Maravi

Govt to unbundle Zesco after improvements in distribution

Govt to unbundle Zesco after improvements in distribution
Written by Kabanda Chulu
Friday, July 10, 2009 4:22:26 PM

GOVERNMENT will only consider unbundling Zesco Limited into separate entities after ensuring that the company has improved its distribution service delivery challenges.

Making submissions to the Parliamentary Committee on Government Assurances on commercialisation of Zesco Limited, energy permanent secretary Peter Mumba said the commercialisation process was intended to encourage the company to make all divisions operate as separate business entities such as generation, transmission and distribution. He submitted that distribution of electricity was the biggest burden in terms of cost.

“Distribution poses major challenges to most of the electricity utilities in the world especially in the developing countries and this is also the case with Zesco, which is experiencing the same especially through vandalism and illegal connections,” Mumba said. “Replacement of vandalised accessories makes the unit to be costly while illegal connections make the company lose out in revenue collections. Considering these challenges, most investors are not willing to invest in distribution hence government will first ensure that Zesco improves its service delivery before the option of dismantling is considered.”

Mumba explained that in assisting Zesco achieve aims of the commercialisation process, government, through the Energy Regulation Board (ERB) in 2007, adopted a multi-year incentive tariff framework.

He submitted that the multi-year incentive framework was based on the use of self enforcing incentives that were embedded in the form of key performance indicators (KPIs) to motivate Zesco to improve profitability and service delivery as this would be the basis for a tariff adjustment.

“In accordance with the tariff migration plan (framework), Zesco obtained a tariff review of 28 per cent in 2008 and Zesco has further applied for another tariff adjustment of 66 per cent which is currently under consideration by the ERB,” said Mumba.

Some of the agreed KPIs include metering new customers upon connection, metering new residential connections within 30 days after the customer pays for connection and metering all un-metered customers by March 2010.

Other indicators are to enhance cash management by billing all customers timely and on a regular basis, reduction of debtor days from current 180 to not more than 60 days by March 2010.

However, many Zesco customers have complained about the company’s poor service provision and have questioned the proposed 66 per cent adjustment to electricity tariffs.

Labels: ZESCO

posted by MrK @ 3:25 PM