Press Statement

Lilongwe, Wednesday, August 24, 2022

The Centre for Democracy and Economic Development Initiatives (CDEDI)
hereby challenges the President Dr. Lazarus Chakwera-led Tonse Alliance
administration to come up with a clear roadmap on how it intends to address
the electricity woes chocking the economy, or risk facing the wrath of
Malawians.

By all measure of patience, Malawians have become tired of the increased hours
of load-shedding that now goes up to 10 hours in a day in urban areas and for
days in the rural areas.

It is clear that these blackouts are having a huge negative effect on the economy and, consequently on the daily lives of all people in this country, probably except the President.

The electricity woes have hit the private sector the hardest, since the extended
load-shedding means outright loss in productivity. Actually, with the current
high fuel prices, using a generator for production is not even an option.

This is the sad development that recently prompted CDEDI to conduct a fact
validation exercise to unmask the causes of the electricity woes in the country,
and some the findings actions taken have been as follows:

1. The Electricity Supply Cooperation of Malawi (ESCOM); the Energy
Generation Company (EGENCO) and the Independent Power Producers
(IPPs), through the Power Marketing Limited (PML), have presented their
revenue requirements in the power industry to the regulator, the Malawi
Energy Regulatory Authority (MERA) for the next Base Tariff from 2022-
2026.

The tariff build-up comprises new transmission and distribution infrastructure to accommodate the upcoming IPPs who will require the services of the ESCOM Transmission Licensee.

These costs have been presented to MERA to form part of the revenue requirements for the energy sector, hence ESCOM’s resolve to adjust the electricity tariffs, since
the parastatal does not get subvention from government.

2. CDEDI has written the Minister of Energy, Hon. Ibrahim Matola, to
stop this imminent electricity tariff hike. CDEDI has also requested the
minister to propose to the Minister of Finance to allocate resources in the
2022 – 2023 National Budget to meet the desired revenue requirements.

Should this fail, CDEDI will be left with no option but to mobilise
Malawians for nationwide peaceful demonstrations until they have power
as expected.

3. Despite the Malawi Kwacha being the legal tender in Malawi, some IPPs
in the country, notably JCM Power, is charging ESCOM in United States
dollars.

4. EGENCO has also applied to both the Reserve Bank of Malawi (RBM)
and MERA so that they, too, should be allowed to quote their prices in US
dollars.

5. CDEDI has written the RBM Governor Dr. Wilson Banda to stop giving
preferential treatment to JCM Power by allowing them to be charging
ESCOM in US dollars.

6. CDEDI has unearthed causes of a very serious wrangle between ESCOM
and PML over the ownership of the Single Buyer licence. CDEDI has found
out that in 2016, MERA awarded four licenses to ESCOM following the
amendment of the Electricity Act of 2016, that also led to the unbundling
of ESCOM, which resulted in the birth of EGENCO as a power generation
company.

The licences that were awarded to ESCOM by MERA are:
Transmission for 30 years; Distribution for 20 years; System Market
Operator for 25 years; Single Buyers for 25 years.

The CDEDI investigations have shown that in February 2020 a decision was made by
the Malawi Government to further unbundle ESCOM, to form another
company known as Power Marketing Limited (PML), thereby taking over
the single buyer functions from ESCOM, when Section 5 of the Electricity
Act(amended)2016 clearly states that the MERA shall issue licences for
system and market operation and single buyer to the current holder of
transmission and distribution, which is ESCOM.

7. CDEDI has written the MERA Chief Executive Officer (CEO) Mr. Henry Kachaje to explain the Single Buyer licence ownership between ESCOM and PML.

This tug-of-war between ESCOM and PML is threatening the survival of the energy sector and if not resolved speedily will soon degenerate into demotivation and sabotage.

The investigations have also revealed the following:

Despite putting on hold the transfer of Single Buyer functions from
ESCOM to PML, electricity users are paying PML MWK800 million per
week. CDEDI’s investigations have so far revealed that ESCOM has paid
PML up to MWK6.4 billion between January 2020 and February 2022. ESCOM is buying power at various rates from various plants. For
example, Mulanje Hydro is selling at MWK168.36 per Kilowatt per hour;
JCM is selling at MWK230.36; EGENCO is charging at MWK25 from
Wowve plant and MWK140 from its diesel-powered plants. On average,
ESCOM is buying power at MWK74 per Kilowatt per hour and is selling
the same to the consumers at MWK104 per Kilowatt per hour. ESCOM is losing about MWK1.2 billion annually in the Mulanje Hydro
contract and this will continue for the next 25 years of the contract. The JCM Solar Plants do not have batteries, thereby only effective
between 10am and 5pm, hence less base-load power in the grid. The
fluctuation is affecting the grid, therefore, triggering national blackouts. Currently, ESCOM is using weak and almost obsolete infrastructure
which is a national disaster in the offing.
In view of the above circumstances, CDEDI hereby makes the following
demands:

i) EGENCO and all the IPPs should be stopped from milking ESCOM
with immediate effect; these companies are only benefiting the ruling
elites and by extension skinning Malawians alive.

ii) EGENCO should be forced to put in place meters that should show
daily recordings of power generation, and this is what should be paid
for by the consumers, not the current status quo where the consumers
are paying for what has not been produced.

iii) All the Power Purchase Agreements that are not making
sense should be reviewed, including the JCM contract, for the sake of
ordinary people to have access and affordable electricity.

iv) The Secretary to the President and Cabinet (SPC) should
stop being the Board chairperson for EGENCO, in order to depoliticize
the energy sector in Malawi.

v) The Malawi Government should consider committing
financial resources from the National Budget to meet the Revenue
Requirements of the power market, in order to avert the imminent
electricity tariff hike, and in the process protect further deforestation.

Sylvester Namiwa

Executive Director

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