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.
Last Friday, BERA announced that the minister of Mineral Resources, Green Technology and Energy, Lefoko Moagi, had approved the request by BERA to increase electricity tariffs by 3% from the beginning of April. The increase is lower than the 5% initially sought by the cash-strapped BPC. The state-owned power utility’s decision to increase electricity costs by 22% last year April drew widespread criticism from consumers, decrying the extortionate hike. BPC defended its move, explaining that the current tariffs fall way short of its operational costs.
In pushing for a further hike, BPC insists its weakened financial position can be traced to the non-cost reflective charges, with further operational losses worsened by the defective Morupule B power station, which has led to the high cost of imported electricity. BPC had planned to increase tariffs by 13% between 2021 and 2023, starting with 5% this year, then another 4% increase in 2022 and a 4% 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, the 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 attributed to years’ worth of maintenance backlog, ageing infrastructure and network overloads where demand is outstripping network capacity. This is being addressed by the maintenance backlog programme which started in 2018, Southern Transmission System Reinforcement and the recently commissioned North West Transmission grid. Moagi further said despite last year’s 22% increase, electricity tariffs are still not cost-reflective and need to be reviewed annually. While BPC is getting a 3% increase instead of its preferred 5%, 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 to meet the ICBM loan repayment.
BPC will also receive P171 million from the 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 the power supply build programme. BPC has already embarked on the maintenance catch up programme designed 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-phase approach. Phase 1 commenced in 2018 and has been completed at a cost of P250 million; Phase 2, estimated at P240 million, is on-going and scheduled for completion in July 2021 and the last phase, estimated at P160m, is set to start in May 2021 and last 11 months.
The Energy ministry has started implementing the rooftop solar programme into the grid following the guidelines introduced last November. The programme urges end-users to generate their own electricity and sell the 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 three years, with a 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-month 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 60% 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). At the moment, the 600MW Morupule B coal power plant is undergoing comprehensive remedial works to address the perennial boiler failures. The Government commissioned the plant in 2012, pumping into it nearly P10 billion. But it has never been fully functional, with only half of the four units functioning at any given time.
Works on unit 4 commenced in June 2019 and are 94% complete. It 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 has delayed the steam turbine repairs.