Bereng Mpaki
LESOTHO must abandon its power purchasing agreement (PPA) with Mozambique and re-negotiate an improved deal with South Africa in order to reduce power costs that are burdening consumers, the Lesotho Chamber of Commerce and Industry (LCCI) has said.
Lesotho has a local generation of power of 72 megawatts (MW) through the ‘Muela Hydropower Station and it augments its increasing demand by importing more than 50 percent from South Africa (Eskom) and Mozambique (Electricidade De Moçambique).
At M432.7 million, the cost of importing additional power forms the largest component of Lesotho Electricity Company’s (LEC) total cost estimates for the 2017/18 financial year.
In the 2017/18 financial year, LEC’s electricity bulk purchases from Eskom and EDM are expected to increase by at least M6 million
And LEC is currently seeking to hike tariffs by 16.9 percent, a move it seeks to justify by claiming increased costs of importing power.
However, LCCI representative, Ntsie Maphathe said Lesotho could reduce the power cost burden on consumers by ditching Mozambique and negotiating a new agreement with South Africa.
Mr Maphathe said that at M1.34 per unit, the unit cost of buying electricity from Mozambique is higher than that of buying from South Africa which is currently at M0.94 per unit.
He said that South Africa was experiencing a power generation surplus and was looking to cash in by securing buyers.
“The termination of EDM/LEC power purchasing agreement is strongly recommended to avoid the unsustainable cost unit burden of M1.34 on LEC which in turn is passed through to consumers,” Mr Maphathe told the Lesotho Times this week.
“Currently Eskom has an excess capacity of around 5000MW at M0.94 per unit recently made available to the region and all LEC has to do is negotiate a better Power Purchase Agreement contract with Eskom on required import capacity in substitution of EDM supply.”
Lesotho entered into a deal with Mozambique when South Africa, its long term power supplier, was experiencing power shortages in 2008. At the time, power from Mozambique was also cheaper.
“Signing an agreement with Mozambique at the time made good business sense because their rates were lower than those of South Africa. But now their costs are higher as they are trying to recoup investments they injected in their new power generation projects.
“On the other hand we have a willing seller in South Africa who is looking for a buyer. I personally believe this is the right time to terminate the agreement we have with Mozambique and renegotiate with South Africa, which may even be open to a better deal,” Mr Maphathe said.
He added that it would not be difficult to terminate the contract with Mozambique as all that was required was the tendering of a six month notice beforehand.
