THE Lesotho Electricity Company (LEC) has scored a major coup which will see it continue importing electricity from Mozambique after successfully negotiating a reduction in power rates with Mozambican power utility, Electricidade de Mocambique (EDM).
The new price of M0.89 per unit as opposed to the previous cost of M1.42 is even cheaper than imports from neighbouring South Africa which are pegged at M0, 98 per unit.
This follows the recent signing of a re-negotiated bulk power purchasing deal in Maputo, Mozambique two weeks ago.
Lesotho has a local generation of power of 72 megawatts (MW) through the ‘Muela Hydropower Station and it augments its increasing power 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 were expected to increase by at least M6 million.
At the previous M1.42 per unit, the unit cost of buying electricity from Mozambique was higher than that of buying from South Africa which is currently at M0.94 per unit.
It was against this background that LEC informed their Mozambican counterparts last October that come December 2017, they would not be renewing the deal to import power from Mozambique and they would look elsewhere instead.
LEC Managing Director, Tankiso Mot?oikha, subsequently held a press conference in Maseru in October 2017 to inform the nation that they would not renew the contract and they had resolved to look elsewhere.
“The costs of importing electricity are very high especially from Mozambique therefore we have already told them we will not be renewing the contract as the plan is to reduce costs,” Mr Mot?oikha said at the time.
“We will continue sourcing from Eskom and we will join the Southern African Power Pool in January. The power pool enables Southern African countries with excess electricity to invite bids from other countries in the pool to bid for power, and this is a cheaper alternative.
“The ultimate plan is to have our own generation which can supply the whole country. LHDA is currently doing a feasibility study on which of their dams we can construct another hydro-power station and this study is also expected to end in December this year after which we will then know the costs and place to build power generators.”
However, LEC has since had a change of heart after EDM agreed to reduce their charges to M0.89 from M1.42 per unit.
“The LEC struck a new deal with Electricidade de Mocambique (EDM) on bulk purchases of electricity, during a meeting in Maputo, Mozambique on 2 February 2018,” LEC Public Relations Manager, Phumla Moleko, recently told the Sunday Express.
Ms Moleko further said that LEC will purchase electricity at the rate of M0.89 as opposed to the previous cost of M1.42 per unit. The new negotiated price is also below the rate that LEC currently purchases electricity from Eskom in South Africa at M0.98 per unit.
“This is the lowest rate at which EDM has ever sold electricity to LEC since the bilateral agreement was initiated in 2008. At this new rate therefore, LEC will continue to purchase electricity from EDM until December 2018, when the contract will be reviewed and re-negotiated between the two parties.”
In response to whether or not the new deal will see electricity tariffs remaining unchanged for consumers, Ms Moleko said while tariff hikes were still expected, they would not be as high as they would have been had the power utility continued to import power in terms of its previous contract with EDM.
“We should be cognisant of the fact that LEC currently has three sources of power being LHDA, Eskom and EDM. So, when one of the suppliers lowers their rates, it goes without saying that any adjustment on the price of electricity will not be as high as when that rate was the same,” she said.
According to media reports in Mozambique, EDM will earn US$7 million from the new deal.