Zambian electricity consumers have been paying less than the cost of production and Cabinet has revealed that Zambian tariffs were lowest in region, while while Zambian consumers paid about 5 cents per unit the rate in the region is 10 cents.
In view of the rising cost of producing power, Acting Chief Government spokesperson Vincent Mwale, said Cabinet has resolved that Government was no longer in a position to continue offering the incentive.
This follows the 16th Special Cabinet meeting held on Monday and Wednesday this week.
Briefing the media Lusaka yesterday, Mr Mwale said Cabinet had since resolved to increase the electricity tariff category for residential from 100 to 500 kilowatt hours per month with immediate effect.
Mr Mwale said the increase of 500kWh per month would enable low income households to use electricity for their necessities.
“Currently investments in power generation projects are not moving because investors cannot get a good return on their investment,” he said.
Mr Mwale said that government had been using low electricity tariffs as an incentive to lure foreign firms to take over ownership of the local mining companies.
He said the measures were intended to ensure the mining companies remained viable with the view to boost economic growth in the country.
“The copper price was relatively low on the global market at US$2,000 per tonne compared to the current copper prices which stand at US$5,000 per tonne,” he said.
Mr Mwale said Cabinet resolved that Bulk Supply Agreement (BSAs) signed between Zesco and Bulk consumers be reviews to allow for constant adjustment of electricity for consumer category just as the case was for residential and other customers.
“Should the need be, this will be achieved by enacting appropriate legislation,” he said.
Mr Mwale also revealed that Cabinet had resolved that all Power Purchase Agreement (PPAs) be regulated and set by the Energy Regulation Board (ERB) in accordance with the pricing model approved by the ERB as a way to ensure transparent and uniform tariffs for each category of consumers.
He said Cabinet also resolved that Government should provide guarantees on behalf of Zesco Limited to underlay Independent Power Producers (IPPs) Purchase Agreement (PPAs) until tariffs reached cost reflective levels.
Meanwhile, Cabinet has directed the Ministry of Mines, Energy and Water Development to expedite investment in other sources of energy like solar which could be developed quickly and was not subjected to climatic changes.