Tanzania Electric Supply Company Limited (TANESCO)
TANESCO has asked the Energy and Water Utilities Regulatory
Authority (EWURA) to approve a power tariff reduction of 1.1 per cent
effective from April 1 this year, and a further cut of 7.9 per cent
effective from January 1, 2017.
The public utility said the basic reason for seeking the tariff
cuts despite its financial woes was to comply with the “government
policy of ensuring that the population with access to electricity
reaches 75 per cent by 2025.”
About 40 per cent of Tanzanians currently have access to
electricity. The government believes this access can be further boosted
by lowering the tariffs along with power connection fees.
But TANESCO also warned in a letter to EWURA that to cut the
tariffs even further than as indicated would paralyze the company’s
financial capacity and risk driving it out of business.
“(Such a) situation may lead creditors to take legal action,
tarnish our business image and goods and service providers may refrain
from doing business with TANESCO,” the power utility’s managing
director, Felchesmi Mramba, warned in its tariff adjustment application
sent to EWURA this month.
“The unavoidable reality is that no enterprise can provide the
service that its customers seek if it loses money on every unit of
output that it sells,” Mramba added.
Bigger tariff cuts would mean TANESCO having to forego important
repair and maintenance work on its power generation, transmission and
distribution infrastructure, hence leading to more power cuts, the
letter to EWURA said.
It explained: “In the recent past, TANESCO has spent only a
fraction of the funds for repairs and maintenance (R&M) dictated by
international best (industry) practice which sets 15 per cent of
revenues as the desired target for R&M expenditure…TANESCO’s actual
expenditure in 2014 was only about 4 percent of revenues.”
“Continued deferral can only be expected to result in increased
forced outages for both generating equipment and the transmission and
distribution networks.”
TANESCO also warned that it has “always been under-recovering for
every unit (of electricity) sold, including the period since our last
tariff application in 2013.”
The power utility said the fact that it has been selling power at a
loss for several years now has rendered it unable to fulfill
contractual obligations and resulted in its debts increasing to
765.733bn/- by mid-February 2016.
It further stated that the proposed new tariff cuts would lead to
lesser annual revenue from electricity sales for 2016 and 2017. While
the utility’s revenue requirement for this year is 1.89trn/-, it will
likely collect 1.7trn/- from power bills as a result of lower tariffs.
Similarly, while TANESCO’s revenue requirement for 2017 is
1.9trn/-, it now expects its revenues to fall to 1.69trn/- for that year
due to the proposed tariff reductions.
“In order to pay its financial obligation for the previous backlog
caused by unmet revenues, the company will opt to borrow money from
commercial banks,” TANESCO said in its correspondence to EWURA.
Analysts say political interference in the running of TANESCO has
for decades been a major stumbling block in plans to turn around the
loss-making power utility.
Officials confirmed to The Guardian that the World Bank and the
International Monetary Fund (IMF) have been pushing the government for
several years now to allow TANESCO to raise power tariffs and end the
continued use of state budget funds to subsidize the utility.
In the last tariff adjustment in January 2014, EWURA approved a
39.19 per cent increase after TANESCO had sought a hike of 67.87 per
cent.
It remains to be seen if TANESCO will be able to demonstrate its
bankability to donors offering concessionary loans and grants and
commercial lenders if it continues to sell power to Tanzanian households
and businesses at a loss.
SOURCE:
THE GUARDIAN
