Update on consideration of the 4th tranche of ESCOM’s base tariff
In October 2018, the Malawi Energy Regulatory Authority (MERA) approved a 31.8% Electricity Supply Corporation of Malawi Limited (ESCOM) base tariff covering the four-year period from 2018 to 2022. The implementation of the base tariff was segmented into four annual tranches as follows: 20%, 7%, -3%, and 10% tariff adjustments for the first, second, third and fourth years, respectively.
Implementation of the first, second and third tranches of the base tariff:
The 20% tariff increase for the first year translated into an average tariff of K88.02/kWh up from K73.23/kWh.
In February 2020, ESCOM qualified for 1.65% instead of 7% of the second tranche of the base tariff, based on performance on the agreed upon Key Performance Indicators (KPIs). A further 5.63% was awarded based on the Automatic Tariff Adjustment Formula (ATAF), making a total of 7.28% tariff adjustment. However, the tariff increase was not implemented immediately.
The intended 3% tariff reduction of the base tariff in the third year was premised on the planned decommissioning of the Aggreko diesel generators which were procured by Government on an emergency basis to supply 78 MW of power to ESCOM for further distribution to its customers. However, the power supply contract for Aggreko was extended since solar Independent Power Producers (IPPs) had not rolled out to fill in the power supply gap that would have been created by the decommissioning of Aggreko diesel generators. Therefore, the planned tariff reduction could not materialise.
In March 2021, MERA approved a 10.62% electricity tariff increase, comprising 4.9%being the revenue recouping adjustment due to non-implementation of a tariff increase that was approved in February 2020, and 5.72%being the ATAF outcome. The 10.62%tariff adjustment moved the average tariff from K94.43/kWh to K104.46/kWh and was implemented with effect from 30th March 2021.
Consideration of the fourth tranche of the base tariff:
The 2021/2022 fiscal year is the fourth and final year of implementing the 2018-2022 base tariff and a 10% base tariff adjustment will be considered. As with the previous years, ESCOM’s performance against KPIs and findings of the annual regulatory audit will be scrutinised.
When finalised, MERA will communicate the outcome of ESCOM performance assessment as well as the determination on the fourth base tariff tranche.
For more information:
Phone: 01 774 103/135 or 01 775 810