regonal multi-stakeholder consultation on “financing access to utilities for all” ensuring...
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REGONAL MULTI-STAKEHOLDER CONSULTATION ON “FINANCING ACCESS TO UTILITIES FOR ALL”
ENSURING SUSTAINABLE ACCESS TO ELECTRICITY FOR THE POOR THROUGH
INTERNAL REVENUE GENERATION
PRESENTATION BY MOSES E ZULU
DIRECTOR OF FINANCE, ZESCO
24 APRIL 2007
INTERCONTINENTAL HOTEL, LUSAKA
PRESENTATION OUTLINE
• WHO ARE THE POOR?• LOW NATIONAL ACCESS RATES• CAUSES• POSSIBLE SOLUTIONS• MINIMISING COST OF ELECTRICITY• RECOVERING COST OF OPERATIONS• NEED FOR SUBSIDIES• BEYOND COST RECOVERY• CONCLUSION
WHO ARE THE POOR?
• BY PER CAPITA INCOME
• BY RESIDENCE– URBAN/RURAL– HIGH COST/LOW COST RESIDENCE
• BY OTHER MEANS
NATIONAL ACCESS RATES
• DEFINITION OF ACCESS:-
-INDIVIDUAL CONNECTION
-ACCESS TO FACILITIES E.G. SCHOOLS, CLINICS, CMMUNITY CENTRES WITH ELECTRICITY
• ELECTRIFICATION STANDARDS-INIHIBITION TO ACCESS– CANT ELECTRIFY THATCHED HOUSES– MUD HOUSES– ETC
ZAMBIA ACCESS RATES
• NATIONAL AVERAGE 23%– URBAN 44%– RURAL 2%
ACCES: WHY NOT 100%
• SIZE OF ZAMBIA 752,000 SQ. KM
• POPULATION DENSITY– HIGHER COSTS PER CONNECTION $1000– HIGHER COST FOR O&M
• LOW PER CAPITA INCOMES– $300 UP TO 2005– ROSE TO $800 BY END 2006
• POOR PAYING CULTURE
D R CONGO
TANZANIA
MA
LA
WI
MOZAMBIQUE
ZIMBABWE
NAKONDE
KASAMA ISOKA
CHINSALI
MPOROKOSO
LUWINGU
MPIKA
PENSULO
SERENJE
CHIPATA
CHIRUNDU
LEOPARDS HILL
KARIBA SOUTH
MUSONDA FALLS (5MW)
LUSIWASI(12MW)
MULUNGUSHI(20MW)
MSORO
LUNDAZI
MFUE
AZELELUNSEMFWA(18MW)
CHISHIMBA FALLS
LUNZUA(0.75MW)
MBALA
SAMFYA
KASHIKISHI
PETAUKE
MOMBUTUTA
CHIENGI
LUAPULA RIVER
To Sumbuwanga
KALUNGWISHI RIVER
MPULUNGU
NAMIBIABOTSWANA
ANGOLA
KALABO MONGU
SENANGA
SESHEKE
SOLWEZI
ITEZHI – TEZHI(120MW)
VICTORIA FALLS(108MW)
MUZUMA
MICHELO
LUANO
KITWE
MAPOSA
KANSUSWA
KABWE
KAPIRIMPOSHI
MPONGWE
LUSAKA WEST
KAFUE WEST KAFUE TOWN KAFUE LOWER(750MW)KAFUE GORGE
900MW(1080MW)
KARIBA NORTH(600MW(750MW)
LAKE KARIBA
MAZABUKA
MUMBWA
MANSA
MAMBILIMA
KA
FUE
RIV
ER
ZA
MB
EZ
I
RIV
ER
CHAMBESHI
RIVER
WEST LUNGA at West Lunga River(2.5MW)
KASEMPA CHIKATA FALLS (3.5MW)
MUFUMBWE
LUKULU
KAOMA
220kV
22o East
33.5o East
8o
18oKATIMAMULILO
ZAMBEZI
LUANGWA
132kV
88kV
66kV
330kV
EXISTING POWER\SUBSTATIONSAND POWER LINES
PROPOSED POWER\SUBSTATIONSAND POWER LINES
330kV
220kV
132kV
88kV
66kV
HYDRO POWERSTATION
SUBSTATION
DIESEL STATION
PROPOSED HYDROPOWERSTATION
PROPOSED SUBSTATION
PROPOSED DIESEL STATION
CHONGWE
CHAVUMA
KABOMPO
MWINILUNGA
KANSANSHI
LUMWANA (Mine)
KAPUTA
NCHELENGE
CHAMA
KUNDABWIKA (101MW)
KABWELUME (62MW)
KAWAMBWA TEA
MBERESHI
LUSIWASIEXTENSION(40MW)
KARIBA NORTHEXTENSION(600MW(750MW)
BATOKA GORGE(800MW)
DEVILS GORGE(800MW)
BWANA MKUBWA
ROMA
COV.
NAMPUNDWE
MAAMBA
KATIMAMULILO
KABOMPO Gorge(34MW)
LuangwaBridge
Mkushi
MkushiFarm Block
Mkushi Central
Kawambwa Town
Chambasitu
SHANGOMBO
MUYOMBE
ZESCO GRID (66 – 330kV)
ZESCO
POSSIBLE SOLTUIONS
• ACCELERATE NATIONAL DEVELOPMENT– INCREASE PER CAPITA INCOMES– DEVELOP PRO-POOR POLICIES
• ELECTRICITY KEY TO NATIONAL DEVELOPMENT– MOST BUSINESSES REQUIRE ELECTRICITY– MINING– AGRICULTURE– COMMERCIAL– INDUSTRIAL– TOURISM– SERVICES (EDUCATION, HOSPITAL, ETC)
• ELECTRICITY SUPPORTS ALL THESE BUSINESSES AND SERVICES– THUS SUPPORTING THE POOR
MINIMISING COST OF ELECTRICITY
• NEEDS OF THE POOR– FOOD, CLOTHING, EDUCATION, WORK,
HEALTH, ETC– LIGHTING, COOKING, STUDY
_ INCOME GENERATING ACTIVITIES (SMALL SCALE INDUSTRIES)
ALL SUPPORTED BY ELECTRICITY
RECOVERING COSTS
• CONNECTION COSTS• OPERATIONS AND MAINTENANCE COSTS
– GENERATION, TRANSMISSION, DISTRIBUTION, SUPPLY COSTS
– SYSTEM MAINTENANCE & STRENGTHENING COSTS
• NEED TO RECOVER ALL COSTS • QUALITY OF SERVICE DEPENDS ON COST
RECOVERY • COST RECOVERY PLUS MARGIN
NECESSARY FOR NEW INVESTMENT • OTHERWISE NO SYSTEM EXPANSION, NO
INCREASED ACCESS
RECOVERING COSTS
• NEED FOR APPROPRIATE TARIFFS– DIESEL PLANT COST 27Cents/kWh – TARIFF IS 3.1Cents/kWh
• CURRENT ZESCO TARIFFS BELOW COST RECOVERY– LOWEST IN THE REGION
• LOW TARIFFS DISCOURAGE INVESTMENTS– RECOGNISED IN GRZ/ERB COST OF SERVICE
STUDY– SOME PRIVATE SECTOR IPPs WANT TO SELL TO
ZESCO AT TARIFFS HIGHER THAN ZESCO SELLING PRICE
COUNTRY DOMESTIC COMMERCIAL INDUSTRY900KWH 5000 2500KVA@80%LF
ANGOLA 0.059 0.042 0.033BOTSWANA 0.070 0.068 0.047KENYA 0.104 0.105 0.068MALAWI 0.034 0.060 0.039MOZAMBIQUE 0.165 0.160 0.053NAMIBIA 0.090 0.089 0.069SOUTH AFRICA 0.063 0.051 0.025UGANDA 0.119 0.116 0.035ZAMBIA 0.031 0.048 0.034ZIMBABWE 0.010 0.044 0.060
REGIONAL ELECTRICITY PRICESUS$/KWH
RECOVERING COSTS
• LOOMING NATIONAL & REGIONAL DEFICIT• HUGE INVESTMENTS IN GENERATION AND
TRANSMISSION REQUIRED– REQUIRES SUPPORTING TARIFFS
• COST OF IMPORTS MUST BE RECOVERED –REGULATOR’S SUPPORT NECESSARY
• LOANS FOR PRP & OTHER PRIOR SYSTEM WORKS NOW BECOMING DUE– LOAN REPAYMENT DIFFICULT WITHOUT COST
RECOVERY– POOR PEOPLE WILL HAVE EVEN LESS ACCESS
INSTALLED CAPACITY vs ANNUAL MAXIMUM DEMAND
0
10,000
20,000
30,000
40,000
50,000
60,000
19
98
20
00
20
02
20
04
20
06
20
08
20
10
20
12
YEAR
MW
INSTALLEDCAPACITY
MW
Rapid Load Growth
Available Capacity
NEED FOR SUBSIDIES
• DEVELOPED COUNTRIES HAVE SUBSIDIES TO ELECTRICITY BY WAY OF:– GRANTS OR TAX WAIVERS– CONSUMPTION SUPPORT THRU WELFARE PAYMENTS
(FOOD, HOUSING, TRANSPORT, ELECTRICTY, ETC)
ZAMBIA DOES NOT HAVE WELFARE PAYOUTS– ONLY LIFELINE TARIFFS– ROLE OF RURAL ELECTRIFICATION AUTHORITY
• POSSIBILITY OF CROSS-SUBSIDIES– ONE CUSTOMER CATEGORY PAYS MORE THAN ITS COST
OF SUPPLY TO SUPPORT ANOTHER CATEGORY WHICH IS DISADVANTAGED
NEED FOR SUBSIDIES
• ROLE OF MINES & INDUSTRIAL CUSTOMERS– CURRENT TARIFFS AVERAGE 2.1 CENTS– REAL COST TARIFF 4.2 CENTS– IF THEY GET COST REFLECTIVE TARIFFS
BENEFIT CAN GO TO POOR CUSTOMERS
• POSSIBILITY OF MULTI-YEAR PROGRESSION TARIFFS– HELPS CUSHION THE IMPACT ON POOR
CUSTOMERS
NEED FOR SUBSIDIES
• USE OF ELECTRICTY– DEVELOPED COUNTRIES USE GAS FOR
COOKING– RECOMMEND THAT ALL NEW HOUSES TO HAVE
SOLAR PANELS FOR HEATING– DEVELOPED COUNTRIES HAVE LIFELINE UNITS
OF UP TO 50– ZAMBIA’S LIFELINE TARIFFS CURRENTLY 300
UNITS – SHOULD ADOPT LOWER UNITS AND RECOVER
FULL COST FROM NON-POOR
BEYOND COST RECOVERY
• ALLOCATING STATE REVENUES TO UTILITIES– CURRENTLY THRU ELECTRIFICATION LEVY– AMOUNTS RAISED NOT ENOUGH
• NEED FOR BUDGET SUPPORT– JUST LIKE AGRICULTURE (CATLE RESTOKING, FARMERS’
PACK, ETC– TOURISM DEVELOPENT FUND– WITHOUT SUPPORT, ALL GOVERNMENT INVESTMENT IN
OTHER SECTORS MAY BE AFFECTED
• INTENSIFY PPP– REQUIRES COST-REFLECTIVE TARIFFS– OTHERWISE NO OFFTAKERS
BEYOND COST RECOVERY
• WHAT HAS KEPT PRIVATE SECTOR AWAY FROM ELECTRICITY?
• DEAL WITH STRUCTURAL ISSUES
• DEAL WITH POLICY ISSUES
CONCLUSION
• NEED TO ACCELERATE RURAL ELECTRIFICATION (60% OF POP.)
• ALSO NEED TO INCREASE ACCESS IN PERI-URBAN AREAS
• FUNDING FROM INTERNAL RESOURCES MEANS FULL COST RECOVERY
• GRZ SIGNIFICANT SUBSIDIES THRU REA REQUIRED
• HUGE INVESTMENTS IN NEW GENERATION SOURCES AND RETICULATION NEEDED
THANK YOU
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