Corporation outline need for 5% tariff increase
In their efforts to become sustainable, Botswana Power Corporation (BPC) aims to gradually migrate to cost reflective tariffs from non-cost reflective tariffs.
This was confirmed last week by BPC Chief Executive Officer, David Kgoboko during the Botswana Energy Regulatory Authority (BERA) and BPC public hearing, in which the latter applied for a tariff adjustment.
Although most households are already complaining that their power bills are too high, BPC want a 5 percent tariff hike to cover the 2023/24 and 2024/25 financial years.
They had sought a similar increase for the current financial year but were unsuccessful.
If successful this time, it would be the fourth tariff increase since 2018, when rates have risen by 35 percent in total.
The power corporation are also seeking a government subsidy of P300 million and P200 million for the two years.
The request is motivated by the corporation’s need to raise close to P5.4 billion as operation income.
Reasons advanced by BPC for the tariff adjustment include: recurring financial losses caused by non-cost reflective tariffs, increasing costs of imported power and low availability of Morupule Power B.
BPC believe a tariff increase will improve their: commercial viability, financial sustainability, service delivery, reduce over-reliance on government support and efficiently meet the incurred costs in delivering its mandate which is providing electricity for Batswana.
“The corporation is not immune to the rising inflation and sharp increases experienced in our output costs of generating, transmitting and distributing electricity. These include fuel such as coal, diesel, petrol, power infrastructure, equipment and materials used,” explained Kgoboko, who estimated the cost of producing electricity currently stands at P1.9 billion annually.
Ultimately, BPC would ideally prefer a 20 percent hike but are willing to accept 5 percent instead.
“Annual tariff reviews are necessary in order to generate the required revenues to sustain the corporation. The benefits of our improved performance in power generation and exports will be realised in a foreseeable future because we have started from a negative cash flow base. BPC tariffs remain non-cost reflective, the current consumer tariffs do not cover the cost of generating, transmitting and distributing electricity. Further the government subsidy which aims to cushion the corporation against the impact of non-cost reflective tariffs has reduced over the years in line with the plan to migrate to cost reflective tariffs. Therefore the 5 percent hike we are proposing is part of the journey to migrating to cost reflective tariffs which will allow the corporation to sustain its operations,” said Kgoboko.
The corporation recorded a notable improvement on performance of power plants having managed to meet 87 percent of local electricity demand during the first quarter of 2022/23 financial year.
At the same stage last year, they were sitting at just 47 percent so this represents an impressive turnaround.
In addition BPC have even managed to export surplus power into neighbouring countries during off peak hours.
Botswana’s current demand for power hovers at around 600MW a year.
However, this is set to almost double by 2040, with experts envisioning the country will be consuming 1113MW by then!
Cost reflective tariffs
One which reflects the true cost of supplying electricity and removes the reliance on Government subsidies to cover the variance between the current tariff and the true cost of electricity supply.