Energy reforms in Africa’s second largest copper producer have been key in the development of the sector which has for years been marred by pricing inefficiencies and other related hurdles that continue to deter significant investment potential. As part of liberalization of the energy sector, the Zambian authorities passed the Electricity Amendment Act in 2020 which allowed for Independent Power Producers (IPPs) to sell power directly to consumer. Another key was to ensure Cost of Service Study (CSS) completes, to aid determination of not only cost reflective tariffs to help IPPs thrive but also optimality of electricity prices. The Energy Regulation Board (ERB) has for the second and final time extended the cost of study completion date to August 2021. This was confirmed by the Director General Langiwe Lungu in the capital Lusaka which the key funders, the Africa Development Bank have agreed to.
The ERB Energy regulator had on December 03, 2019 commissioned a 1-year cost of service study to be conducted by London based Energy Markets and Regulatory Consultants (EMRC) at a fee of $600k.
Read also: Zambia’s Energy Regulator commissions a 12 month cost of service study
Earlier last year in the fourth quarter, the Economic Recovery Plan (ERP) launched by Republican Head of State, focused on expediting energy reforms, which have been procrastinated for years, to ensure that tariffs for Independent Power Producers (IPPs) would be revised optimal on the premise that the COSS would have completed by 1Q21. Other areas that the 2020-2023 medium term expenditure framework strategy document focused on was ensuring that load management in power blackouts is exterminated completely through adding 750MW to the power grid this year.
ZESCO Directorate in Livingstone. Victoria Falls power station contributes circa 108MW to the grid.
The COSS is the second study that the Southern African nation is conducting after the earlier study was discontinued. The study results are hoped to correct the pricing inefficiencies that have deterred investment propensity in the sector and should assist with the negative jaws position that the national power utility faces for years. The power utility grapples with debt and an inefficient operating model. Zambia’s power tariffs remain the most unattractive in the region and the COSS review will provide an opportunity to correct this anomaly.
Copperbelt Energy Corporation CEC Plc Head Office in Nkana East of Kitwe, on the Copperbelt of Africa. CEC Plc recently challenged the common carrier SI.57 whose judgement which was favorable by the high court.
The red metals energy sector faces a labyrinth of developments in the sector such as litigation over a common carrier paradox implemented through a Statutory Instrument Number (57) that was thwarted by a high court and is up for appeal, ballooning arrears owed to IPPs due to cashflow challenges faced by the monopolistic power transmitter in an oligopolistic power market and energy deficits due to climate change effects.
The Kwacha Arbitrageur