Wednesday, July 6, 2022

BPC justifies proposes tariffs hikes

Botswana Power Corporation (BPC) says it undertook an assessment of the required revenue for the financial year 2022/23 for the corporation to meet its operating, maintenance and financing costs of P6.155 billion coupled with P500 million consumer tariff subsidy from the government of Botswana.

The required revenue is attainable by 5 percent electricity tariff increase across all customer categories. The corporation has revealed that it is expected to continue recording under recovery of costs for every unit of electricity sold until the financial year 2023/24.

“Because of this revenue shortfall, there is need for the Corporation to continue receiving P500 million yearly tariff support from the Government of Botswana in the same period. This financial support is meant to cushion the customers from sudden increases in electricity tariffs,” reads the statement.

Information contained in the electricity tariff adjustment proposal for the 2022/23 financial year, BPC’s recurring precarious financial position was mainly due to non-cost reflective tariffs, low availability of Morupule B Power Station and the increasing cost of imported power. Stated is that consequently, the government of Botswana continues to subsidize the corporation in order to cushion the impact of non-cost reflective electricity tariffs. However, this subsidy has significantly reduced over the last five years without being matched by corresponding electricity tariff increases.

“The tariff proposal for the financial year 2022/23 is based on the yearly determination of the required revenue to meet the operating, maintenance and financing costs of the Corporation. The proposal also considered future energy demands especially from Large Power Users such as mines,” reads the report.

Contained in the report is that the projected tariff increase of 5 percent in the 2022/23 financial year provides the required revenue of P6.155 billion. Added is that the P6.155 billion is made up of return on regulated asset base and total expenses of P1.437 billion and P4.718 billion respectively. Also stated is that the consumer tariff subsidy from the government of Botswana would be P500 million.

BPC stated is that the required 2023/24 projected sales revenue is P4.592 billion which translates into revenue growth rate of 11percent compared to the 2021/22 financial year. The 11 percent revenue growth rate is made up of 5 percent and 6 percent for tariff increase and average energy consumption growth respectively.

The Corporation stated that it is undertaking the various measures to reduce costs and improve operational efficiencies, and that Morupule B Power Station (MBPS) low availability remains the single largest factor in the financial sustainability of the Corporation due to high dependence on power imports to meet the local demand. Added is that the corporation is currently undertaking remedial works programme at MBPS to rectify the construction and equipment defects.

“We have implemented the revenue protection initiatives to reduce non-technical losses due to revenue leakages through illegal connections and other fraudulent activities. Also considered is the process to convert Orapa Power Plant from diesel to use cheaper gas fuel commenced in the financial year 2020/21 and it is anticipated to be completed in the financial year 2023/24,” reads the statement.

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