The high cost of energy

A parody ZESCO Twitter account called, ZESCO explains it, on 2^nd June 2020 posted a message stating; “Accusing our meters of finishing your power quicker is like accusing the [petroleum] filling station of increasing your car’s fuel consumption.”

It’s rare for me to agree with a parody account but when I saw that tweet, I agreed with it. Those would have easily been my words. That would be my exact position, save my view is not satirical. I know I try satire every now and then, but I really suck at it. Then again, I am not a big fan of parody accounts because many people do not distinguish spoof from real posts by people or organisations being bluffed. However, the moment I saw that post I agreed with it. I believe that statement from the parody account, even though I am one of the many complainants who this past week signed petitions over the cost of ZESCO electricity prepaid units. 

My view… my thoughts…

I will have to put a disclaimer right from the onset, I am not an energy expert even though I now discuss what has been the most topical discussion of the week in Zambia - high cost of energy. Of course, this discussion was dwarfed by another important discussion regarding freedoms of expression and speech in Zambia, a discussion ignited by Lusaka province minister, Hon Bowman Lusambo’s reaction to musicians Kings Malembe and Bflow recorded and posted online, videos where they discussed aspects of governance that they thought had not been handled well. To avoid running the risk of digressing, I won’t dwell on that discussion because it is very clear to anyone who has seen the duo’s videos that all they did was responsibly use their fundamental rights to speech and right to expression to air their views on governance. 

That aside, this is not an expert analysis on the energy sector, but a consumer’s rant. A consumer’s diatribe discourse on what has clearly become an unbearable high cost of energy in Zambia. This discourse leaves me feeling short of being dejected and in deep Melancholy. I say this because clearly, we have no solution to the high energy costs because even when consumers complain, they don’t know what they should complain about. It’s so bad that even troll accounts are having to correct them.

Evolution of ZESCO tariffs, 2014-2020
(Energy Regulation Board of Zambia 2015, p. 50, 2017, p. 60, 2019b, p. 81, 2019a)
Adopted from: Haris, S & Ahmed, I (2020)

So, what should the complaints be about?

Well, toward the end of 2019, ZESCO announced an increase in electricity tariffs by an average of 113%. However, most domestic customers got over 200% increase. This is also coming off the backdrop of ZESCO increasing the tariffs twice in 2017. As a matter of fact, ZESCO has been increasing tariffs since 2014 in the quest to get to what they term “cost reflective tariffs”. A May 2019 report by the Policy Monitoring and Research Center (PMRC), highlighted that by 2015 ZESCO was paying between USc 7/KW/h and USc 13.23/KWh to Independent Power Producers who have invested in power generation with associated higher generation costs.

 

To cut the long story short, ZESCO costs are in US dollar (USD) including the power which they themselves generate, but they charge their [domestic] consumers in Zambian Kwacha (ZMW). On 31^st December 2014, USD/ZMW was 6.40, on 31^st December 2017, USD/ZMW was 9.97, on 31^st December 2019, USD/ZMW was 14.03 and on 5^th June 2020, USD/ZMW is 18.20. The experts can correct me, but I am certain therein lies the problem. As a result of what keeps happening to our currency all the gains achieved to get to cost reflective tariff, have all been eroded. We are back to where we started. ZESCO will need further increases. This is a corporation which ideally should make profit but has been facing serious financial problems regarding profitability, liquidity, solvency and efficiency for a long time now.

 

Why don’t we as a people petition our government to manage the economy better so that our currency should not depreciate as it has done? They will say; it is global! Even the South African Rand (ZAR) has been losing value against the US dollar. As a matter of fact, all major currencies have been losing value against the US dollar! It’s climate change! Hogwash. As an example, in 2013 when Zambia rebased its currency, the value of the Rand was 0.4 to 1 Kwacha, but as at 5^th June 2020, 1ZAR is equal to 0.929 ZMW. Clearly ZMW is headed the other direction.

 

At the time of the most recent ZESCO tariffs increment (over 200%), we were subjected to between 16-20hrs of load shedding, so no one noticed just how expensive electricity had become. We didn’t have power for more than two thirds of a day and when power was restored, we were all sleeping. The last two months power supply has been stable with load shedding only between 2-4 hours on three days of the week. Now we can all feel the high cost of energy. It’s not that ZESCO have miraculously adjusted our pre-paid meters to consume more power. We have missed the plot here fellow countrymen and women.

 

I will give a practical example of my electricity use for the month of May 2020, where I purchased 576.5kW. The most I have used in a month is 600kW, and that was costing me 300 Kwacha at most before the 2017 increases. For 576.5kW in May, I paid 900 Kwacha. In April, I parted away with before 1,100 Kwacha. So, over the two months my average is 1,000 Kwacha. On 4^th May, 2020 I purchased 403.90kW worth of units at 500ZMW.  By 23^rd May I got a warning from the pre-paid meter that I was running low, so I bought units for 400 ZMW which came to 172.60kW. This meant I had already spent a 900 kwacha on electricity, just over a period of 19 days.

 

On 1^st June 2020 I had to purchase another 403.90kW units for 500 Kwacha. That means over a period of 27 days I have spent 1,400 Kwacha. Of course, my average consumption has gone up because of the use of a heater now since there is a new-born in the house. However, that is not the bone of contention. The cost of 600kW has moved from 300 Kwacha to 1,000 Kwacha. That is the sad reality which we should speak against. To think that all the increases done have already been eroded by the Kwacha depreciation just bring more grief to my soul.

 

By the way, I must hasten to mention that for my geyser I use a solar and for cooking I use a gas stove. This makes spending an amount of 1,000 Kwacha on 600kW units of power more ridiculous. To even think we have a body aptly named the Energy Regulation Board (ERB), with executives who are well remunerated makes us all the more laughable. I say so because my submission is that ERB should be a very strategic energy body advising government. Alas, the board exists mainly to just announce energy price increases be it fuel or electricity. This is all against the backdrop of huge expectation in planning the nation’s future energy requirements. For so many years now, we have been told that the process of Petroleum refinery used at Indeni is one of the most inefficient processes. I still dot know if the ERB has a road map to dump that process and move the country to more efficient and cost effective one. I wouldn’t be surprised if they are just there ‘dololo’. These are the professionals. But they dance to the whims of politicians so the same ‘excellence’ will continue.

 

With their current way of doing business, the ERB is not a necessary. Those announcements they do can easily be done by the minister of energy or even the Energy ministry permanent secretary, with the guidance of technocrats from the ministry. ERB is just a very unwelcome duplication in an otherwise sector already in a state of confusion. The state of confusion under the energy sector is so bad it wouldn’t even be enough for a PhD thesis to catalogue all the problems. This is the sector with ZESCO which alone has so many operational problems regarding profitability, poor service quality, load shedding etc.

 

ZESCO is the only Corporation I know that pays huge money for several adverts discouraging consumers from using its service. Added to that are the issues at Indeni and generally the high cost of fuel. Recently the cost of petroleum the world over has fallen with some states in the US getting to a point where they paid customers who got petroleum from them. The price of petroleum went to negative. In Zambia, the cost of petroleum is at an all-time high.

 

There are a lot of problems in the energy sector, a lot of problems at ZESCO. An even bigger issue now is that the consumers seem lost over the reasons why they are spending a lot on ZESCO units. They are attributing it to ZESCO pre-paid meter consuming more than before. Consumers need to check if they are now using more kW of power than they were using say a year ago. I have always used 600kW and I am still averaging the same, save for the extenuating circumstance now, mentioned above. However, I have moved from paying 100 Kwacha for 600kW to 300 Kwacha and now under the new normal, 1,000 Kwacha.  This is not normal; it is not sustainable. We need not lose perspective.