Namibians are exposed to the second highest electricity tariffs in the 15-member Southern African Development Community (SADC) after Tanzania thanks to the country’s cost reflective pricing model.
The current pricing regime has resulted in only one producer, the state-owned Namibian Power Corporation (NamPower) dominating power generation in the country while Independent Power Producers (IPPs) struggle to make ends meet.
Cost reflective tariff model allows for electricity suppliers to factor in cost of production and a profit margin while charging the end user, who is the consumer.
Cost recovery tariffs, on the other hand, are more subsidised by Government and only allows the producer to recover their production cost without necessarily passing on cost to the end user.
The high tariffs that Namibians have to stomach despite the gruelling financial challenges faced on a daily basis to sustain a basic living are revealed in the latest statistical bulletin released by the power regulator, the Electricity Control Board (ECB), themed: ‘Security of electricity supply in Namibia’.
“… Namibia and Tanzania have the highest tariff levels of about US16 cents per kWh, while the rest of the member countries are below US10 cents per kWh. Namibia and Tanzania are the only countries reported to the cost reflective while the other member countries are still committed in maintaining their efforts to implement cost-recovery tariffs. Cost reflective tariffs may be seen by others as expensive tariffs, but these tariffs are important in ensuring long term long term viability for the sector…,” the bulletin noted in part.
Ironically, while the move puts Namibian consumers under severe pressure it is summed up to be as a result of the fact that the country imports more than 60% of its power from other producing countries, having failed to boost domestic production in tandem with consumption since independence.
The tariff breakdown was compiled last year.
Arguments raised for the Namibian pricing model say the high tariffs benchmarked on cost reflectivity are more sustainable for the power sector which is vital for the economy to survive and also allows independent power producers to play a part in the sector profitably.
While on average consumers both commercial and none-commercial in Angola, Zimbabwe Zambia, Lesotho, South Africa, Malawi fork out between US2 cents (approximately N30 cents) and US10cents (approximately N160 cents) per kilowatt at the current exchange rate, the story is very different in Namibia where consumers have to part with an average of US16cents (approximately N256 cents) per kilowatt.
The country has also been constantly increasing power tariffs in the past three years resulting in some Namibians in the low end of society struggling to acquire power for use at domestic level.
According to the bulletin Namibia has also experienced a gradual increase in power consumption in the past few years. While a reason is not necessarily given in the bulletin, the power increase could easily be traced to the growth in the extractive sector, especially the uranium producing industry, which has since recorded new entrants in the past three to four years.
“The Namibian electricity consumption per capita has been increasing slowly since 2006. The Namibian consumption per capita for 2015 stands at slightly below 1 400 kWh per capita. Domestic consumers in Namibia are the highest. This shows that most of the electrification efforts are geared towards electrifying the households. This is the only customer category that has recorded an increase with over 7000 households more during the period 2014 to 2015…,” noted the bulletin in part.
Namibia is currently pursuing different options to avert potential power shortages in the future. Some of the projects pursued by the Government include possible erecting the Kudu Gas project and a controversial 250 megawatt power plant.