, the regulator said in a statement released late on Wednesday.
“The proposed new tariff adjustment is expected to generate revenue that will facilitate investment of 3.7 billion dollars in generation projects thereby adding capacity of 1,500 megawatt to the national grid,” the regulator said.
“At this tariff, Zambia will become competitive and will attract the much needed investment in electricity sub-sector,” it added.
According to the statement, the need to adjust the tariffs upwards is due to changes in the country’s macroeconomic fundamentals such as inflation and the exchange rate which have deteriorated resulting in the escalation of operational costs for the power utility without increase in tariffs.
The energy regulator said the necessity to adjust the tariffs has been worsened by a drastic reduction in hydro power generation capacity as a result of low water levels, a situation that has caused a severe electricity deficit necessitating the importation of emergency power. Enditem
Source: Xinhua
