Sunday, April 18, 2021

BPC fails to get its way but power prices will still rise

Botswana Energy Regulatory Authority (BERA) has given Botswana Power Corporation (BPC) permission to raise electricity tariffs, in the latest move to bring electricity costs to market levels.

On Friday, BERA announced that the minister of Mineral Resources, Green Technology and Energy, Lefoko Moagi, has approved the request by BERA to increase electricity tariffs by 3 percent beginning of April. The increase is  lower than the 5 percent initially sought by the struggling BPC.

The state-owned power utility’s decision to increase electricity costs by 22 percent last year April drew a wave of criticism from consumers, decrying the excessive costs. BPC defended its move, explaining that the tariffs currently charged are not enough to cover operational costs of providing electricity.

In pushing for additional increments to tariffs, BPC says its weakened financial position can be traced to the non-cost reflective charges, with other operational losses made worse by the defective Morupule B power station, which has led to high cost of imported electricity.

BPC had planned raise increase electricity tariffs by 13 percent between 2021 and 2023, starting with 5 percent this year, then another 4 percent increase in 2022 and a 4 percent adjustment in 2023. The power supplier says it requires a healthy liquidity position to undertake overdue refurbishment of its transmission and distribution infrastructure.

“BPC is facing severe financial challenges due mainly to Non-Cost Reflective Tariffs, which are kept deliberately low to ensure consumers have access to affordable power,” Moagi said in parliament this week when seeking approval for the ministry’s budget. “In the interim, government is providing subsidy to close the tariff gap, however as a long-term solution a plan to migrate to cost reflective tariffs is being pursued.”

He told legislators that BPC is facing major power supply disruptions mainly caused by maintenance backlog accumulated over the years, aging infrastructure, and network overloads where demand is outstripping network capacity. This is being addressed by maintenance backlog programme which started in 2018, Southern Transmission System Reinforcement and the recently commissioned North West Transmission grid.

Moagi added that despite last year’s 22 percent increase, electricity tariffs are still not cost reflective, requiring review on an annual basis. While BPC is getting 3 percent increase instead of their preferred 5 percent, the ministry has allocated P500 million to the BPC tariff support programme to cushion the utility company against non-cost reflective tariffs as well as meet the payment for the ICBM loan.

In addition, BPC will receive P171 million from government for the power generation and distribution programme, with funds to be used on improving the backbone power transmission projects of Mochudi, Tlokweng and Ramotswa as well as the provision of services for power supply build programme.

BPC has already embarked on the maintenance catch up programme meant to clear a maintenance backlog accumulated over the years and network overloads that result in power interruptions in some parts of the country. The backlog includes replacing rotten poles, servitude maintenance and uprating of distribution infrastructure. The exercise is undertaken in a three (3) phased approach.

Phase 1 commenced in 2018 and has been completed at P250 million, while Phase 2 estimated at P240 million is currently on-going and scheduled for completion in July 2021 and the last phase estimated at P160m is planned to start in May 2021 for 11 months duration.

The Energy ministry has started implementation of the rooftop solar programme into the grid following guidelines introduced last year  November for end users who can generate their own electricity and sell excess to BPC. The development of these included applicable rules, regulations, standards, tariffs as well as a review of implementation processes.

The Rooftop Solar Programme will run for a period of 3 years, with the system-wide aggregate capacity of 10MW in the first 12 months. The ministry has also developed an Integrated Resource Plan for Electricity Generation (IRP) to establish a robust electricity generation build programme from 2020 until 2040.

“This was done through a twenty-four (24) months collaboration project through which we received technical assistance from the International Atomic Energy Agency (IAEA). Implementation of the IRP is envisaged to add approximately 1,540MW of new generation capacity by 2040, and these projects are earmarked to be by Independent Power Producers (IPP),” Moagi said.

Currently about sixty percent of the national electricity demand of 600MW is being met from domestic generation facilities, Morupule A and B, while the balance is imported from other power utilities in the Southern African Pool (SAPP).

The 600MW Morupule B coal power plant is currently undergoing comprehensive defects remedial works to address the perennial boiler failures. The plant was commissioned in 2012, gobbling nearly P10 billion, but has never been fully functional, with only half of the four units functioning most at a time.

Works commenced in June 2019 on Unit 4 and are 94 percent complete and is scheduled to return to operation by July 2021 while remedial works on the remaining three units will be completed in the first quarter of 2023, according to Moagi. The project timelines have been impacted by the outbreak of the global covid 19 pandemic which affected the steam turbine repairs.

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