- Says it needs P1.55bn to become profitable
- Has applied to BERA for 5% increase
- Says it will still need the regular P500m in govt subsidy
This ‘reasoning’ is contained in its application to the Botswana Energy Regulation Authority (BERA) for approval to raise tariffs.
The regulator rejected BPC’s request to raise tariffs by 5 percent in the last financial year and allowed the utility only 3 percent. BERA is currently assessing BPC’s application and it will publish its outcome after concluding consultations with stakeholders.
This is how BPC motivates for another tariff hike in its latest application to BERA: “The projected tariff increase of 5 percent in the 2022/23 financial year provides the required revenue of P6.155 billion. The P6.155 billion is made up of return on Regulated Asset Base and Total Expenses of P1.437 billion and P4.718 billion respectively.”
It adds that the consumer tariff subsidy from the government will be P500 million and says it “undertook an assessment of the required revenue for the financial year 2022/23 in line with BERA prescribed methodology”. It requires money in these quanta, it says, in order to meet its operating, maintenance and financing costs. The 5 percent electricity tariff increase should be across all customer categories.
“The required 2023/24 projected sales revenue is P4.592 billion which translates into revenue growth rate of 11 percent compared to the 2021/22 financial year,” BPC says in its application to BERA. “The 11 percent revenue growth rate is made up of 5 percent and 6 percent for tariff increase and average energy consumption growth respectively.” It notes that the total cost of rendering its service constitutes all costs related to generation, transmission and distribution of electricity to the consumers.
However, it says it expects to continue recording under-recovery of costs for every unit of electricity sold until financial year 2023/24. Because of this revenue shortfall, it notes, there is need for the Corporation to continue receiving P500 million yearly tariff support from the Government of Botswana in the same period. “This financial support is meant to cushion the customers from sudden increases in electricity tariffs,” BPC argues.
The utility blames its recurring precarious financial position mainly on “non-cost reflective tariffs, low availability of Morupule B Power Station and the increasing cost of imported power”. It refers to the cushioning effect of the government subsidy but says it has significantly reduced over the last five years without matching electricity tariff increases.
“Therefore, the tariff proposal for the financial year 2022/23 is based on the yearly determination of the required revenue to meet the operating, maintenance and financing costs of the Corporation,” it argues in its application to BERA in which it says it has also considered future energy demands, especially from Large Power Users such as mines. “The need for sufficient revenues is also supported by Section 17 of BPC Act (CAP 74:01), which requires it to conduct its affairs on sound commercial lines and to produce a net operating income by which a reasonable return can be measured,” it says.
Regarding refurbishment of its infrastructure, BPC says, it was constrained to dedicate sufficient money to its capital expenditure plans due to its strained cash position in prior years. It therefore requires a healthy liquidity position to undertake long overdue refurbishment of its transmission and distribution infrastructure. “The commitment of the Corporation is to undertake a robust preventative maintenance plan to improve service delivery and it would be financed by cash from operations,” it says.