Industry wants USD power tariff linked to forex income

The Confederation of Zimbabwe Industries (CZI) says US dollar electricity billing should be matched to the proportion of foreign currency sales given that businesses have different mixes of local currency and forex earnings.

This comes after the Zimbabwe Electricity Transmission and Distribution Company (ZETDC) announced a new US dollar power tariff of US12,21c/kWh for all exporters while other foreign currency earners would be billed at an average tariff of US10,63c/kWh.

Previously, most customers paid in Zimbabwe dollars, under a stepped billing system where users paid tariffs in line with the amount of electricity consumed while only a few exporters/partial exporters, including miners, paid in forex.

The industrial lobby said ZETDC’s tariff for exporters was way above the regional average of US11,7c/kWh, as per data from the Southern African Power Pool (SAPP), adding at this level the new tariff priced out Zimbabwe’s value-added exports.

Companies were also being levied different power tariffs, CZI said, for different times of off-peak consumption, which resulted in an effective tariff rate of US13,4c/kWh.

“Additionally, the computation of the MD (Maximum Demand) charge of US$5,71 per unit kilowatt, which most industrial users incur adds to the cost of production,” the business lobby group said.

Further, CZI said ZETDC indicated that the new tariff regime would be backdated to October 1, 2022 for Maximum Demand (MD) customers and October 14, 2022 for the rest of the consumers.

The industrial businesses lobby group said selected businesses that were non-exporters have been receiving bills that are in 100 percent foreign currency regardless of foreign currency sales, export levels and other considerations.

“It is key that ZETDC bills be matched to local versus forex sales rations as the Zimbabwean dollar is legal tender and refusing to accept it from customers is illegal under SI 127 and other regulations.

“Similarly, the auction rate should be used as the reference point in terms of conversion to local currency in bill payment as is the case on product pricing,” CZI said in its position paper on new ZETDC tariffs and 100 percent USD billing.

According to ZETDC, the new tariffs are meant to improve the power supply situation and speed up the resolution of faults.

“However, the power supply situation in the country remains erratic to a level where some consumers are experiencing an average of 10-12 power cuts daily while others go for days without power and before faults are resolved.”

CZI said the settlement of electricity bills in foreign currency should take into account foreign currency retention levels for exporters and local deposits, meaning, the electricity bills should be settled off the retained earnings.

“Currently, consumers must find supplementary foreign currency to settle bills in foreign currency. The current level of retained forex is acting as indirect taxes on businesses due to the misalignment between the formal and the widely quoted market exchange rates used to source supplies,” CZI said.

The industry representative body said in order to create a level playing field and fairness, consumers should be treated the same on effective tariffs, billing and payment modalities, unless a special dispensation is warranted for national cause.

CZI said there were concerns that a high US dollar power tariff would not result in improved power generation or importation of more power to plug the supply deficit.

“Businesses have found it hard to structure production shifts, open doors, procure alternative energy on time and plan on raw materials stocking due to the intermittent nature of the power cuts.

“ZETDC should do more to communicate schedules for the power cuts on time to allow for planning and allocation of resources,” read part of the position paper.

According to CZI, the cost of production has shot through the roof with most producers running on diesel-powered generator sets which require significant forex outlay.

It said capacity utilisation in the sector has dropped as most businesses cannot operate on the usual number of shifts due to power cuts, meaning that productivity no longer matches fixed costs of running plant and machinery.

“Significant time is lost when there is no power during daytime. This also takes into consideration the fact that generators cannot be run continuously without rest,” CZI said.

CZI said producers were struggling to meet supply deadlines for the local and export markets, which posed a threat to well-developed export markets and foreign currency earnings.

However, ZETDC Commercial service director engineer Gift Ndlovu told a virtual engagement meeting with the CZI that the challenge with the electricity supply was infrastructure, with 80 percent of ZETDC’s infrastructure requiring overhaul.

“We need to overhaul it to improve the integrity so that we can at least get to a better level that is acceptable.

“We have had decades of grid non-maintenance owing to the sub-economic tariff that we have had for the past decade,” he said.

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