MERA BOARD RESOLUTION ON THE ESCOM BASE TARIFF APPLICATION FOR THE PERIOD 2018 TO 2022

1.0   BACKGROUND

The Malawi Energy Regulatory Authority (MERA) received an application for the third base tariff from Electricity Supply Corporation of Malawi (ESCOM) on 20th April 2018. The proposed electricity base tariff was for the period 2018 to 2022. ESCOM made the application following the conclusion of its implementation of the second base tariff in June 2018 which covered the period 2014 to 2018.

This third base tariff application was unique as it was prepared on the basis of the unbundled ESCOM comprising business units of Transmission, Distribution, Single Buyer, System Market Operator as the building blocks to the overall tariff to be paid by electricity users. The charge from the Electricity Generation Company (Malawi) Limited (EGENCO) has in the new framework been accounted for as a power procurement cost to ESCOM.

ESCOM applied for a 60% third base tariff increase covering all the business units which would have moved the average tariff by K44.07 from MK73.23/kWh to MK117.30/kWh.

As mandated by the Energy Regulation Act, 2004, the MERA Board undertook a review and analysis of the ESCOM application and determined the appropriate increase in the base tariff.

 

2.0 THE BASE TARIFF REVIEW PROCESS AND THE DECISION MADE ON THE APPLICATION

The review process of the electricity base application involved the following activities:

a) In May 2018, MERA undertook a preliminary review of ESCOM’s application to identify issues and gaps in the application to ensure the application was complete with all the relevant information and data that was key for the analysis of the application.

b) In order to validate the information and data provided by ESCOM, MERA held one-on-one meetings with ESCOM Business Units and EGENCO from 21st to 23rd May 2018.

c) From 3rd July 2018, the MERA publicised both the abridged and full versions of the base tariff application for comments and observations by stakeholders and the general public.

d) MERA organised and held public hearings to enable ESCOM present the tariff application to key stakeholders and the general public and provide responses and feedback on the observations made on the application. The public hearings were held from 6th to 10th August 2018.

 e) MERA undertook a detailed analysis of the application from 13th to 24th August 2018. The analysis also reflected on the issues and concerns that were raised by stakeholders during the public hearings as summarized in Appendix 1.

 f) The Analysis Report and Recommendations on the proposed ESCOM base tariff were considered and approved by the Energy Pricing Committee during its Extra-Ordinary meeting held on 30th August 2018.

 g) The Recommendations of the Energy Pricing Committee on the ESCOM third base tariff for the period 2018-2022 were considered and approved by the MERA Board at its Extra-Ordinary Board meeting held on 7th September 2018.

h) The MERA Board of Directors resolved that the base tariff be increased by 8% over the four-year period from 2018 to 2022.

This 31% increase, compared to ESCOM’s requested 60% increase, translates into K21.92/kWh increase and an average tariff of K95.15/kWh against the average of MK 117.64/kWh requested by ESCOM.

 i) The MERA Board further decided that the approved tariff be implemented with effect from 1st October, 2018.

 j) The MERA Board resolved that the base tariff adjustment shall be implemented as follows:

Annual Average Tariffs for 2018-2022  

 

 

Base Year

2018/19

2019/20

2020/21

2021/22

Average

End User Revenue Requirement

MK '000

-

184,656,399

221,946,523

235,857,210

423,398,784

1,065,858,916

 Energy Billed

 kWh

-

2,097,938,504

2,347,617,016

2,564,299,746

4,191,933,533

11,201,788,799

End User Tariff

 MK/kWh

73.23

88.02

94.54

91.98

101

95.15

Percentage Changes

 

 

20%

7%

-3%

10%

31.8%

 

The full Board Resolution can be downloaded here