Public hearings for the Botswana Power Corporation’s (BPC) proposal to hike power costs began this past week.
The power utility has argued that increased electricity tariffs will ignite a glimmer of hope for BPC’s precarious financial position.
Last week, the Botswana Energy Regulatory Authority (BERA), and the public heard in detail how BPC plans to increase electricity tariffs by 13 percent between 2021 and 2023. The corporation’s plans have already been met with anger.
The BPC’s decision to increase electricity costs by 22 percent in April, attracted wave of criticism from consumers, decrying the excessive costs. The company countered the criticism levelled against it, explaining that the existing electricity tariffs are not enough to cover operational costs of suppling electricity.
In pushing for additional increments to tariffs, the 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 is also feeling the pressure from government’s anticipated belt tightening measures. The government, which is dealing with slow economic growth, has advised that it will reduce subsidies given to state owned entities (SOEs), while also planning to privatise some.
“Government continues to subsidise the corporation in order to cushion the impact of non-cost reflective tariffs, but this subsidy has reduced significantly over the last 5 years. The cumulative tariff increase is lower than the cumulative subsidy which is indicative of the revenue mismatch,” said BPC in its submission to the energy regulator, seeking approval to increase electricity charges.
BPC believes that if BERA could approve its proposed tariff adjustments, which is a 5 percent tariff increase in 2021, then another 4 percent increase in 2022 and a 4 percent increment in 2023. The power supplier says it requires a healthy liquidity position to undertake overdue refurbishment of its transmission and distribution infrastructure.
If the tariffs are approved, BPC has projected a turnaround in the corporation’s financials, anticipating operating profits in the next five years. The power utility is also planning to reduce imported electricity, something which will lower costs for the struggling entity.