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Consumers squeezed as power tariffs go up

’Mantoetse Maama

MASERU — Starting today, consumers will have to dig deeper into their pockets to pay for electricity.

The Lesotho Electricity Authority (LEA), which regulates the power industry, has allowed the Lesotho Electricity Company (LEC) to hike electricity charges by 17 percent, a move that increases pressure on consumers who are already grappling with high food and fuel prices.

Hard-hit by the economic recession, most businesses have not been able to significantly review wages.

In many instances some companies have cut jobs or kept wages at last year’s levels to remain viable.

The tariff increase is way over the annual inflation rate which is just over three percent and is used by most businesses to review wages.

Few companies have awarded wage increases above the inflation rate. This means a 17 percent tariff increase will only make workers poorer.

With Lesotho’s unemployment rate running at 45 percent, jobs have become increasingly hard to come by.

The LEC had applied for a 24 percent tariff increase arguing that its power suppliers from South Africa and Mozambique have regularly reviewed their prices.

But speaking at a press conference on Thursday, LEA board chairman, Zola Tsotsi, said they had settled for a 17 percent increase after considering input from the general public and business representatives.

“The approved tariff will be effective from May 1,” Tsotsi said.

Under the new tariffs domestic power consumers will now pay M0.881685 per kWh (kilowatt) up from M0.75516 per kWh. A kilowatt-hour is reached when you use 1 000 watts for one hour.

This new charge means that consumers will pay about 13 cents more per kWh.

While this might look like a small increase the figure is actually quite huge in real terms.

In simple terms a household that was using M100 worth of power per month will now have to fork out M117 for the same amount of power.

And that’s no small change in a country where the majority of the breadwinners are textile workers who earn a minimum wage of M916 per month.

With winter approaching many households will have to spend more on electricity to keep warm.

The LEC said it requires these funds to cover increased bulk supply purchases from South Africa and Mozambique.

Part of the funds would also go towards operational costs owing to increases in connections and sales in the country and inflation, the company said in its application for a review to the LEA.

Tsotsi said the LEC used maximum demand value reached in November 2010 when estimating the transmission network and distribution network access charges, the period when ’Muela was not generating any power.

The Authority then used the difference of the forecasted maximum demand and the capacity of ’Muela to estimate bulk supply purchases.

Although people in rural areas will not be directly affected by the tariff reviews because they are less reliant on electricity, they too will have to brace themselves for the increases that business will effect on their goods and services to cover the new charges.

Manufacturers and retailers normally pass on power costs to consumers.

There is a strong possibility that basic groceries and services might become more expensive as a result of the tariff increases.

Businesses interviewed by the Sunday Express on Friday said they will have to increase their prices to cover the new power tariffs.

They said the electricity tariff hike was coming at a bad time when the price of fuel had been increased over the past year.

The executive director of S & M Bakery, Thato Kao, said they would have to increase the price of their products.  

“When looking at the fact that the price of petrol has just been increased and now electricity, this means we will also have to do the same to remain viable,” he said.  

Sam Rapapa, an economist from Sammy David Partnership, a consultancy firm,
said the new electricity tariff increment would increase
the cost of running businesses, which would be passed
on to consumers.

“This increased cost of doing business might force some businesses to retrench employees. Property owners might also increase their rentals,” said Rapapa who is also the secretary general of the All Basotho Convention party.

Another economist from Business Development Trust, Semethe Raleche, said the increment would put an additional burden on many people’s incomes. “Many people are already struggling because they do not earn high salaries. Now an additional cost on electricity will only worsen their situation,” he said.

On the other hand, Raleche added, people also needed to understand that LEC had to increase its power tariffs to remain viable and offer good service.

The local textile industry, which employs nearly 35 000 people and is the country’s biggest employer after government, is already facing competition from other countries on the global market and such increases could have a negative impact on their performance, he added.

During a consultative meeting recently, Lesotho Textile Exporters’ Association representative Lin Chin-yi told LEA that the increase is coming at a time when the textile industry is already battling to contain costs to remain viable.

“We say this after considering that we lost three factories last year and in the process we lost about 2 400 workers,” he said.

A member of the Consumer Protection Association, Khoabane Khalema, had suggested a 10 percent increase on tariffs for domestic consumers.

“This suggestion is made after considering that it is not easy for members of the public to raise sufficient funds to pay for electricity,” Khalema said.

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