By Professor Betchani Tchereni, Economic Expert
It is a fact that ESCOM, PML and EGENCO are also Malawian economic agents in their own right. They too are facing the economic hardships that we are all facing.
The devaluation has also affected them just like all of us. There is therefore some semblance of a justification for the tariff adjustment. But wait a minute…
One of the reasons being advanced is cost recovery. When I look at that, I start to see what constitutes these costs. There are big cars, fuel, school fees, etc. To it you can add things like the cost of poor service delivery. And then comes PML, a Company which also need overheads, big cars etc for everyone.
Apart from creating jobs for some cronies there, what else is this company adding in value apart from simply increasing the costs of production which need to be recovered thereby making the requested tariff high?
The calculation of the loss too might have to be revisited. Suppose these electricity companies were generating enough electricity for all of us, wouldn’t that have given them a much more economies of scale position for them to not really bother or worry about such a huge tariff adjustment?
Psychologically, the companies are hoping for an adjustment but not up to 99%, obviously. The costs to be recovered in this case are actually costs for administration more than the actual cost of transmitting and supplying the electricity.
My recommendation therefore is for MERA to:
1. Do an analysis of what the adjustment may be if PML costs are removed from the equation
2. Have ESCOM and its allies show a cost reduction plan which I believe they have not shown
3. Have EGENCO properly outlining the generation expansion drive without which the costs will remain high for all the companies.
On this basis, it is my considered view that the tariff may have to be adjusted yes, but not by 99%. That is not justifiable.
