Escom faces many challenges after unbundling

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By Antony Isaiah Jr

Electricity Supply Corporation of Malawi (Escom) says the decision that wad made by the government in 2017 to unbundle Escom has brought a number of problems to the sector.

In 2017, Government through the ministry of Energy confirmed that the Electricity Supply Corporation of Malawi (Escom) had been officially unbundled, creating two companies, one responsible for power generation and the other distribution.

The development implied that the generation of power was carved out of Escom and that a new company called the Electricity Generation Company Malawi Limited (Egenco) was operational.

The government described the development as implementation of the Power Market Restructuring (PMR) programme, meant to increase efficiency in power generation and creating enabling environment for Independent Power Producers (IPP) to invest in power generation.

Escom Chief Executive Officer Kamkwamba Kumwenda making his remarks on Tuesday in Lilongwe when Escom appeared before a joint committee of Parliament to answer questions about the issue of intermittent power outages, there are Escom has never made a profit since the unbundling and there are a number of challenges in the sector.

“Since unbundling, we has been operating on a loss. We have been paying for electricity that has bot been delivered.

“As of today, we have K82 billion that we have yo pay to Egenco on power the power that was not delivered. As Escom where will we get this money from?

“We need to find solution on who should be paying for the undelivered energy.

“Exchange rates also affect us because the IPPs are paying in dollars, meaning that any movement to a dollar we are affected.

“Our total purchase cost is the additional of all those lines, not just one line, not just what was written in the PPA,” said Kumwenda.

He added ab invoice for JCM power where Escom was supposed to pay K651 million for electricity delivered but ended up getting a bill of k1.6 billion for undelivered energy.

“Let’s go to one invoice for JCM. They gave us 6 million kilowatt per hours at K108 per kilowatt per hours. The total was $552,000 which is about K651 Million. Now there was deemed energy, the energy that Escom did not receive for various reasons, Escom has paid K728 million for the energy that was never received and we never sold but I have to take that into account when coming up with a unit cost.

“This forces Escom to borrow money from banks to pay the Independent Power Producers (IPP) and tax to MRA for power that was not delivered.

“Egenco is undervaluing assets that previously belonged to Escom. Assets worth k20 billion in 2018 are now valued at K228 billion.

“Malawians are the ones to suffer as they will be paying for something that they already paid for,” said Kumwenda.

Kumwenda further blamed Egenco for providing energy that is below what they agreed which is major reason for the intermittent blackouts.

“The power sector is only 400 megawatts and it is not eight to have many companies governing the energy sector. Having many companies only burdens the end consumer with costs,” said Kumwenda.

The Electricity Supply Corporation of Malawi, Escom weeks ago announced that it has registered a loss of K112 billion since its unbundling in 2018 to non-cost effective tariffs.

Speaking at the press briefing in Blantyre on Tuesday, the Company Chief Executive Officer Kamkwamba Kumwenda said Escom is currently buying electricity from producers at K140 per kilowatts per hour and selling the power to end-user consumer at K104 per kilowatts per hour

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