Business

Relief for electricity consumers

Bereng Mpaki

ELECTRICITY consumers will this year breathe a sigh of relief after the Lesotho Electricity and Water Authority (LEWA) dismissed an application for an annual tariff increase from Lesotho Electricity Company (LEC).

In its recent ruling, LEWA announced that it has disallowed the proposed 14, 2 percent electricity tariff increase as the LEC’s reasons for an increment were unconvincing.

LEWA has also reviewed downwards LEC’s proposed expenditure required to finance its 2019/20 financial year operations from M1, 075 billion to M901, 48 million.

The current charges for connection, wiring testing, wiring re-testing, survey, resurvey, licencing for wiring, metre testing and house extension will also remain unchanged.

In its 2019/20 tariff review application, the LEC requested an approval for an expenditure requirement of M1, 075 billion for the 2019/20 financial year, which would be met by a tariff increase of 14, 2 percent for both energy and maximum demand charges.

Among the various reasons cited for the tariff application, the LEC said it had to cover bulk electricity purchases costs (mostly imports); operating expenditure costs; return on assets; and depreciation costs.

Prior to making its ruling on LEC’s application, LEWA issued a public notice in both print and electronic media for stakeholders to provide comments. Six public hearings were also held across the country with stakeholders such as the Lesotho Textile Exporters Association (LTEA) and the Consumers Protection Association (CPA) making presentations before the Pricing and Tariffs Committee of the authority.

“The LEWA board, at its meeting on 18 April 2019 decided that LEC’s revenue requirement for the 2019/20 financial year will be M901, 48 million (instead of M1, 075 billion as requested by the Company),” LEWA board chairperson Relebohile Mosito said.

“There will be no tariff increase on the energy and maximum demand charges for all customer categories in 2019/20.

“The current charges for connection, wiring testing, wiring re-testing, survey, resurvey, licensing for wiring, meter testing and house extension remain unchanged for the 2019/20 financial year.

“There will be a two level block-increasing tariff with lifeline tariff for domestic customers, the first block is for consumers using between 0-30 units (kWh) which is priced at M0, 7273/kWh. The second block is for consumers consuming above 30 units (kWh) which is set at M 1, 4782/ kWh; and the new tariffs become effective from 01 May, 2019.”

Mr Mosito further indicated there were data gaps in the application received from LEC.

“Based on the facts and evidence presented to the authority by both the company and the public, the authority found the justification for a 14, 2 percent tariff increase on both energy and maximum demand (MD) charges not consistent with LEWA’s regulatory principles and guidelines.

“The authority took into consideration, among other things, that:

  • In order to meet its revenue requirement of M1, 075 billion, energy and maximum demand charges would need to increase by 17, 0654 percent;
  • The LEC’s revenue requirement for the 2019/20 financial year is M901, 48 million and in order to meet it, the tariff will decrease by -1, 9116 percent for both energy and maximum demand charges, without the introduction of lifeline tariff to cater for disadvantaged customers;
  • Introducing pro-poor tariff is in line with the energy policy approved in 2015 and it’s within the LEWA mandate to do so, the Lesotho Electricity Authority Act of 2002, as amended and LEA (Electricity Price Review and Structure) Regulations, 2009;
  • When introducing the lifeline tariffs, the LEC’s tariffs (for both energy and maximum demand charges) will not increase. The Company will still be able to recover its revenue requirement of M901, 48 million;
  • LEC’s operating expenses are set at M116, 44 million instead of M120, 98 million requested by the company;
  • LEC is allowed full depreciation charge of M109, 04 million in line with its proposal;
  • The company is allowed M432, 48 million for bulk supply cost. The company’s bulk supply costs are slightly inflated as they do not take into account energy from EDM resold to Eskom;
  • LEC needs to migrate from “Megaflex Tariff” to “Nightsave Urban large Tariff” as it is cheaper,” Mr Mosito noted.
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