REGONAL MULTI-STAKEHOLDER
CONSULTATION ON “FINANCING
ACCESS TO UTILITIES FOR ALL”
ENSURING SUSTAINABLE ACCESS TO
ELECTRICITY FOR THE POOR THROUGH
INTERNAL REVENUE GENERATION
PRESENTATION BY MOSES E ZULU
DIRECTOR OF FINANCE, ZESCO
24 APRIL 2007
INTERCONTINENTAL HOTEL,
LUSAKA
PRESENTATION OUTLINE
•
•
•
•
•
•
•
•
•
WHO ARE THE POOR?
LOW NATIONAL ACCESS RATES
CAUSES
POSSIBLE SOLUTIONS
MINIMISING COST OF ELECTRICITY
RECOVERING COST OF OPERATIONS
NEED FOR SUBSIDIES
BEYOND COST RECOVERY
CONCLUSION
WHO ARE THE POOR?
• BY PER CAPITA INCOME
• BY RESIDENCE
– URBAN/RURAL
– HIGH COST/LOW COST RESIDENCE
• BY OTHER MEANS
NATIONAL ACCESS RATES
• DEFINITION OF ACCESS:-INDIVIDUAL CONNECTION
-ACCESS TO FACILITIES E.G. SCHOOLS, CLINICS,
CMMUNITY CENTRES WITH ELECTRICITY
• ELECTRIFICATION STANDARDS-INIHIBITION
TO ACCESS
– CANT ELECTRIFY THATCHED HOUSES
– MUD HOUSES
– ETC
ZAMBIA ACCESS RATES
• NATIONAL AVERAGE 23%
– URBAN 44%
– RURAL 2%
ACCES: WHY NOT 100%
• SIZE OF ZAMBIA 752,000 SQ. KM
• POPULATION DENSITY
– HIGHER COSTS PER CONNECTION $1000
– HIGHER COST FOR O&M
• LOW PER CAPITA INCOMES
– $300 UP TO 2005
– ROSE TO $800 BY END 2006
• POOR PAYING CULTURE
ZESCO GRID (66 – 330kV)
To Sumbuwanga
KAPUTA
8o
CHIENGI
MPULUNGU
KASHIKISHI
DR
CONGO
ZESCO
MPOROKOSO
NAKONDE
KABWELUME
(62MW)
NCHELENGE
MBERESHI
MBALA
LUNZUA
(0.75MW)
KUNDABWIKA
(101MW)
Kawambwa
Town
KALUNGWISHI RIVER
KAWAMBWA
TEA
CHISHIMBA FALLS
MAMBILIMA
ISOKA
KASAMA
Chambasitu
LUWINGU
MUSONDA FALLS
(5MW)
MUYOMBE
CHINSALI
MWINILUNGA
WEST LUNGA
at West Lunga River
(2.5MW)
MANSA
KANSANSHI
SAMFYA
MPIKA
MOMBUTUTA
SOLWEZI
LUMWANA
KABOMPO Gorge (Mine)
ANGOLA
CHAMA
MICHELO
LUANO
KANSUSWA
PENSUL
O
(34MW)
BWANA
MKUBWA
KITWE
CHAVUMA
MUFUMBWE
LUNDAZI
LUSIWASI
(12MW)
SERENJE
MAPOSA
CHIKATA FALLS
(3.5MW)
KASEMPA
ZAMBEZI
KAPIRI
MPOSHI
KABOMPO
MPONGWE
MFUE
LUSIWASI
EXTENSION
(40MW)
Mkushi
Mkushi Central
Mkushi
Farm Block
MSORO
LUNSEMFWA
(18MW)
CHIPATA
AZELE
KABWE
MULUNGUSHI
(20MW)
Luangwa
CHONGWE
Bridge
MUMBWA
ROMA
LUKULU
LUSAKA WEST
KAOMA
NAMPUNDWE
COV.
KALAB
O
MONGU
KAFUE WEST
MUZUMA
MOZAMBIQUE
LUANGWA
KAFUE GORGE
900MW(1080MW)
KARIBA NORTH
(600MW(750MW)
KARIBA NORTH
EXTENSION
(600MW(750MW)
ITEZHI – TEZHI
(120MW)
SHANGOMBO
LAKE KARIBA
KAFUE LOWER
(750MW)
CHIRUNDU
KATIMA
MULILO
SESHEKE
NAMIBIA
VICTORIA
FALLS
(108MW)
KATIMA
MULILO
BOTSWANA
EXISTING
POWER\SUBSTATIONS
AND POWER LINES
330kV
330kV
220kV
220kV
132kV
132kV
88kV
88kV
66kV
DEVILS GORGE
(800MW)
HYDRO POWERSTATION
SUBSTATION
18o
BATOKA GORGE
(800MW)
PROPOSED
POWER\SUBSTATIONS
AND POWER LINES
KARIBA SOUTH
MAAMBA
22o East
33.5o East
LEOPARDS HILL
KAFUE TOWN
MAZABUKA
SENANGA
PETAUKE
ZIMBABWE
DIESEL STATION
66kV
PROPOSED
HYDROPOWERSTATION
PROPOSED
SUBSTATION
PROPOSED
DIESEL STATION
POSSIBLE SOLTUIONS
• ACCELERATE NATIONAL DEVELOPMENT
– INCREASE PER CAPITA INCOMES
– DEVELOP PRO-POOR POLICIES
• ELECTRICITY KEY TO NATIONAL DEVELOPMENT
–
–
–
–
–
–
–
MOST BUSINESSES REQUIRE ELECTRICITY
MINING
AGRICULTURE
COMMERCIAL
INDUSTRIAL
TOURISM
SERVICES (EDUCATION, HOSPITAL, ETC)
• ELECTRICITY SUPPORTS ALL THESE BUSINESSES
AND SERVICES
– THUS SUPPORTING THE POOR
MINIMISING COST OF
ELECTRICITY
• NEEDS OF THE POOR
– FOOD, CLOTHING, EDUCATION, WORK,
HEALTH, ETC
– LIGHTING, COOKING, STUDY
_ INCOME GENERATING ACTIVITIES (SMALL
SCALE INDUSTRIES)
ALL SUPPORTED BY ELECTRICITY
RECOVERING COSTS
• CONNECTION COSTS
• OPERATIONS AND MAINTENANCE COSTS
– GENERATION, TRANSMISSION, DISTRIBUTION,
SUPPLY COSTS
– SYSTEM MAINTENANCE & STRENGTHENING
COSTS
• NEED TO RECOVER ALL COSTS
• QUALITY OF SERVICE DEPENDS ON COST
RECOVERY
• COST RECOVERY PLUS MARGIN
NECESSARY FOR NEW INVESTMENT
• OTHERWISE NO SYSTEM EXPANSION, NO
INCREASED ACCESS
RECOVERING COSTS
• NEED FOR APPROPRIATE TARIFFS
– DIESEL PLANT COST 27Cents/kWh
– TARIFF IS 3.1Cents/kWh
• CURRENT ZESCO TARIFFS BELOW COST
RECOVERY
– LOWEST IN THE REGION
• LOW TARIFFS DISCOURAGE INVESTMENTS
– RECOGNISED IN GRZ/ERB COST OF SERVICE
STUDY
– SOME PRIVATE SECTOR IPPs WANT TO SELL TO
ZESCO AT TARIFFS HIGHER THAN ZESCO
SELLING PRICE
COUNTRY
ANGOLA
BOTSWANA
KENYA
MALAWI
MOZAMBIQUE
NAMIBIA
SOUTH AFRICA
UGANDA
ZAMBIA
ZIMBABWE
REGIONAL ELECTRICITY PRICES
US$/KWH
DOMESTIC COMMERCIAL INDUSTRY
900KWH
5000 2500KVA@80%LF
0.059
0.042
0.033
0.070
0.068
0.047
0.104
0.105
0.068
0.034
0.060
0.039
0.165
0.160
0.053
0.090
0.089
0.069
0.063
0.051
0.025
0.119
0.116
0.035
0.031
0.048
0.034
0.010
0.044
0.060
RECOVERING COSTS
• LOOMING NATIONAL & REGIONAL DEFICIT
• HUGE INVESTMENTS IN GENERATION AND
TRANSMISSION REQUIRED
– REQUIRES SUPPORTING TARIFFS
• COST OF IMPORTS MUST BE RECOVERED –
REGULATOR’S SUPPORT NECESSARY
• LOANS FOR PRP & OTHER PRIOR SYSTEM
WORKS NOW BECOMING DUE
– LOAN REPAYMENT DIFFICULT WITHOUT COST
RECOVERY
– POOR PEOPLE WILL HAVE EVEN LESS ACCESS
INSTALLED CAPACITY vs ANNUAL
MAXIMUM DEMAND
60,000
50,000
INSTALLED
CAPACITY
MW
30,000
20,000
10,000
Rapid Load Growth
YEAR
2012
2010
2008
2006
2004
2002
2000
0
1998
MW
40,000
Available Capacity
NEED FOR SUBSIDIES
• DEVELOPED COUNTRIES HAVE SUBSIDIES TO
ELECTRICITY BY WAY OF:
– GRANTS OR TAX WAIVERS
– CONSUMPTION SUPPORT THRU WELFARE PAYMENTS
(FOOD, HOUSING, TRANSPORT, ELECTRICTY, ETC)
ZAMBIA DOES NOT HAVE WELFARE PAYOUTS
– ONLY LIFELINE TARIFFS
– ROLE OF RURAL ELECTRIFICATION AUTHORITY
• POSSIBILITY OF CROSS-SUBSIDIES
– ONE CUSTOMER CATEGORY PAYS MORE THAN ITS COST
OF SUPPLY TO SUPPORT ANOTHER CATEGORY WHICH IS
DISADVANTAGED
NEED FOR SUBSIDIES
• ROLE OF MINES & INDUSTRIAL CUSTOMERS
– CURRENT TARIFFS AVERAGE 2.1 CENTS
– REAL COST TARIFF 4.2 CENTS
– IF THEY GET COST REFLECTIVE TARIFFS
BENEFIT CAN GO TO POOR CUSTOMERS
• POSSIBILITY OF MULTI-YEAR
PROGRESSION TARIFFS
– HELPS CUSHION THE IMPACT ON POOR
CUSTOMERS
NEED FOR SUBSIDIES
• USE OF ELECTRICTY
– DEVELOPED COUNTRIES USE GAS FOR
COOKING
– RECOMMEND THAT ALL NEW HOUSES TO HAVE
SOLAR PANELS FOR HEATING
– DEVELOPED COUNTRIES HAVE LIFELINE UNITS
OF UP TO 50
– ZAMBIA’S LIFELINE TARIFFS CURRENTLY 300
UNITS
– SHOULD ADOPT LOWER UNITS AND RECOVER
FULL COST FROM NON-POOR
BEYOND COST RECOVERY
• ALLOCATING STATE REVENUES TO UTILITIES
– CURRENTLY THRU ELECTRIFICATION LEVY
– AMOUNTS RAISED NOT ENOUGH
• NEED FOR BUDGET SUPPORT
– JUST LIKE AGRICULTURE (CATLE RESTOKING, FARMERS’
PACK, ETC
– TOURISM DEVELOPENT FUND
– WITHOUT SUPPORT, ALL GOVERNMENT INVESTMENT IN
OTHER SECTORS MAY BE AFFECTED
• INTENSIFY PPP
– REQUIRES COST-REFLECTIVE TARIFFS
– OTHERWISE NO OFFTAKERS
BEYOND COST RECOVERY
• WHAT HAS KEPT PRIVATE SECTOR
AWAY FROM ELECTRICITY?
• DEAL WITH STRUCTURAL ISSUES
• DEAL WITH POLICY ISSUES
CONCLUSION
• NEED TO ACCELERATE RURAL
ELECTRIFICATION (60% OF POP.)
• ALSO NEED TO INCREASE ACCESS IN PERIURBAN AREAS
• FUNDING FROM INTERNAL RESOURCES
MEANS FULL COST RECOVERY
• GRZ SIGNIFICANT SUBSIDIES THRU REA
REQUIRED
• HUGE INVESTMENTS IN NEW GENERATION
SOURCES AND RETICULATION NEEDED
THANK YOU