Zambia Rejects 156% Power-Price Rise as Drought Deepens Cuts

(Bloomberg) -- Zambia’s energy regulator refused the state power utility’s proposal to increase electricity tariffs by as much as 156% to cover the cost of emergency supplies, citing the negative impact it would have on inflation and jobs.

The application from Zesco Ltd. presented an “impossible” way of raising its required revenues, Energy Regulation Board Chairman James Banda said Friday, adding his organization would work with the utility to find an alternatives to fund pricey power imports.

The decision denies Zesco an extra $42 million it would earn over three months from customers including households, malls and factories. While it avoids the price pressures that the tariff increase would have brought, the rejection could amplify Zambia’s electricity shortage. Where consumers dodge bigger power bills, they face heightened supply shortages.

The nation, which relies on hydropower for about 85% of generation, has gradually increased daily electricity cuts to about 14 hours as the worst drought in decades hurts water levels. The rolling blackouts will worsen to 17 hours from September as plunging water levels in hydropower dams choke production.

At Kariba, the world’s biggest artificial freshwater reservoir, Zesco risks having to switch off its turbines next month as it depletes the amount of water it’s allowed to use for the year. The nation’s only coal-power plant is due for a maintenance shutdown, exacerbating the deficit.

Mining companies in Africa’s second-largest copper producer are supplementing their power needs with costly imports. Operators are still trying to recover from years of policy inconsistency and frequent clashes with the previous government that resulted in a slump in output.

While it’s unclear how much impact this year’s power crisis could hurt copper production, output was up 6.2% in the first six months of this year compared with the same period a year ago.

Zambia has an installed generation capacity of 3,777 megawatts, with the deficit reaching 1,510 megawatts.

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