Botswana Power Corporation (BPC) charges some of the lowest tariffs in the Southern African Development Community (SADC), it has emerged.A Regional Energy Regulators Association (RERA) of Southern Africa has placed Botswana fourth behind Zimbabwe, Zambia, and Lesotho respectively.According to the report Botswana charges US cents 9.436/kWh; compared to Eswatini (13.720 cents), Mauritius (16.810 cents) and Namibia (15.998 cents). Botswana charges slightly more than Lesotho (7.391 cents), Zambia (7.400 cents) and Zimbabwe (9.345 cents).BPC increased tariffs by 22% across all categories of users early this year in a bid to boost revenues.
“The increase is to ensure tariffs are cost reflective, affordable and appropriately priced. The rate remains one of the lowest in the countries in the region without hydropower,” the corporation said in April this year.
Acting Chief Executive Officer (CEO) Edward Rugoyi recently said it was important for the Corporation to gradually migrate its tariffs to cost reflective status to ensure affordability and reliability of supply. “BPC’s precarious financial position is caused by non-cost reflective tariffs, low availability of Morupule B Power Station and increasing cost of imported power. While government continues to subsidise the Corporation in order to cushion the impact of non-cost reflective tariffs, this subsidy has reduced significantly over the years,” he said.
Power tariffs in most countries in SADC have been found to be below cost recovery levels. All SADC countries except Botswana have Time of Use tariffs that price energy differently depending on the time of day. The RERA report indicates that only three countries in the region are cost reflective – Eswatini, Mauritius and Namibia. Botswana is the only country in the region that has not conducted a Cost of Service Study (COSS) for the electricity supply industry.
A cost of service study is a tool used by municipal utilities to ensure that their rates are tied to their costs of providing electricity. Such a study would help BPC manage its costs and revenue projections. However, plans are underway to start the study in March 2021. As far back as 2015, SADC countries committed to transitioning their power utilities towards cost reflective tariffs as a way of resolving ever recurring problems of power deficits, poor state of infrastructure, higher system losses and failure to attract investment.
“Such a move will also improve profitability and encourage Independent Power Producers (IPPs) to play a more active role in the energy sector,” economists have said. Cost-reflective tariffs will ensure recovery of all the allowable costs of each regulated and licensed activity within the generation, transmission, distribution and supply value chain.
BPC services over 492 000 customers throughout the country, mostly domestic households, government departments and commercial enterprises. According to Rugoyi, the Corporation’s customer base increases by five percent every year, buoyed by its landmark village electrification projects. At least 91 percent of BPC customers are domestic households, spread across 432 villages, cities and towns. The Corporation has three regions in North, Central and South Botswana. The Central region is the most spatial, boasting of 100 000 customers in 102 villages, all an average 105km apart and serviced by six BPC service centres.
“We need adequate resources and capital to meet their expectations on reliability of supply and quality of service. The infrastructure that is used to transmit electricity also needs regular maintenance. So when we apply for tariff increases, we are in effect trying to balance affordability with reliability of supply,” the Acting CEO has said. As part of initiatives meant to increase generation capacity and ensure reliability of supply, BPC has embarked on a number of projects, among them the refurbishment of Morupule A, remedial works at Morupule B as well as investments in the northwest and Zizabona transmission grids.
BPC has also invested introduced smart meters and a meta data management system to enhance availability, operational efficiency and fault detection. In the year 2019/20, the Corporation’s internal capital expenditure was planned at P694 million. However, the government consumer tariff subsidy has been steadily decreasing from P2.3 billion in 2015 to P1.7 billion in 2017, P800 million in 2019 and P500 million in 2020. As a result, the consumer tariff subsidy that government gives the Corporation to cushion against the impact of non-cost reflective tariffs has been steadily decreasing over the last five years, which the corporation says results in under recovery of allowable costs.
Among other functions, RERA was established to facilitate the development of regional regulatory policies, legislation and regulations as well as monitor and evaluate electricity regulatory practices among members, and support the development of energy regulators in the region.
