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Is the proposed power tariff increase viable?

12th December 2012
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Editorial Cartoon

Power consumers on Monday delivered a strong NO to the proposed massive tariff increase which Tanzania Electric Supply Company (Tanesco) says is unavoidable if the generation, transmission and distribution of electricity is to be sustained and imporved.

Tanesco, the sole power utility in the country, will have found the reaction quite irrational and unjust, especially when these same consumers are demanding major improvements to the power flow into homes, industries and service centres.

In presenting the proposal for a massive price hike, Tanesco is actually telling consumers that their demands for cheap, uninterrupted flow of electricity cannot be sustained at current tariff rates.

Yet the current rates, which are almost 41 per cent higher than last year, have also elicited understandable protests from consumers. The financial burden of paying for more expensive power is becoming unbearable to consumers.

The reality is that not only will the proposed further tariff increase of more than 80 per cent hit power consumers’ pockets harder, directly and indirectly, it also threatens the economy’s growth potential.

Not only will consumers have to dig deeper into their pockets to pay electricity bills, but most of the goods and services they purchase will logically be more expensive, as producers and suppliers scramble to pass on the costs to the final consumer.

The hike if passed by the Energy and Water Utilities Regulatory Authority (EWURA) will also deal a debilitating blow to the current vibrant economic growth rate of around 7.0 per cent.

Indeed the World Bank in its recent economic update warned that the impressive economic growth numbers, could disappear if the issue of power was not dealt with conclusively and in a manner amicable to maintaining the growth.

Tanesco is trying to break out of a vicious business circle of a narrow consumer base of less than 20 per cent of power clientele by counting on an unprecedented growth of new clients to expand the revenue base and turn around its fortunes.

And that is where the challenge lies. Is it a realistic plan? Apparently it was rejected by EWURA as over-ambitious, containing plans not likely to be fulfilled in the given time frame. Tanesco still needs to do more to put its house in order.

The truth is there is a feeling that not enough analysis of the utility’s cost structure has been undertaken. Recent scams involving the firm’s officials justify revisiting its every cost centre, to ensure there is no mismanagement or waste of resources.

The campaign to eliminate power thefts needs to be more efficiently coordinated to ensure they are stamped out and all revenue flows into the company’s coffers.

Tanesco therefore must come up with a more realistic plan, in terms of the number of clients it will realistically be able to connect with power, the rate of expansion of generation and transmission to ensure that consumers are not unnecessarily squeezed by the tariffs, only to end in further waste.

Herein is the challenge for EWURA and energy experts in general as they weigh the responses from Tanesco, consumers and other stakeholders to the tariff hike proposal.

And as the experts look into more options, the directive that politicians stay out of the issue should be strictly enforced.

SOURCE: THE GUARDIAN