Friday, May 27, 2011

NAWEC tariff increment: Three sides to the story


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The National Water and Electricity Company Limited (NAWEC) has finally succeeded in lobbying for an increment in its electricity tariff despite rejection to such a move by 98 per cent of the people who attended the recent public hearing convergence organised by PURA to gauge comments on the tariff increment.
Pics: From L to R, Messrs. Jallow and Jagne, MD of NAWEC and Chairman of PURA, respectively .
The Gambia Public Utilities Regulatory Authority (PURA) has approved, with modification, the proposed tariffs increment that they received from NAWEC on 27 December 2010.
With effect from 1 April this year, the tariff on electricity will increase across the board, for all shades of consumers. Tariff for domestic electricity consumption will be increased from D6.18 to D7.20 per kilowatt, representing 16.50 per cent increment; commercial usage of electricity will also be increased from D7.20 to D8.60 per kilowatt, representing 19.44 per cent increment. Hotel, club and industrial uses of electricity will also hike from D7.65 to D8.95 per kilowatt, representing 16.99 per cent increment.
Electricity uses for agriculture, the backbone of the Gambia economy, will also be increased from D7.20 to D8.00 per kilowatt, representing 11.11 per cent increment. The usage of electricity by area councils and central government will also be accelerated to D8.70 per kilowatt from D7.20, representing 20.83 per cent increment.
Pic: Mr. Alagi Gaye, Director General of PURA

The new development of tariff increment on electricity has sparked fear and worries for consumers in the country. Many people, ranging from private individuals to proprietors, entrepreneurs and potential investors across the length and breadth of the greater Banjul area who have spoken to our reporters following the latest increment on electricity tariff for various categories of consumers, have expressed deep concern over the looming situation of hiked electricity tariff. A pain in their neck, they say, is fast becoming the order of day, regarding electricity bill.

Tombong Saidy of AMRA Consulting says the current tariff for electricity in the country “is already high” to be increased.

The average people in the country are struggling to pay as it is now, so increasing the tariff will logically deny those people electricity, which is a basic need, argues Mr Saidy.

“Any increment on tariffs of electricity, water and sewerage will affect the poor people whose income is very low. They will not be able to solve their family problems much more the cost of electricity, water or sewerage,” he said.

Considering the huge debt the Gambia government and area councils owe NAWEC - D302 million and D118 million respectively, Momodou Jallow of GRTS TV said NAWEC should have thought again before increasing tariffs. “What you need to do is to pursue these people to pay their debts,” he said. “If NAWEC raises the tariffs now and people cannot pay, what will happen,” he asks rhetorically.

PURA, the national regulatory body for utilities, including electricity, water and sewerage, received an application on 27 December 2010 from NAWEC for an increase of current electricity, water and sewerage tariffs by 37%, 25% and 26% respectively.

According to PURA, the application was reviewed in accordance with Section 13 (1) b of the PURA Act 2001 and specifically Section 18 of the Electricity Act 2005 which states: “the Authority may in accordance with the provisions of the Regulatory Act determine, review, approve, modify or refuse the tariff and the terms and conditions of service provided by licensees.”

Before approving the impending increment of electricity tariff, PURA says it took into consideration the need to balance the interest of all stakeholders whilst at the same time ensuring that the procedures set out and due consultation with all stakeholders were adhered to.

It says it relies upon the principle that NAWEC has little or no control over the cost of utilities, such as fuel and energy payments to the Independent Power Producer (IPP), which are fully absorbed in the tariff in accordance with international best practice.

PURA’s modification of NAWEC’s proposed increase of 37% in electricity tariff was “based on the fact that it would not reflect optimal operational efficiency and would pass excessive electricity network losses and water leakages to consumers”.  It however says it will ensure modified tariffs reflect their true cost.

NAWEC’s proposed tariffs increment for water and sewerage services by 25% and 26% respectively were, however, not approved by PURA, for “social reasons”.

One of the reasons put forth by NAWEC to justify the tariff increment is that the company will hardly raise the financial resources needed to provide the required utilities if tariffs remain unchanged.

“The current revenue base of NAWEC is not enough to sustain the company’s operational obligations, which has resulted in the company going in for short term borrowing from commercial banks at exorbitant cost,” NAWEC Finance Director Alhagie Jallow said.

He says the company is currently undergoing extreme financial difficulties due to its ever-increasing cost of light and heavy fuel and lubricants, cost of energy purchased from the Independent Power Producer (IPP), and high cost of running the corporation.

However, during the public hearing a businessman called Lamin Sanneh of Serrekunda said:  “As far as I am concerned, NAWEC has no tangible justification for increasing the tariffs of electricity, water and sewerage. What they have highlighted are the problems they are facing; let them find other ways to solve them.”

However, the NAWEC finance director said if anyone thinks the tariff for electricity is expensive, “just buy a generator and be using it for one month, then come and tell us how much money you spend. It will be more than that of NAWEC’s bill. All are trying to do is to call on the public to reason with us and give us the necessary support and we will also give them what they want.”

Mr Jallow said NAWEC plans to replace all post-paid meters with pre-paid ones. “In that way we will reduce our arrears and then get our money upfront to be able to sustain our operations,” he said.
The increased tariff for electricity has crossed the affordability level for average Gambians, many people who spoke to MarketPlace said. The resulting effect of the increment will be difficult to fathom as its consequences will affect cost of production and inflate prices of essential commodities and services, which lead to a high cost of living for the country’s populace. The fundamental necessities of life such as food, household activities and education will be difficult to afford as the effects of the electricity bill hikes continue to hit hard.
When the increase is effected, businesses will have to push their prices up. This applies to prices of commodities in general, since electricity is a prerequisite in the manufacturing of goods.
Industrial activities in the country are likely to be skew thanks to the electricity tariff increment. The hike will also negatively impact on employment opportunities, affecting both employers and employees.
Businesses have already been hit hard by the world recession and fuel hikes and the new tariff will lead to inflation if not hyperinflation.
NAWEC needs to invest more into research to find alternative energy sources that are cost efficient and affordable, a concerned citizen says. “This implies that various avenues need to be explored to make use of other energy sources that are non-conventional,” he said.
For instance, the cost of electricity generation through hydropower is only 10 per cent compared to that of thermal power that NAWEC uses. Oil based thermal power, the most expensive of the current options, should be minimised, the people say.

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