Electricity increases to recover N$1.3 billion

Home Business Electricity increases to recover N$1.3 billion

Ngaevarue Katjangua

Windhoek-From July 1 Namibians will have to dig deeper into their pockets after the Electricity Control Board (ECB) this week approved an 8 percent tariff increase for NamPower to recover N$1.3 bilIion it overspent during 2015/2016 financial year.

The 8 percent increment, which translates into N$1.49 – N$1.61 per kWh, is applicable to NamPower’s bulk customers such as regional electricity distributors (REDs), local authorities, regional councils and mines. Respective bulk customers (distributors) will individually apply to the ECB for tariff increases that will then be passed on to end-consumers.

In conducting tariff reviews the ECB employed a tariff methodology known as ‘cost-plus’. This implies the allowed cost of power, plus a regulated return, will determine electricity fares for the end-user.

“ECB approved the 8 percent tariff increase to be the optimum increase for NamPower and its customers. The allowed increase will ensure that NamPower recovers allowable cost as per tariff methodology as well as 57 percent of the under-recovery, while the remaining 43 percent is deferred to the next financial year,” said Foibe Namene, the CEO of ECB.

In its application for the bulk tariff increase to ECB, NamPower, which is the national power utility, asked for three options, namely 6.38 percent, 10.08 percent or 22.40 percent, relating to different strategies for recovering the under-recovered amount.

NamPower incurred an under-recovery of N$1.3 billion in the previous financial year, following the acute power shortages experienced in the country and the southern African region.

According to Namene, the application of cabinet-approved cost reflective tariffs now and in the future ought to sustain a going concern for NamPower amidst the challenges of ensuring a least cost supply portfolio, as well as a stable electricity supply for both regional and domestic supply options.

Namene said: “Should the increase be lower than 8 percent it means that a large portion of the under-recovery will be deferred to the following year, which will burden future tariffs adjustments and therefore have an impact on the affordability of electricity tariffs.”