ZERA to audit Zesa

Source: ZERA to audit Zesa | The Herald October 17, 2016

Business Reporter—
Zimbabwe Energy Regulatory Authority will institute an independent audit of the cost structure and operations of Zesa to determine whether the utility is passing the cost of its inefficiencies to consumers. ZERA acting chief executive Engineer Misheck Siyakatshana said the regulator had already started reviewing submissions by international consultants for the tender to carry out the cost and operations audit of Zesa.

“The results of the review will be presented to the Ministry of Energy and Power Development who will decide on the course of action as the shareholder,” he said. Over the past five years, Government and ZERA have only allowed marginal increase in power tariff to avoid crippling businesses.

The audit comes after ZERA rejected a proposal by Zesa, in July this year, to hike power tariffs by 49 percent to increase revenue inflow to fund operations, finance maintenance works and bankroll capital intensive projects.

Zesa, owed over $1 billion in arrears by consumers, would have hiked tariffs from an average 9,83c/kWh to 14,69c/kWh if the request had been granted. It was feared hiking tariffs would lead to a wave of price increases.

Available research findings show that electricity is a major cost to production in virtually all sectors of the economy accounting for 20 percent of production cost in farming and agriculture, 16 percent in institutions, 15 percent in industry and 11 percent in commercial activities.

Mr Siyakatshana said that there was concern from various quarters, including Government, that possible inefficiencies within Zesa could be the reason for high cost of power and sustained demands to raise tariffs.

“The review was commissioned (by Zimbabwe Energy Regulatory authority) following concerns from various stakeholders; Confederation of Zimbabwe Industries, Chamber of Mines, consumer groups and most importantly Government itself that there could be inefficiencies in both the structure and operations of ZESA Holdings and its subsidiaries,” he said.

“The Zimbabwe Energy Regulatory Authority is currently procuring independent international consultants to examine and review the cost structure and operations of ZESA with a view to identify areas of cost saving and efficiency improvement,” Mr Siyakatshana said on Friday last week.

Zesa’s power tariffs are considered a major cost driver to businesses in Zimbabwe. Cost of power is one of many factors cited in studies meant to improve the country’s ease of doing business conditions with a view to raising the competitiveness of local industry and companies to global standards.

“Government is concerned there could be inefficiencies in Zesa and wanted an independent consultant to go through the cost structure operations of Zesa. Government, as shareholder, will decide what to do,” he said.

While a study by National Economic Consultative Forum found out that the average cost of producing electricity from the power utility’s hydro and thermal power stations is higher compared to other regional countries, due to the ageing equipment, inefficiencies were also cited as a factor. Official statistics show that Zesa’s average cost of producing electricity between 2009 and 2016 has ranged between 9,65c per kilowatt hour and 14,62c/kWh while the tariff ranged from 7,53c/kWh and 9,86c/kWh.