Electricity hikes to finance Kudu?
Thorn in the flesh of Nampower, advocacy group Consumer 4 Electricity has projected that electricity prices are subject to increase by 100% sooner rather than later. Apart from the increase, the advocacy group believes the hikes are used as measures to fund the Kudu gas-to-power project as well as the Xaris coal power station.
Speaking to the Economist, advocacy member Peter Nutt said, “These are interesting times. They [Nampower] are still aiming for a two dollar per kiloWatt/hour increase. They are aiming for 100%. This tariff increase is meant to create an equity base for the Kudu and Xaris power projects respectively.”
Drawing reference to the Electricity Act Nutt said, “The Electricity Control Board can not increase the price of electricity for projects that are coming, or when Nampower buys electricity from other countries.”
Another point of concern for Nutt is Nampower’s deviation from its intended hike trajectory. According to him, Nampower is deviating from a cost reflective curve. “Last year they applied for 21.3%. The Electricity Control Board approved for 13.2%. This year they applied for 13.2% and got 9.5%.Why have they deviated from their strategy? Something has changed. They are deviating from a cost-reflective curve. Nampower still needs to get to N$2 per kWh. Nampower is trying to build a capital base without approved projects. This whole thing is strange.”
Nutt further stated that the Electricity Control Board was informed of non-disclosure by the advocacy group. He asked, “Why is the public not informed about Kudu? The ECB is trying to backtrack on disclosure.”
Sources within the Electricity Control Board allegedly informed Nutt that a consultant was appointed and warned the regulator against the hikes. “The ECB appointed a consultant that told them that what they were doing was not right.”
Cautioned Nutt, “The Electricity Control Board is trying to get out of the situation. The ECB will precipitate the crisis.”
The Electricity Control Board last week increased wholesale electricity tariffs from N$1.17 to N$1.32 per kWh for the financial period 2015/2016, stating the increase is necessary for Nampower to meet its service delivery costs and for the tariff to remain cost reflective.
In its justification, Nampower said the increase is to cover incremental costs of electricity supply from imports and local generating thermal power stations, and to remain within the Debt Service Cover Ratio. The utility said the tariff increase makes provision only for the year-on-tear revenue requirement of Nampower, taking only actual costs and losses into account. Said the ECB in a statement, “the ECB analysed and reviewed the NamPower tariff application, considered feedback from other stakeholders and decided that a 9.53% tariff increase would suffice for NamPower to cover its allowed operating costs, keep the lights on and fulfil its financial obligations. This means an effective bulk tariff increase from N$1.17 to N$1.28 per kWh.