The Malawi Energy Regulatory Authority (MERA) considered a review of the ESCOM’s electricity tariff under the Automatic Tariff Adjustment Formula (ATAF).
TRENDS IN INFLATION AND EXCHANGE RATES AND THE IMPACT ON ELECTRICITY TARIFFS
MERA noted that inflation and exchange rate were at 22.1% and MK693.50/US$, respectively, as at 3rd May, 2016. This was the last time MERA had adjusted tariffs for ESCOM and therefore was used as a basis for consideration of tariff adjustments for October 2017.
Since 3rd May 2016, the Kwacha depreciated from K693.50/US$ to K733.95/US$ as noted on 30th October 2017. On the other hand, inflation has decreased to 8.4% as noted in September 2017.
Applying these economic fundamentals to ATAF resulted into a -7.73% potential electricity tariff adjustment. According to the principles of ATAF, electricity tariffs are adjusted when the ATAF outcome is beyond the ±5% trigger threshold. However, the Board considered the backlog on the implementation of the fourth tranche of the second base tariff for the 2017/2018 and the ESCOM’s revenue loss emanating from the delay in implementing this tranche.
The Board therefore resolved to maintain electricity tariffs at current level.