Erongo RED sticks to its guns

Floris Steenkamp

Regional electricity distributor Erongo RED sticks to its guns on the abolishment of the subsidy of prepaid electricity tariffs on 30 Amps circuit breakers. Prepaid consumers on 30 Amps circuit breakers were used to receive 61,8 units for N$100 but now only receives 42,6 units/N$100.
Consumers in the 30 Amps circuit breaker bracket in recent weeks, since the tariff increases on 1 July, interpreted this reduction in the number of units they receive as a drastic tariff increase, but in actual fact the subsidy portion fell away and they now pay the same per unit as prepaid consumers in the 40 Amps, 50 Amps and 60 Amps segments. Erongo RED’s tariff in-creases across the board were on average 4 % (as allowed by the Electricity Control Board (ECB)).
In a media briefing in Walvis Bay on Tuesday the Chief Executive Officer, Mr Festus Mbango, confirmed subsidising the 30 Amps prepaid rate meant Erongo RED was losing tens of millions in Namibia Dollar in every financial year. In the last financial year (June 2017 to July 2018) alone this loss amounted to N$23 million. That was as a result of subsidising approximately 19 000 customers (48% of active customers) who are actually middle- and high-income consumers who can afford to pay full rates, as opposed to receive a subsidised rate.
Mr Mbango added though there are 30 Amps consumers who cannot afford the tariff without a subsidy and said these customers are welcome to apply for the 20 Amps circuit breaker where pro-poor or subsidised prepaid tariffs are applicable. If your household how-ever, cannot function properly on 20 Amps, as there are too many electrical appliances, there is little else the consumer can do than either adapt the lifestyle or absorb the subsidised portion on the 30 Amps usage.
A press statement was issued by Erongo RED after the media briefing. The full content appears here under, in order to clarify all aspects of the abolishment of the 30 Amps subsidy: ”At the press conference which was held in July 2018, Erongo RED announced a weighted tariffs in-crease of 4% as approved by the Electricity Control Board (ECB). The 4% average in-crease is a weighted average of different tariff categories.
Therefore, the impact on customers will vary according to the tariff category on which they are connected and their consumption pattern.
During the same event, we also communicated that the customers who were previously on the subsidised tariffs (up to 30Amp) will notice a reduction in units. This means that until June 2018, for a purchase of N$100.00, one would have received 61.8 units on subsidised tariffs. Effective 13 July 2018, the subsidy is longer applicable on this category. Therefore, customers who are currently on the above 20 Amps will only get 42.6 units from N$100.00. The reason for such reduction in units is mainly due to the discontinuation of the subsidy on this category and NOT the tariff increase.
Erongo RED is cognizant that the impact of the discontinuation of the subsidy on the 30 Amps connection is high for the customers who were previously subsidised. Between July 2017 and June 2018, Erongo RED spend nearly N$23 million subsidising over 19000 customers which accounts to 48% of active customers. Since 2012, we have spent over N$88 million on assisting pensioners and low-income customers to have access to electricity through lower tariffs. The aim of the subsidised tariffs is to provide relief to the pensioners and low-income earners. However, we have notice a steep in-crease in the number of customers on the subsidised tariff over the past two (2) years. This steep increase is mainly due to customers who are not supposed to be on the subsidised tariffs.
Meaning they are well off to be on the subsidy. The subsidised tariffs are only meant for the pensioners and low-income earners.
Erongo RED strongly believes that middle and high-income earners do not form part of the subsidy scheme. Hence, the discontinuation of the subsidy on 30 Amp connection to ensure that the subsidy is being utilised only by those meant to use it. During modelling of the tariffs this year, Erongo RED took into account the socio-economic challenges of our customers including the impact of electricity cost on all customers. At the same time, the company must be managed on sound business principles and ensure that the company remains sustainable. We had good intentions when we started with the subsidy in 2012, but some of the people started to misuse the scheme.
As part of our efforts to still assist low income earners, we will continue to provide subsidised electricity on the 20 Amp connection.
Thus, customers who are not able to afford electricity rates on 30 Amp, are advised to move to 20 Amps. All registered pensioners and those receiving government disability grants are not affected by the limitation on subsidised tariffs. They will still continue to be subsidies up 40 Amp connection.
Ladies and Gentlemen
We have commenced with the process of appointing the new Consumers Liaison Committee. This committee will be made up with individuals nominated by the local and regional Councillors. The purpose of the committee is to provide a forum for discussions, consultation, advice and feedback on matters of common concern, interest and to exchange information and views. The committee will also give inputs and direction on policies and procedures on matters affecting the community. Thus, we wish to appeal to the public to make use of this committee to raise their concerns.
Erongo RED further wishes to inform the customers that the electricity prices in general are influenced by a number of elements. These includes costs associated with generation, transmission, distribution and supply of electricity, upgrading of the network, operational costs, connection of new developments as well as the costs to replace the aging electricity infrastructure.
In addition, bulk of Namibia requirements are imported from the neighbouring countries. All these factors influence electricity ta-riffs. It is also worth mentioning that for every unit cost, up to 70% goes towards purchasing of electricity from the National Utility, NamPower. Erongo RED only has about 30% of the revenue collected to finance its operations, maintenance, electrification, remunerations, subsidies, bulk upgrade projects as well as royalties to the shareholders. As a company, we are required to adhere to ECB requirements to ensure that we do not compromise on quality.
Before I conclude, I wish to say a few words on the renewable. Early this year Erongo RED announced a morato-rium on the renewable energy.
The purpose of the moratorium was to allow Erongo RED to conduct the Impact Assessment Study on penetration of renew-able energy aimed at analysing the impact of renewable energy grid integration and ultimately determine the acceptable levels of renewable energy at various points of Erongo RED’s net-work. There were some delays in finalizing the study but I am happy to say that we are almost done. At the moment we are just engaging some key stakeholders and we will soon make a public announcement on the way forward.
Erongo RED is still committed to diversify its energy mix in order to ensure that the electricity consumers reap benefits emanating from renewable energy. We are cognizant that electricity supply is vital in stimulating and accelerating development. Therefore, the outcome of the Impact Assessment Study on penetration of renew-able energy will enable us to comprehend on how best to implement and expand the renewable energy and further diversify our energy mix. I wish to appeal to all prospective investors or individuals who would like to invest in renewable energy to bear with us.
Erongo RED regards our relationships with our customers as absolutely important to the organisation.
We wish to express our sincere regret for the inconvenience our customers may have experienced as a result of the discontinuation of the subsidised electricity on 30 Amps connection”.

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