The government has turned down the proposal by the ZETDC, a branch of the Zesa power utility, to increase its tariff by 52%, saying it is unjustified as local generation capacity has increased.
Govt says increasing the cost of power would scuttle efforts to attract investment and grow the country’s fragile economy.
The Zimbabwe Energy Regulatory Authority (Zera) is currently reviewing an application by Zesa to increase tariffs to an estimated 15 US cents per kilowatt hour (kWh) from 9,86 US cents per (kWh.)
Zera last approved a power tariff increase in 2011 by 30% from 7,50 US cents.
The latest application by Zesa for a tariff increase has been fiercely opposed by the Confederation of Zimbabwe Industries (CZI), which argues that increasing power charges would derail efforts to grow the country’s manufacturing base.
Investment analysts have often cited the cost of power as one of the key determinants guiding where an investor sets up.
One analysts who refused to be named said, “I do not think that any power tariff increase at the moment is sustainable.
“We are building an economy and naturally you cannot push for an increase. At the moment I do not think it makes sense to push for an increase.”.
Zimbabwe’s power cost, currently pegged at close to US10c, is among the highest in Africa, with Zambia and Ethiopia charging 5 US cents per kWh and 6 US cents per kWh respectively.
In 2017, proposals by the loss-making Zesa to hike tariffs so it could “break even” were turned down.
Normally, Zera requires 45 days to evaluate an application for a tariff review.
Zimbabwe, which is battling to generate sufficient power, has been relying on imports, particularly from neighbouring South Africa and Mozambique, to meet its consumption needs.
However, in May last year, Eskom of South Africa threatened to switch off Zimbabwe from its power grid over US$43 million arrears for electricity imports.
The southern African country also owed Mozambique’s Hydro Cahora Bassa money running into millions of dollars in arrears for power imports.
Research think-tank BMI forecasts that Zimbabwe’s power deficit, which is set to be bridged through imports, will soar to 2,914tWh in the next two years.
By 2020, Zimbabwe is projected to import at least 2,508tWh while consumption will soar to 9,7000tWh