REVIEW OF ESCOM TARIFFS UNDER THE AUTOMATIC TARIFF ADJUSTMENT FORMULA (ATAF)
The Malawi Energy Regulatory Authority (MERA) considered a review of the electricity tariffs for ESCOM under the Automatic Tariff Adjustment Formula (ATAF).
TRENDS IN EXCHANGE RATE AND CONSUMER PRICE INDEX (CPI) IMPACT ON ELECTRICITY TARIFFS
MERA noted that as at February 2020, the last time electricity tariffs were revised following the implementation of the second tranche of the base tariff and the ATAF outcome of that month, the exchange rate was at MK743.81/US$ while the CPI was at 122.6. Since then, the economic fundamentals have changed, with the Kwacha depreciating to MK787.85/US$ as of 26th February 2021, while the CPI increased to 128.6 as noted in November 2020.
Applying the above levels of economic fundamentals to the automatic tariff adjustment formula (ATAF), resulted into 5.72% potential upward tariff adjustment. The electricity consumers/customers and the general public may also wish to note that MERA is yet to implement the 7.28% tariff increase as approved by the Board in February 2020. Continued non-implementation of this approved tariff has led to ESCOM losing revenues from February 2020 to date. The Board therefore has resolved to have this revenue recouped by ESCOM within the next sixteen (16) months to the end of the current base tariff period in June 2022. This will entail increasing electricity tariffs by a further 4.9%.
Based on ATAF principles, the Board resolved to increase electricity tariffs by 5.72% as the ATAF outcome and 4.9% as revenue recouping by ESCOM, resulting into a total of 10.62% tariff increase. This increase will move the current overall average tariff from K94.43/kWh to a new average of K104.46/kWh. This increase is with effect from 30th March 2021.
MALAWI ENERGY REGULATORY AUTHORITY
29th March, 2021