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Being honest about electricity tariffs

22nd January 2012
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Editorial cartoon

The reactions against the substantial increase in electricity tariff are positively wishing to defend the common people, but misleading the public is something that we can’t afford at any cost.

We fully understand the impact of higher electricity to the economy as well as to the common man’s daily life, and that’s why we agree with reactions from various stakeholders, following the news that the State owned power utility, Tanesco shall change its tariff by 40.5 percent last week.

 We understand the situation of our fragile economy, which has been performing abysmally during the past four years due to the global credit crunch, a prolonged drought, power rationing and poor policies adopted by the government in some key issues. We understand the concern of many Tanzanians about the impact of any move to increase power tariffs.

However, what we don’t understand are the lies spread by a breadth of lawmakers, even some cabinet ministers, as well as sections of the business community that our current tariff is the highest in the East and Central African region.

This is a total lie that we would like to correct with facts, because at the end of the day, our noble mission is to seek and tell the truth regardless whether that truth hurts some of our readers or customers.

For instance industrialists this week faulted the comparison of Tanzanian tariffs with those in Uganda and Kenya, saying our perfect comparison should be South Africa or Zambia.

But, what industrialists miss here are facts about electricity generation and supply in South Africa, which is Africa’s largest economy, controlling about a third of the continent’s economy with the Gross Domestic Product of about $200 billion, four times the combined East African GDP.

 South Africa supplies two-thirds of Africa’s electricity and is one of the cheapest electricity producers in the world.

Almost 90 percent of South Africa’s electricity is generated in coal-fired power stations, 5 percent is generated by Koeberg, a large nuclear station located in South Africa while the rest is produced by hydro-electricity, and pumped storage schemes.

Comparing South Africa’s electricity and Tanzania’s electricity is very unfair, because the latter depends heavily on thermo electricity produced by using industrial diesel and hydro-electricity power, which depends heavily on availability of rainfall.

In terms of modern infrastructure, South Africa’s electricity generation system is among the best in the world, while Tanzania’s infrastructure managed by Tanesco is dilapidated, whereby no serious investments have been made during the past 15 years, paving the way for the 15-20 percent loss of electricity during transmission.

The truth is our fair comparison should be Uganda, Kenya, and Rwanda, not South Africa. Comparing South Africa’s electricity system with ours is like comparing a Toyota Corolla sedan with a Mercedes Benz S500. They are vehicles, but can’t be compared at all, because they differ by a million quantiles.

For about a decade now, a section of the business community as well as lawmakers has been spreading mere propaganda that what Tanesco charges its consumers was higher than Uganda and Kenya. What is appalling is that those spreading this kind of propaganda know the truth, but are not ready to say it loudly for reasons best known to themselves.

If you take for instance the tariff charged by the Uganda Electricity Board, it is quite obvious that Ugandan consumers pay three times what we pay Tanesco in this country. In Uganda the cost of single unit of electricity is Ush1000(Tsh628) or USD 0.40 cents, while in Tanzania the highest tariff following the recent increment is Sh273, imposed mainly to household users.

What happens in Uganda is that the government subsidises electricity to big and medium consumers by paying 82 percent of the cost of a single unit, which amounts to Ush820 ($0.33cents). This means that industries in Uganda and medium scale users pay only Ush180 (Tsh109) or $0.07cents per unit.

In Tanzania our industries and mines pay Tsh118 per single unit up from the previous Tsh94, which is higher by Tsh9 shillings compared to their counterparts in Uganda.

In Uganda domestic households and small scale businesses pay Ush 385 (Tsh235) of the total cost of a single unit, while the government pays Ush615 (Tshs380) as subsidy to ease the impact of electricity as well as enabling the Uganda Electricity Board to operate efficiently.

In Tanzania, medium scale users and domestic households pay Tsh Sh132 and Tshs 273 respectively. These rates are still lower than the subsidised Ugandan rates paid by consumers. We have taken Uganda as fair comparison factor because economically it matches with Tanzania is so many ways.

The truth is that electricity tariffs in Tanzania are still the lowest in East Africa if compared by what consumers in Uganda and Kenya have been paying. Forced by the skyrocketing operational costs, the Ugandan cabinet last week agreed to increase electricity tariffs by 41 percent effective this month.

In our case, we have battled power shedding for 18 months, forcing the Parliament in July last year to reject estimates of the Ministry of Energy and Minerals, demanding an emergency power supply plan. Finally the $1 billion plan was tabled on August 13 and endorsed by Parliament. But what many didn’t understand is that by demanding an emergency power rescue plan, we were inviting more emergency power generating companies who mainly rely on fuel to generate electricity.

Now, with the surging fuel prices in the world market as well as the tumbling shilling that reached a record high by October last year,  emergency power becomes the most expensive product for Tanesco to afford. However, since people wanted electricity at any cost, Tanesco had no option but to procure and supply electricity from independent power producers.

 What happened is that by November 2011, the State owned power utility was overburdened by operational costs with about 88 percent of its revenues pays independent power producers. It should also be noted that in every single unit of electricity lost during the power shedding, the economy was losing $1.5 (Tsh2385).

Today at least we are having that single unit after intervention by Parliament at a cost of TSh156.8, which means our economy is still gaining TSh2222.8 compared to the loss we would have incurred when there’s no electricity at all.

With the current situation facing our hydro electricity production systems, Tanesco is forced to rely on thermo electricity generation system, which are more expensive to the company as well as consumers.

But since there wasn’t any available option, we should be able to understand the reality surrounding or facing this country. It’s beyond cheap politics and lies told by some our leaders to gain political mileage.

Our leaders should tell the people the truth, instead of giving them false hopes. Truth hurts, but it sets you free. What Tanesco’s critics are supposed to do is forcing the government to subsidise electricity especially for economic productive groups, and this is what Uganda has been doing, or provide an alternative on how to reduce the cost of production. With the current situation it costs Tanesco Sh359 to produce a single unit of electricity, which it then sell at a much lower price than the production cost.

SOURCE: GUARDIAN ON SUNDAY
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