Miners are livid overt the decision taken by the Electricity Control Board (ECB) to only approve a 2,5 percent decrease in the bulk electricity tariff, when power utility NamPower had asked for a 3,11 percent decrease.
Chamber of Mines Chief Executive Officer, Veston Malango said the mining body was disappointed with the decision taken by the regulator.
“I am deeply disappointed with the decision of the ECB on why they had to cushion the decrease that NamPower had asked for, which is 3,11 percent. We felt the proposed NamPower decrease was progress, considering it would be the first decrease that the country would have witnessed since 1983,” he told the Windhoek Observer.
“As the Chamber, we will try to understand why the ECB has made that decision, where it approves a 2,5 percent decrease when NamPower had asked for 3,11, as electricity is a major component in our operations.”
ECB Chief Executive Officer, Foibe Namene said the regulators had taken a lot of factors into consideration before coming up with the new tariff.
“In determining the tariff change, the ECB considered a number of factors including; the impact of the tariff change on the Electricity Supply Industry, the economy at large and the consumers, amongst other stakeholders. This is the norm whether such application is for an increase or decrease. Based on the available facts and evidence, the Electricity Control Board approved a 2.5 percent tariff decrease, translating into an effective bulk tariff decrease, moving from N$1.69 to N$1.65 per kilowatt-hour,” she said during the new tariff announcement.
“In the application by NamPower for the decrease of 3.11 percent, the Long Run Marginal Cost (LRMC) was not included. This needed to be included in the tariff determination by the ECB as the LRMC is used to ensure a continued supply of electricity. The LRMC amounts to 3 cents per kilowatt-hour. The purpose of the long run marginal cost is to ensure a smoother tariff path for the future and to provide for any eventualities and assist in capitalisation of new generation capacity for the future. This led to the approved decrease of 2.5 percent.”
Namene said the new tariff will allow NamPower to remain sustainable, which is in line with a government position that it charges a cost reflective tariff.
“The 2.5 percent tariff decrease would enable NamPower to recover its allowed operating costs and ultimately fulfil its financial obligations, including payments to the local Independent Power Producers. In 2015, Namibia and the Southern Africa region experienced a shortage of electricity that led to NamPower having to procure more expensive power in order to secure a constant supply of electricity to the Namibian customers. This state of event led to an under-recovery amount incurred between 2015 and 2017. The under-recovery amount was provided in the tariff by the ECB over a three-year period (2016, 2017 and 2018).
Since the under-recovery amount for the mentioned period is now fully recovered, a tariff decrease is necessary to ensure that NamPower does not over recover on the tariff for 2019/2020 and that the tariff remains cost reflective as directed by Cabinet.”
The ECB boss said the approved tariff decrease is only applicable to NamPower bulk customers such as Regional Electricity Distributors (REDs), Local Authorities, Regional Councils and Mines, while distributors will be expected to submit their proposed tariffs after the regulator’s announcement.
“Distributors will individually apply to the ECB for the review of their tariffs, which when approved will be applicable to end consumers. The 2.5 percent tariff decrease of NamPower will be taken into consideration. Considering the approved bulk tariff decrease, inflation related impact and adjustments on distribution costs of Distributors to distribute electricity to end users, it is projected that end consumer tariffs should on average remain as is,” she said.
“Actual changes to end user tariffs will be based on individual Distributor’s tariff application and the review by the Regulator. It should be noted that should there be no bulk tariff decrease, end user tariffs would have at least increased by inflation, therefore the bulk tariff decrease absorbed the necessary inflationary adjustments for the period 2019/2020.”
Namene said the EBC will continue to investigate means and mechanisms to reduce tariffs, in an effort to make electricity more affordable.
“We are cognizant of the fact that the economy is highly dependent on reliable and affordable electricity supply. It is, therefore, the responsibility of the Regulator to ensure a sustainable electricity industry at affordable tariffs. We believe that the recently Cabinet approval of the Modified Single Buyer Market Model (MSB) for the industry will attract more Independent Power Producers (IPPs) promote investment,” she said.