Tanzania Electric Supply Company Limited (TANESCO)
owed to the controversial Independent Power Tanzania Limited (IPTL) company and other emergency power firms.
TANESCO revealed details of its current cash-strapped situation in
documents submitted to the Energy and Water Utilities Regulatory
Authority (EWURA) last week as part of its application for a tariff
downward adjustment. More than two-thirds of TANESCO's debt is owed to
private power producers, gas and fuel suppliers, representing 550.98bn/-
in total.
Out of that amount, the IPTL company alone is owed an outstanding
debt of 125.37bn/-, while Songas Limited - which also sells electricity
to TANESCO – is owed 214.84bn/- and Pan African Energy - which supplies
natural gas for power generation - is owed 172.15bn/-.
Some of TANESCO's other biggest creditors include Aggreko
International, Symbion Power, and a clutch of oil marketing companies
who are owed 174.26bn/- for emergency power purchase and 24.88bn/- for
the supply of fuel and lubricants for TANESCO's off-grid diesel power
generators.
Other costs, which include materials, repair and maintenance, audit
fees, insurance, projects, legal fees and consultancy, account for
15.58bn/- of the loss-making power utility’s debt stock.
The company is now seeking EWURA’s approval to lower electricity
tariffs in compliance with government directives aimed at increasing the
size of the population with access to electricity to 75 per cent by
2025 from current levels of around 40 per cent.
The logical thinking of the President Magufuli-led fifth phase
administration is that by lowering power tariffs and connection fees,
more Tanzanians would be able to afford electricity. Based on that
premise, TANESCO – while currently selling electricity at a loss - has
formally requested the government-run energy regulator to approve a
tariff reduction of 1.1 percent effective from April 1 this year, and a
further cut of 7.9 per cent effective from January 1, 2017.
However, so high are TANESCO’s current debt levels that the company
warned in its correspondence to EWURA that it could well become
financially paralysed if the energy regulator chooses to reduce tariffs
more than the requested levels.
Some analysts have warned that political interference in the
running of TANESCO has for decades been a major stumbling block in plans
to turn around the company. The World Bank and the International
Monetary Fund (IMF) are reported to have advised the government for
several years now to allow TANESCO to raise power tariffs and end the
continuous use of state funds to subside the utility.
Meanwhile, TANESCO's managing director Felchesmi Mramba yesterday
defended the company's decision to seek a cut in power tariffs despite
being in poor financial shape.
Speaking to journalists in Dar es Salaam, Mramba said the
completion of the Mtwara-Dar es Salaam gas pipeline meant that the
company could now reduce its reliance on costly imported oil for power
generation by switching to gas-fired turbines.
This, he said, meant the recommended tariff reductions would not
have any negative impact on the company as operational costs should be
lowered thanks to the new pipeline.
“We will generally depend on gas starting next year…the government
has recently provided over 100bn/- to speed-up implementation of the
Kinyerezi II power project which is expected to add 240MW to the
national grid,” the TANESCO boss said. He noted that fuel and
hydro-power will only be used to boost supplies during peak hours at
night.
He also announced a decision to scrap service charges for domestic
users in their monthly power bills and application fees for all
customers with effect from April this year.
Under the current tariff regime, TANESCO sells one unit of
electricity for just 274.9/-, compared to its actual revenue requirement
target of 348.68/- per unit (in kilowatt hour). The company also
charges a service charge of 5,520/- per month per to every domestic
customer. The scrapped initial payments (application fee) is 5,900/-.
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