Power tariff hike 'a necessary evil’

The recent decision to hike power tariff was received with mixed feelings, and it appears to be a big challenge to low-income earners as well as entrepreneurs in different sectors of the economy.

The Energy and Water Utilities Regulatory Authority (EWURA) last week, announced in the “Multi Year Tariff Adjustment Order of 2013,” an increase in tariff at an average of 40 per cent that will last up to December 2016.

The Confederation of Tanzania Industries (CTI) says Small and Medium Enteprises (SMEs) will be hard hit by the rise because for most of them, power accounts for about 40 per cent of the total production costs. “The tariff hike will, without doubt, increase the cost of production and render Tanzania’s products unable to compete with imports,” CTI’s statement on its position on the new power tariffs.

Besides the increase in direct production costs, unlimited number of products and services necessary for operations of industries would also be affected and have adverse impact on locally made goods. The amount of tariffs hiked will be charged directly to the final consumer, thus negatively affecting economic development.

According to EWURA, The proposed tariff adjustment will enable the state-owned power utility -- TANESCO to meet its operational costs and capital investment programme as well as demonstrating its creditworthness to donors, while increasing the capacity needed to meet system peak demand.

Effectively from tomorrow, domestic power customers in the first category called D1; out of five outlined categories, will have to pay 100/- per unit up from 60/-. Another category is T1 in which consumers will have to part with 306/- for one unit, which is an increase of 85/- from the present tariff.

Tanesco had applied for a 131/- per unit payment for this group. The group consists of larger domestic power consumers, small business operators, milling machine operators and the likes while the T2 category, whose consumption is over 7,500 units per month will have to pay 205/- per unit up by 73/- from the current charges.

For medium and high voltage consumers falling in T3 MV and T4 HV categories, the new charges per unit will be 166/- and 159/- respectively being an increase by relatively 50 per cent of the present tariffs. EWURA said it was satisfied the proposed multi-year tariff and charges increase by TANESCO were reasonable, save for some few elements which were adjusted to suit the tariffs enquiry and evaluation process.

A city resident, Ms Regina Raphael said power tariff hike will definitely impact on the cost of living of most households, and in the end would even fail to pay for electricity bills but also discourage new customers to be connected. “The frequent increase of power tariffs is worrying because there is no improvement seen in the generation that could give justification of increasing charges,” she said.

The power utility firm holds that operational costs are higher than the revenue collected partly because the thermal power, that has enabled the country to avoid power rationing, is expensive. The company buys emergency thermal power at 50 US cents per kilowatt hour and sells the same at 12 US cents creating losses that accrue to enormous debts to the company.

The company spends an average of 5.4bn/- a day on fuel to produce 365 megawatts of electricity from emergency power plants. Its total daily revenue is just 2.34bn/-. TANESCO said due to operational costs, its losses have increased to 178.25bn/- in 2012 from 43.23bn/- in 2011.

The Mzumbe University Dar es Salaam Campus lecturer Dr Honest Ngowi said power hike was necessary at this point in time for reliable power supply in the country. Dr Ngowi said the power utility firm was in great need to do business profitably while assuring present and prospective investors in various sectors reliable power supply.

“It is a necessary evil because by increasing the power charges, low income earners will have to dig deeper in their pockets to pay for the service as well as the increased production costs to be passed on the ultimate consumer,” he said. He added, “On the other side, TANESCO badly needs the increase in power tariffs in order to run electricity supply operations profitably.”

Most of the people are of the view that the government should invite private firms to compete with TANESCO to ensure sustainable and cost effective power supply as opposed to the current situation in which power charges are going up without any improvement in services.
Source: Daily News, reported from Dar es Salaam, Tanzania
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