Zimbabwe energy crisis to get worse

By Staff reporter | 01 Jun 2019 at 22:30hrs
ENERGY and Power Development minister Fortune Chasi has painted a bleak future for the country's energy sector, which is blighted by shortages of electricity and fuel. Chasi told Parliament on Thursday that power utility, Zesa Holdings was bleeding due to sub-economic prices.

Zesa has been unable to effect a viable tariff increase because energy regulator, the Zimbabwe Energy Regulatory Authority, is worried about the domino effects on industry, commerce and households. The new Energy minister said the electricity distribution arm of the power utility, the Zimbabwe Electricity Transmission and Distribution Company (Zetdc) is headed for trouble because of uneconomic tariffs.

He said the Zesa subsidiary is recording a deficit of more than RTGS$60 million every month. "With the current tariff, Zetdc is collecting between RTGS$60 and RTGS$70 million against a monthly budget of RTGS$130 million to cover the bare essentials. Zesa is technically insolvent and I am sure members are fully aware of this. It is struggling to fully fund operations.

"The severe cash flow crisis being experienced would see operations grinding to a halt in the not too distant future, unless support is rendered as the funding gap increases every month cumulatively, as people fail or decide not to pay the bills," said Chasi. He said the price of critical generation consumables has increased by 250 percent, adding that coal suppliers are also agitating for a price review.

To cushion Zesa and its units, he suggested that these be exempted from paying import duty on diesel for power generation and importation of critical spares for the generation transmission and distribution networks.

The country is already in the throes of crippling electricity shortages with Zesa introducing 10-hour-long load shedding last month.
This is largely due to problems at Kariba Power Station where output has gone down due to low water levels in the Kariba Dam.
Within 14 weeks, Kariba will not be able to deliver power because its water levels are plummeting fast.

As of last week, the dam was 32 percent, and as of Monday, it had dropped to 29 percent. Hwange Power Station is also performing below its average due to its obsolete plant.  Zimbabwe's current average internal electricity generation is about 1200 megawatts (MW) against maxim demand of 1 700MW.

"This general comment is applicable to almost all the infrastructure that relates to the generation of electricity, which means that we must, in some instances, invest in maintenance and invest in new installations or renewable methods of coming up with power.

"The reduced power generation has resulted in load shedding in order to match power supply and demand. I want to emphasise that if we continue to consume at the rate that we are doing, if we continue to leave our houses with lights on all the time, government buildings with lights on all the time, things can only get worse," said Chasi.
To add to the current woes, thieves are also stealing Zesa's transformers.

At the moment, 2 000 transformers need replacement after thieves helped themselves to the infrastructure. To replace each transformer, Zesa will need to part with about US$50 000.

Regarding the shortages of fuel, Chasi predicted price increases.
Whereas in the past, fuel prices were influenced by changes on the international market, which changes were usually minimal, the new system adopted by the Reserve Bank of Zimbabwe (RBZ) now requires oil marketing companies to access their foreign currency on the interbank market where rates are fluctuating daily.

"Now the Interbank rate, at least up to the time it stabilises, will also be causing fuel price changes. Currently, the changes are upwards and more significant than the price changes caused by the international prices of fuel," he said. Chasi said to curtail the fluctuations in the short-term; the RBZ will hold the fuel exchange rate constant for two weeks.

He also revealed that the oil industry has accrued a huge debt for fuel supplied in the past. "This resulted in the oil companies being unable to extend further credit, preferring to be paid upfront. Given the foreign currency challenges that the country faces, it is proving difficult to pay upfront for enough fuel to meet demand, hence the establishment of Letters of Credit for current consumption," he said.



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