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LEC explains tariff review application

Bereng Mpaki

THE Lesotho Electricity Company (LEC) is proposing a 23.6 percent tariff increase in electricity to cover its overall costs of supplying power to the nation.

The proposed tariff increase comes despite a significant reduction in the cost of acquiring power from Mozambique.

Earlier this month, the power utility announced it had renegotiated a new power purchasing deal with Electricidade de Mocambique (EDM) of Mozambique to purchase electricity at the rate of M0.89 cents per unit, down from M1.42 as per the previous contract.

Following this negotiation, LEC is now saving at least M0.53 for every unit of power it purchases from EDM.

LEC buys 35 megawatts (MW) from Mozambique, which accounts for about 22 percent of LEC’s estimated total demand of 156 MW. LEC also buys 72 MW of power from ‘Muela Hydropower station and 49 MW from Eskom in South Africa.

However, LEC has still lodged a tariff review application with regulator, Lesotho Electricity and Water Authority (LEWA), for a tariff increase of 23.6 percent for a revenue requirement of M1.04 billion for the 2018/19 financial year.

In their application, LEC stated that costs of importing bulk electricity supply from Eskom in South Africa and EDM in Mozambique will grow. It further indicated that its operational and depreciation costs are on the increase.

In an interview with the Sunday Express, the LEC General Manager responsible for Engineering, Tankiso Motšoikha said the decrease from Mozambique would not be sufficient to cover the company’s planned costs for the upcoming financial year.

“We are going to need financial resources to maintain the network, which is very old for the coming financial year, and as it is, the Mozambique deal will not cover that,” Mr Motsoikha said. LEC has requested M64 million for maintenance of its infrastructure in the 2018/19 financial year.

After requesting a 16.9 percent increase for the 2017/18 financial, LEC was given a 3.6 percent tariff increase.

In a separate interview, General Manager Corporate Services Bernard Masoabi explained that one of the issues that warranted a tariff review include inflation, which increases the company’s operating costs.

“The Mozambique deal brings a positive prospect of reduction in bulk electricity costs. But it does not mean that our other operational costs remain the same year-on-year, mainly due to inflation,” he said.

“The costs associated with distributing electricity to the consumers do not only end with importation but also operational costs which do not depend on the changes in cost of bulk purchases,” Mr Masoabi said.

Addressing a second annual stakeholder meeting held in Maseru last Friday, LEC’s Transmission and Distribution Manager, Monica Moeko said LEC requires more funds to maintain its network to reduce unplanned power cuts.

The institution had requested about M45 million towards maintenance in the current financial year ending in March 2018, they were however only allowed M16 million.

This resulted in more power cuts than the previous year as the LEC were unable to replace the old equipment, Ms Moeko said.

“Given the challenge of climate change, we need to be more aggressive to cope with the challenges it brings. To mitigate the effects, we need more financial support. Last year we were given way less money than we had requested and that led to more unplanned outages because we could not replace the old equipment,” Ms Moeko said.

Commenting on the proposed electricity tariff increase, the chairperson of the Majalefa Development Movement, Ramahooana Matlosa said considering a drop in the cost of electricity imported from Mozambique, there was no need to increase the local rate.

“LEC claims that, the costs of importing bulk electricity supply from EDM of Mozambique and ESKOM of South Africa will grow. I guess they are saying we will import more units this year, but they choose to ignore the fact that we will be buying a unit at a lower price compared to last year.

“Since we are getting electricity at a cheaper rate, compared to last year, the cost of electricity should remain at the same rate or the cost should be reduced,” Mr Matlosa said.

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