After analysing and reviewing NamPower’s application for a 13.2 percent bulk tariff increase, the Electricity Control Board (ECB) yesterday granted the national power utility a 9.53 percent tariff increase.
“This would suffice for NamPower to cover its allowed operating costs, keep the lights on and fulfil its financial obligations,” stated ECB’s Chief Executive Officer, Foibe Namene, when she announced the electricity tariff increase.
This approved bulk tariff increase, which comes into effect on July 1, 2015, means an effective increase from the current N$1.17kWh to N$ 1.28 per kWh.
In its application to the ECB, NamPower requested for an effective bulk tariff increase of 13.2 percent, which would have resulted in an increase from N$1.17 to N$1.32 per kWh (inclusive of generation and transmission) for the financial period 2015/2016.
The utility requested this percentage to meet its service-delivery costs and for the tariff to remain cost-reflective. NamPower reportedly made the request to cover incremental costs of electricity supply from imports and local generating thermal power stations, including the Van Eck, Paratus and Anixas.
According to Namene, the requested tariff increase makes provision for the year-on-year revenue requirement of NamPower, taking only actual costs and losses into account.
“Tariff increases mean a rise in the cost of living and production, and have a potential to jeopardise job creation and poverty alleviation. It is therefore important that the ECB, as the regulator, takes a long-term view and ensures that its decisions are made on the backdrop of tough conditions prevailing in the economy at all times,” noted Namene.
She added that in the ECB’s view, the increase is well suited for Namibia to remain regionally competitive and is indeed cost-reflective.
The ECB CEO explained that the tariff application review process included, among others, an analysis of cost-plus tariff methodology rules and policies; provisions of relevant documentations such as the White Paper on Energy Policy of 1998 and the National Integrated Resource Plan 2013 and Cabinet’s decision, which resolved that NamPower tariffs should reach and remain cost-reflective by the financial period 2010/2011.
This decision was revised in 2009 and the agreed target date for reaching cost reflectivity was the financial period 2011/2012.
“In terms of this Cabinet decision, the ECB has been granting NamPower real tariff increases from 2005 onwards to ensure that cost-reflective tariff levels were reached by 2011/2012 and subsequently sustained beyond that period,” remarked Namene.
The review process also took into account expectations of key stakeholders, including government, and the possible tariff impact on the consumers and the Namibian economy; the need to create and maintain a conducive environment to attract investment in the energy sector and to stimulate economic growth; the need for NamPower to sustain its operations and service delivery in the short, medium and long-term as well as the challenge posed by volatile import electricity prices and the impact of these on cost reflectivity.
Namibia remains a net importer of electricity, importing as much as 70 percent of its requirements from the region depending on the availability of water at the Ruacana Power Station.
“The substantial shortage of energy in the southern Africa region at this stage is putting pressure on energy tariffs not only in Namibia but in all of the countries in the SADC (Southern African Development Community) region. This situation will prevail until enough new generation capacity has been built,” noted Namene.
She continued that electricity tariffs in Namibia, just like in most SADC countries, would continue to rise until enough generation capacity is available.