Energy regulator, the Electricity Control Board (ECB), has ruled out introducing a dual tariff system whereby industries and businesses pay more than ordinary consumers.
In an exclusive interview with the Windhoek Observer on Tuesday, ECB Chief Executive Officer Foibe Namene, said although they are aware that any increase in the cost of electricity has an impact on consumers; there is no deliberate measure to load a high tariff on a certain group of customers.
“The ECB is acutely aware that any increase in the cost of electricity has an impact on domestic, commercial and industrial consumers and the Namibian nation at large. Therefore, the regulator has to ensure that the interest of both the suppliers and consumer are balanced,” she said.
According to Namene, the industry plans to reduce the share of imported electricity over time and that would be achieved through the implementation of the National Integrated Resource Plan, which set out the country’s electricity generation mix through 2036.
“In the medium-term, the country will be importing a substantial amount of electricity from neighboring countries. This is to complement the energy mix to ensure that the new generation capacity, which is made up of renewable energy that is intermittent in nature, is covered by firm supply,” she said.
ECB approved an eight percent tariff increase this week effective July this year after NamPower’s request for an effective bulk tariff increase. This increase means that bulk tariffs would increase from N$1,49 to N$1,61 per kWh.
Namene said the increase would ensure that NamPower charges appropriate tariffs to collect sufficient revenue and ensure a reliable, sustainable and an efficient electricity industry at affordable rates.
She said they had considered a number of factors before reviewing the tariffs, including National Developmental Plans, Government policies and Cabinet directives, such as the 2005 Cabinet decision that resolved that NamPower tariffs should reach and remain cost-reflective by the year 2012.
The ECB chief said they made their decision in consultation with all stakeholders.
“Three stakeholder representatives submitted written comments and inputs on the application. The submitted views and inputs of the stakeholders were considered in the decision process leading to the tariff approval,” she said.
NamPower says the increase was necessary after incurring an under recovery of N$1,3 billion during the 2015/2016 financial year when there were forced to source expensive electricity from regional utilities after Namibia had experienced acute power shortages.
In its application to ECB, NamPower had requested for an effective bulk tariff increase with three options of 6, 38 percent, 10 percent and 22, 40 percent in order to recover their costs.
According to Namene, if ECB had approved a lower percentage increase, consumers were going to suffer in the long run because they would have had to increase with a higher percentage in the next financial year in order for NamPower to recover costs.
“Should the increase had been lower than 8 percent, it means that a large portion of the under recovery would have been deferred to the following year, which would burden the future tariff adjustments and therefore have an impact on the affordability of electricity tariffs,” she said.
Namene added that the net metering rules, which were approved last year, had no influence on the new tariffs, as the rules only allow electricity users with solar systems to offset part of their conventional electricity requirements by generating own electricity.
Mixed feelings over power tariff increases
Meanwhile, the Namibia Chamber of Commerce and Industry (NCCI) said plans to industrialise the Namibian economy were under serious threat following the eight percent increase in electricity tariffs approved by the Electricity Control Board this week.
NCCI Chief Executive Officer, Tarah Shaanika, told the Windhoek Observer this week that the increase in tariff, among other inputs, posed a challenge to industry’s desire to create a strong manufacturing sector and industrialise the economy.
He said manufacturing input costs such as electricity keep going up, which increasingly makes it difficult for local manufacturers to compete on the international stage.
“NamPower needs to run sustainable operations and therefore the need for regular increases, but we must find ways of keeping costs competitive,” Shaanika said.
“Most businesses do take electricity tariffs into their planning because this is done annually, but the point is how it affects the competitiveness of Namibian goods and services.
“Surely, our electricity tariffs are already higher than most economies in the region and any increase will just exacerbate the situation.
“Namibia needs to seriously reconsider the single buyer system and the anti-competitive role of NamPower. We should increase supply from local producers and make tariffs more competitive.”
PSG Namibia Research Analyst, Shelly Arnold, however, said the eight percent tariff increase seemed reasonable given the current inflationary environment.
Arnold said the tariff increase will help NamPower to recover a portion of the N$1,3 billion under recovery it incurred during the 2015/16 financial year. The Namibia Manufacturers Association (NMA) Chief Executive Officer, Ronnie Visser, said they were okay with the increase since it was much less than the 16 percent effected last year.
“The tariff approved by the ECB now is not too high in our view and since we were part of the discussions it is not surprising for us that they came to this conclusion, which is favourable for us mostly considering the previous increase,” Visser said.
IJG Head of Research, Eric van Zyl noted that most industries usually factor in the cost to production when making their annual projections for input costs among other factors and this effected increase was way better than what was effected last year.
“Companies expected tariff increases each year, so we do not expect them to be shocked by any increase.
“The impact of such an increase on the general public is mostly inflationary and considering the current high inflationary environment in the country, most people will not necessarily feel it now as it will just add on to what is already prevailing in the economy now,” Van Zyl said.