Botswana Power Corporation’s (BPC) proposal to hike its tariffs by 5 percent in the next financial year has been rejected by various stakeholders.
The state-owned power utility had applied to the regulator, Botswana Energy Regulatory Authority (BERA), to hike its tariffs effective 1st of April 2023. With no increase implemented in the current financial year, BPC wants to increase tariff in the coming financial year in order to raise P4.9 billion in revenue. This amount will include a P300 million government subvention. Some of the reasons provided by BPC to necessitate the hike including recurring financial losses caused by non-cost reflective, low availability of Morupule B power plant.
In a bid to bring stakeholders on board, including the public, BERA this past week held a public hearing on the proposed tariff hike by the BPC. Presenting his case, BPC Chief Executive Officer, David Kgoboko stated that their proposal is part of a migration to a cost-reflective tariffs. “BPC tariffs remain non-cost reflective, moreover, government subsidies have reduced over the years,” stated Kgoboko, adding that their operations are also costly in maintenance.
“Tariff increase is a very sensitive issue which affects many lives of the public, and it has to be noted that BPC is not immune to rising inflation. However, annual tariff reviews are necessary to improve generation of power.” Adding on what was said by his superior, BPC’s Chief Financial Officer (CFO), Oaitse Ramasedi said the power utility is at the moment making losses, hence not paying taxes to the government. He explained that a 5 percent hike was a compromise decision as under normal circumstances, BPC would be requesting for a 20 percent hike.
“We should be getting a revenue of P6.3 billion from 20 percent increase, but now we are asking for a 5 percent increase which will get us P4.9 billion in revenue.” He adds: “We need to have a positive cash flow to continue servicing our customers. Currently, we have strained liquidity.” Speaking on behalf of the consumers, Richard Harriman of Consumers Watchdog implored BERA not to approve BPC’s request. “My plea is that, can we focus on protecting the poorest section of the community. My appeal is that, can we have no change at all for the lower band who can least afford an increase, maybe BPC can increase for those that can afford because it has the data,” pleaded Harriman.
He also implored BPC to lobby the government to make solar energy equipment VAT zero-rated so as to increase uptake of renewable energy. Khoemacau Copper Mining Executive Director, Boikobo Paya said they do not support the 5 percent increase. “We came in through in June 2021 and spent P200 million to connect the mine to the BPC grid, and with that, we allowed P150 million in annual revenue to BPC,” revealed Paya.
While commodity prices had recently started to show signs of recovery, Paya noted that copper has recently experienced a plunge in prices, saying the situation is made worse by the threat of recession. “So, we should be careful that we actually don’t kill a goose that lays a golden egg.” Paya added that BPC has shared with them that the power utility has seen an improvement in power generation, and therefore called for the rejection of its proposal. “Our argument is that the 5 percent is coming at the wrong time. The world economy is on the verge of a crippling recession, the cost of living is skyrocketing and our economy is not spared.”
Meanwhile, Business Botswana Director, Dichaba Molobe noted that the increase in tariff will drive BPC to be profitable, hence it is necessary. “The issue right now is the quantum increase, we should maybe look at 4 percent. Our take is that we should not come up with an increase that spikes inflation.” BPC’s request for a tariff increase comes after it said it has improved local power generation capacity with both Morupule A and B operating to full capacity in the last three months.
The corporation said it was, therefore, able to meet for power supply during off-peak periods and was to export surplus power to the region. It further said it has started negotiations with Eskom to purchase the excess electricity supply generated during off-peak times in order to protect its plants against load management fluctuations. BERA is expected to make a decision of BPC’s application on tariff increase before April next year.