Power tariff raise to smother struggling consumers

RETHABILE MOHONO

MASERU – Basotho consumers, already grappling with a high cost of living are facing a nearly 10 percent hike in electricity tariffs. The Lesotho Electricity and Water Authority (LEWA) has announced that the new rates will take effect on April 1, 2024. The increase includes a 9.6286 percent raise in energy and maximum demand tariffs, along with a 5.0 percent uptick in the lifeline tariff.

Energy and maximum demand tariffs primarily affect consumers with higher power consumption, notably in the commercial sector, while the “lifeline” tariff predominantly impacts domestic users. LEWA’s approval of the tariff adjustments follows the Lesotho Electricity Company’s (LEC) request for a 23 percent increase in the “maximum demand” category and a 15 percent hike in the “lifeline” category for the financial years 2023/24, 2024/25, and 2025/26 to meet its financial objectives.

Furthermore, LEWA said the approved tariffs from the previous financial year would persist for the current year, resulting in under-recovery. Consequently, the new, higher adjustments will be implemented for the financial years 2024–2025 and 2025–2026. This rise in electricity tariffs compounds the financial strain caused by recent surges in fuel prices. The Petroleum Fund has reported significant increases in fuel expenses following last month’s price hike.

Earlier this month, adjustments were made to petroleum product prices, with Petrol93 rising by M2.45 to M22.25 per liter, Petrol95 increasing by M2.45 to M22.70 per liter, Diesel50 climbing by M1.80 to M23.35 per liter, and Illuminating Paraffin going up by M1.10 to M17.60 per litre.

Similarly, on February 7, 2024, petroleum product prices were adjusted due to increased international crude oil prices and currency fluctuations. In addition to these economic challenges, the Lesotho Bureau of Statistics reports an 11.70 percent increase in food costs in January 2024 compared to the same period the previous year. Speaking at a media briefing, LEWA board member Tšolo Letete explained that the decision to approve tariff adjustments was based on LEC’s multi-year tariff application for the period 2023/24–2025/26.

LEC proposed upward adjustments of 23 percent, 15 percent, and 15 percent on energy and maximum demand charges across all customer categories for the respective financial years.

While LEWA agreed to adjust energy tariffs, the proposal to increase standard connection fees will be postponed until the government re-evaluates its policy.

Letete said LEC’s requested revenue requirements were not granted entirely, with approved figures standing at M1.32 billion, M1.52 billion, and M1.64 billion for the financial years 2023/24, 2024/25, and 2025/26, respectively, instead of the requested M2.09 billion, M2.10 billion, and M2.13 billion.

Before making these decisions, LEWA assessed LEC’s application for compliance with regulatory instruments, finding it materially non-compliant. “As a standard practice, the Authority conducted public consultations to solicit comments and input from the public and stakeholders. The general opinion emanating from public consultations was that the company’s tariff increase should be within the range of 0 percent to 16 percent,” Letete said.

He said in its evaluation of the Modified Tariff Review Application, the Authority took into account numerous factors, including the adverse economic performance and high inflation stemming from, among other factors, the ongoing Russia-Ukraine war. They emphasised the necessity of balancing the sustainability of LEC with the affordability of electricity services for customers. Letete also noted the consideration of stakeholder inputs and comments on the company’s application. Regarding LEWA’s assessment of LEC’s application, it was observed that, among other issues, the quality of the LEC’s data continues to decline, and the company appears to be lacking in its improvement efforts.

“LEC did not submit monthly reporting forms in line with set timelines, and it failed to submit quarterly and annual reports requested by the Authority,” Letete said. He further highlighted that LEWA observed that LEC had received an adverse audit opinion in its financial statements for the fiscal year 2022–2022. The Authority noted the company’s repeated requests for tariff increases aimed at bolstering revenue, despite having alternative avenues to address its financial challenges and the diminishing quality of its services.

On the contrary, LEC argued that their financial resources were inadequate to ensure electricity supply to the Basotho due to depleted funds.

Sello Mothae, the finance manager of LEC, said the government had settled its debt with the parastatal in the preceding year, enabling LEC to import electricity throughout the year. However, with all funds now exhausted and no outstanding government debt, LEC finds itself compelled to pursue higher tariff adjustments. Regrettably, this recent increase is expected to impose a burden on consumers already grappling with low wages and high unemployment rates.