2006-01-17Staff Report 2 "By Wezi Tjaronda WINDHOEK NAMIBIANS should brace themselves for electricity tariff increases from next year. These increases will be effected to cover the costs of additional generation plants, such as the planned Kudu Gas plant. Up until now, Namibia has relied on its neighbour, South Africa, for most of its electricity, whose capacity is also running out. Concerned about this, the Electricity Control Board, (ECB) the country's electricity regulator, says electricity will in the long run be expensive due to shortage of capacity and new generation plants. Apart from covering the costs of new generation plants, the money raised through these increases will, according to General Manager: Technical Services of ECB, Paulinus Shilamba, be used for building additional transmission power lines and the upgrading of existing ones. ""Clients must be prepared to pay for it,"" he told New Era, adding that the newly established Regional Electricity Distributors (REDS) would not be the reason for the price increases but the cost of new generation capacity. Namibia imports 48 percent of its electricity from Escom in South Africa and five percent from Zambia, Zimbabwe and other Short Term Energy Markets. Although increases have been effected in the past, in the next five years the tariffs will go up by between two and five percent so that after five years, when the Kudu gas plant is on stream, people do not feel the pinch, said Shilamba. According to ECB's annual report 2005, the shortage of local generation capacity and increasing reliance on South Africa is the biggest shortcoming in the electricity supply industry. By next year (2007), electricity demand will outstrip supply capacity in the region, thus necessitating the introduction of new generation supply capacity. Other options available for Namibia to increase generation capacity are hydropower on the Kunene, Kavango and Orange rivers as well as the Kudu gas field and other renewable energy sources. The public have voiced concern through the media about the creation of the REDS, which they say will push up the price of electricity. They have also complained about the move, which they add is not necessary because the REDS will neither add value to the electricity supply nor create jobs for the country's jobless population. Shilamba on Friday allayed these fears, saying electricity would go up because of the lack of generation capacity for Namibia and the whole of SADC. REDS, which are owned by municipalities, the power utility NamPower, regional councils and in some cases cooperatives, were established to among others address shortcomings in the distribution of electricity. Due to infrastructure that has come to the end of its lifespan, lack of accounting systems, and no money to pay for the upgrading and modernisation of infrastructure as well as other problems such as lack of human resources, especially in smaller municipalities, the ECB felt that this situation would make it difficult for Namibia to attain the goals of Vision 2030. In addition, Shilamba said, electricity was lumped with taxes and levies, a trend that would make it expensive and unaffordable in future. ""Due to this, no-one will invest anymore but we want to create a favourable climate for investment where electricity is not a barrier."" At the moment, he noted, many municipalities were charging more than they were supposed to, to subsidise their other services. Shilamba said it has been found that Windhoek charges 30 percent more for electricity, Walvis Bay and Swakopmund used to charge 15 percent more, Tsumeb and Grootforntein charged 50 percent more, while smaller municipalities did not charge any extras. This will however be a thing of the past when ECB and its stakeholder discuss and agree on a suitable percentage that will enable the municipalities to avoid bankruptcy. While in the past the country had 54 distributors, these have been grouped into five, namely Nored, which already started its operations in 2003; Cenored and ErongoRED, which opened last year and Central RED and Southern Red, which will be operational from July 1 this year. Shilamba said that with the advent of the REDS, the municipalities would now share resources, equipment and human resources. ""We believe that electricity prices will go down because resources will be shared, they will save on human resources and equipment, and can achieve more with less human resources. The cost of electricity will come down,"" he said. In addition, the ECB as a regulator, said Shilamba, would not tolerate changes in prices to an extent that the profit is in excess of five percent. The rate of return to the distributor is five percent to enable the distributor to cover its administrative costs. Although municipalities have also said that their income will be reduced with the creation of the REDS, Shilamba said this would only happen when the municipalities do not plan properly. ""The ECB wants the municipalities to get the same amount of money. If Windhoek is getting N$60 million from electricity alone on top of what it is supposed to charge, then RED will have to pay over the N$60 million the municipality was getting,"" he added. The regulator is also of the view that electricity distributors should diversify and not just rely on electricity because in most cases, municipalities have used money from electricity to subsidise other services, such as swimming pools and buses, for instance. ""If one is paying for electricity, they should pay for electricity alone,"" he said." 2006-01-17Staff Report 2
