Consumers to pay more for electricityOn the back of elevated commodity prices and a depressed economic environment caused by the Covid-19 pandemic, consumers will face an increase in electricity tariffs, the Electricity Control Board (ECB) announced last week.
The adjustment comes after NamPower submitted a tariff application for an effective bulk tariff increase of 12.78%, which would have resulted in an increase from an average N$1.6982 per kilowatt-hour (kWh) to N$1.9153 per kilowatt-hour for the financial period 2022/2023.
To ensure that utilities charge appropriate tariffs to collect enough revenue to provide reliable and efficient services at affordable cost-effective rates, the ECB resolved to increase the average bulk tariff by 7.30%.
The increase moves the current approved tariff of N$1.6982 per kilowatt-hour to N$1.8222 per kilowatt-hour for the financial period 2022/2023, effective from 1 July 2022. During the financial period 2021/2022, the tariff increased by 2.29%.
According to ECB acting CEO Rachel Boois, the tariff will be applicable to NamPower bulk customers such as regional electricity distributors (REDs), local authorities and regional councils.
However, these distributors will have to individually apply to the ECB for a review of their tariffs, which will be applicable to the end consumers when approved.
To mitigate the impact of the increase on consumers, the Ministry of Mines and Energy through the National Energy Fund (NEF) allocated N$100 million to NamPower in consultation with the ECB, Boois said.
Over the years, the tariff included an amount for Long Run Marginal Cost (LRMC) purposes. The Long Run Marginal Cost is intended to ensure a smooth tariff path for the future, especially when NamPower is experiencing cash-flow challenges due to expensive power supply options or building new power plants.
The LRMC funds may be used to cushion customers from unexpected tariff hikes or in situations when the economy is depressed and or to build new power plants that will ensure an affordable projected tariff path.
For the past two years, a total amount of N$85 million was made available to mitigate the impact of the tariff increase on consumers and the economy, Boois said.
In 2020, N$500 million was allocated from the Long Run Marginal Cost Fund to partially fund the construction of NamPower renewable energy plants. An amount of N$342 million was allocated to the 20MW Solar PV plant at Omburu, she pointed out.
The remaining amount of N$158 million will be used for part funding of the 40MW NamPower-owned wind plant to be procured soon.
“The ECB is pleased to inform the public that the construction of the NamPower Omburu Solar PV plant is completed and the plant was commissioned end of March 2022. Since the plant was customer funded, and only minimal operational costs are recoverable through the approved tariff, the NamPower Omburu Solar PV plant is currently the cheapest source of electricity in our energy mix, thus contributing to a reduction in the tariff increase,” Boois said.