More power hikes coming

IF Namibia wants to solve its power crisis, consumers must be prepared to pay at least three times more for electricity in the next five years than what they are paying now, NamPower Managing Director Paulinus Shilamba has said.

Namibians need to brace themselves for ‘steep, steep increases’ until 2014-15, Shilamba warned at a KPMG mining breakfast on Friday.For starters, consumers should gear themselves for a ‘huge’ tariff hike next year, the MD said, definitely bigger than the 18 per cent granted by the Electricity Control Board (ECB) this year.The regulator gave NamPower permission to charge regional electricity distributors (REDs) and electricity suppliers like the City of Windhoek 39 cents per kW/h from the beginning of next month. However, it will cost NamPower between 45 cents and 54 cents per kW/h to supply power this year, Shilamba said.Illustrating the true cost of energy, Shilamba said 1 kW/h at the Von Eck power station costs 94 cents. The same unit at a hydropower or wind power station in Namibia would cost 78 cents and between N$1,14 and N$1,24 respectively. Once Kudu comes on board, 1 kW/h at the gas power station would cost 84 cents, Shilamba said.NamPower’s request for a 35 per cent increase in tariffs was turned down by the ECB last month. The power utility can still take the punch this year, as it will subsidise tariffs with the N$800 million profit NamPower made last year, Shilamba said. By next year, the kitty will be empty though, he said.NamPower urgently needs to become cost-reflective and this means that it cannot supply electricity at a loss anymore. ‘Very difficult times’ await Namibians and consumers must be willing to accommodate big tariff increases, Shilamba said.If not, NamPower and Namibia as a whole face dire consequences, he said.According to Shilamba, NamPower could go ‘down the drain’, ‘default on loans’ and struggle to borrow the N$4 billion it needs to develop power infrastructure in the foreseeable future. Despite NamPower’s good credit rating, investors will shy away from projects if the company continues to sell electricity at a loss.’Nobody will give you this money,’ he said.Not only will mining be suppressed in the process, but there will be no economic growth in Namibia and there will be no Vision 2030, Shilamba said.By refusing to grant NamPower the 35 per cent tariff increase this year, the ECB has already postponed investment in the energy sector by a year, he said.Shilamba said it was ‘unfortunate that the regulator has not followed the path’ of cost-reflectivity determined by Cabinet in 2005. Since then, the ECB has granted NamPower a smaller than requested tariff increase virtually every year.Announcing the approved 18 per cent increase for 2010 recently, ECB Chief Executive Officer Siseho Simasiku said it was not the responsibility of the consumer to pay for NamPower’s generation infrastructure. That is ‘to a large extend the responsibility of Government’, he said. Consumers pay for consuming electricity, for having power delivered to their doorstep, he said.Simasiku mostly blamed Government for the slow progress with local power projects and the subsequent energy crisis Namibia is caught in.