Namibia: Approved 2.5% bulk electricity tariff decrease unlikely to benefit consumers
Following an application from the national power utility, NamPower, the Electricity Control Board (ECB) approved a 2.5 percent tariff decrease, translating into an effective bulk tariff decrease from N$1.69 to N$ 1.65 per kilowatt-hour. However, the ECB has projected that consumer tariffs should remain at current levels based on inflationary impact as well as adjustments to distribution costs.
The approved tariff decrease, which is effective from July 1, 2019, is applicable to NamPower’s bulk customers such as regional electricity distributors (REDs), local authorities, regional councils and mines. According to ECB’s chief executive officer, Foibe Namene, distributors will now individually apply to the ECB for the review of their tariffs, which when approved will be applicable to end consumers. Namene noted that NamPower’s 2.5 percent tariff decrease will be taken into consideration.
“Considering the approved bulk tariff decrease, inflation related impact and adjustments on distribution costs of distributors to distribute electricity to end users, it is projected that end consumer tariffs should on average remain as is. Actual changes to end user tariffs will be based on individual distributors’ tariff application and the review by the regulator. It should be noted that should there be no bulk tariff decrease, end user tariffs would have at least increased by inflation, therefore the bulk tariff decrease absorbed the necessary inflationary adjustments for the period 2019/2020,” read Namene’s statement.
ECB’s Board of Directors met on April 17 to deliberate on recommendations presented following a review of NamPower’s bulk tariff application for the period 2019/2020. In accordance with the existing legal provisions, NamPower made a tariff application for an effective bulk tariff (inclusive of generation and transmission) decrease of 3.11 percent, a decrease from an average N$1.69 per kilowatt-hour to N$1.64 per kilowatt-hour.
Annual electricity tariff reviews are conducted to ensure that utilities charge appropriate tariffs to collect sufficient revenue to enable reliable and efficient operations at affordable rates.
Said Namene: “As part of the review process, at a stakeholder meeting, NamPower made a presentation of its application to the different stakeholders. The stakeholders were requested to present their views, facts, and evidence on the tariff application. Submitted comments were considered in the decision-making process leading to the tariff approval.”
In determining the tariff change, the ECB considered a number of factors including; the impact of the tariff change on the electricity supply industry, the economy at large and the consumers, amongst other stakeholders, which Namene said is the norm whether such application is for an increase or decrease.
“In 2015, Namibia and the Southern Africa region experienced a shortage of electricity that led to NamPower having to procure more expensive power in order to secure a constant supply of electricity to Namibian customers. This state of events led to an under-recovery amount incurred between 2015 and 2017. The under-recovery amount was provided in the tariff by the ECB over a three-year period (2016, 2017 and 2018). Since the under-recovery amount for the mentioned period is now fully recovered, a tariff decrease is necessary to ensure that NamPower does not over-recover on the tariff for 2019/2020 and that the tariff remains cost reflective as directed by Cabinet,” Namene explained.
The ECB chief executive officer added that the 2.5 percent tariff decrease would enable NamPower to recover its allowed operating costs and ultimately fulfil its financial obligations, including payments to the local independent power producers.
Namene added that for a smooth tariff integration of new generation capacity as per the National Integrated Resource Plan, it is envisaged that the bulk tariff will increase with an average of five percent for the next five years, more or less in line with inflation. However, she noted that external factors such as impact of weather conditions, foreign exchange fluctuations and other unforeseen circumstances have an impact on the future tariff outlook.
“The Electricity Control Board and the electricity supply industry are constantly looking for means and mechanisms to reduce tariffs and make electricity more affordable. We are cognisant of the fact that the economy is highly dependent on reliable and affordable electricity supply. It is, therefore, the responsibility of the regulator to ensure a sustainable electricity industry at affordable tariffs,” Namene concluded.