In southern Africa, ECB has rejected Namibia’s national electricity provider, NamPower’s tariff increase application and has instead approved only a 16,7% hike, reports local media.
This decision by the authority will now require NamPower to revise its operations thereby cutting costs including employment positions.
Tariff increase application based on future programmes
Speaking to the media last week, the utility’s managing director, Simson Haulofu, explained that they wanted to hike electricity prices by 31% based on their future capital expansion programmes.
Haulofu said: “NamPower has accordingly adjusted its operations and capital expenditure costs to ensure that it fulfills its mandate within the approved tariff range.”
He noted that the impact of the shortfall will be mitigated by “significant budget cuts, no new positions filled, and a limited fuel subsidy”.
It is reported that NamPower’s boss also revealed that the company has also reduced its exposure to US dollar-based power import contracts.
“Out of our total energy requirements in the 2016 financial year, only 29% of NamPower’s energy requirements is US dollar-based import contracts. This will reduce to 17% in the 2017 financial year,” Haulofu explained.
Unlike the past two years, the media also reported that the power utility will not receive a government subsidy this year, the reason for this is based on the company’s failure to construct the planned 800MW Kudu gas-to-power plant.
According to the media, economists have expressed fears for this year stating that since there will be no money allocated to NamPower, costs may be passed on to consumers.
Bailouts ‘not a sustainable solution’
However, mines and energy minister Obeth Kandjoze stated that that the ministry “does not support bailouts, as it is not a sustainable solution to any industry”.
The minister said, in 2005 Cabinet decided that bulk electricity tariffs should be cost-reflective by 2010.
Kandjoze noted that at present NamPower is allowed a tariff that is sufficient to cover all costs of supplying electricity by the ECB.
He said: “The ministry is convinced that no bailout is necessary for NamPower to continue supplying electricity. The same also applies to the local authorities; they are issued by the Electricity Control Board with tariffs that are sufficient to cover their electricity-related costs, including payments to NamPower.”