The Electricity Control Board in Namibia has approved the tariff application made by the Namibia Power Corporation (NamPower) and will increase the bulk electricity tariff by 2.92% effective on 1 July 2021.
After considering a tariff application increase for an effective bulk tariff, inclusive of generation and transmission, increase of 5.8% from NamPower, the Electricity Control Board has announced an increase of 2.92% for the 2021/2022 financial year.
This means that consumers will now pay up to N$1.6982 ($0.11) per kilowatt-hour, which was increased from N$1.6500 per kilowatt-hour effective from 1 July 2021.
The new electricity tariff will be applicable to NamPower’s bulk customers, including distribution utilities, local authorities, regional councils and mines. Regional electricity distributors will now all have to apply to the ECB individually for a review of their distribution tariffs. Only when these individual applications are approved by ECB will they be applicable to end consumers.
ECB CEO Foibe Namene, commented: “The Electricity Control Board is cognisant of the fact that the economy is affected by the COVID-19 pandemic but is equally dependent on reliable and affordable electricity supply. It is, therefore, the responsibility of the regulator to ensure a sustainable electricity industry at affordable tariffs.”
ECB’s board of directors met on 8 April 2021 to deliberate on the review of NamPower’s bulk tariff application. Namene explained that annual electricity tariff reviews are conducted to ensure utilities charge appropriate tariffs to collect enough revenue to enable reliable and efficient operations at affordable rates.
She noted that in reviewing the tariff, the ECB considered several factors, including the impact of the tariffs on the electricity supply industry, consumers and the economy at large.
“As part of the tariff review process and considering government directives on public gatherings on account of the Covid-19 pandemic, the ECB requested stakeholders to present their written views, facts and evidence on the tariff application electronically via e-mail. Comments submitted by stakeholders were considered in the review process, leading to the tariff approval”, said Namene
Long Run Marginal Cost
Namene continued that over the years, Namibia’s electricity tariff included an amount for Long Run Marginal Cost.
“The Long Run Marginal Cost is intended to ensure a smooth tariff path for the future, especially when NamPower is experiencing cash flow challenges due to expensive power supply options or building new power plants.
“This means that the Long Run Marginal Cost funds may be used to cushion customers from unexpected tariff hikes or in situations where the economy is depressed and or to build new power plants that will ensure an affordable projected tariff path. No Long Run Marginal Cost is included in the approved tariff,” Namene noted.
She emphasised the ECB is cognisant of the struggling economy that has not yet recovered.
“To mitigate the impact of the tariff increase on consumers and the economy for the period 2021/2022, an amount of $2,3 million is allowed to be used for variable operation cost of the thermal plants by NamPower from the Long Run Marginal Cost,” Namene clarified.
The ECB CEO added that $33,5million has been allocated from the available $38,6 million Long Run Marginal Cost fund to partially fund the construction of NamPower’s renewable energy plants.
Slightly over $22,9 million is allocated to the 20MW solar PV plant currently under construction at Omburu, while the remaining amount will be used for part-funding of the 50MW NamPower-owned wind plant to soon be procured.
“In accordance with the tariff methodology, NamPower will not be allowed return and depreciation on the assets created using the $33,5 million – and this will result in a total net saving to the customers of approximately $67 million over a period of 30 years, and making electricity affordable to end-users,” said Namene.
She concluded that future tariffs are expected to be increased in line with inflation and to cater for new generation as per the National Integrated Resource Plan. External factors such as the weather, foreign exchange fluctuations and other unforeseen circumstances will also be taken into account.