SNAPSHOT IN HISTORY – ZESCO, ITS HISTORY AND THE CURRENT POWER SITUATION

#SNAPSHOT IN HISTORY – ZESCO, ITS HISTORY AND THE CURRENT POWER SITUATION

By Eugene Makai

This series is aimed at informing the reader about the history of electricity production in the erstwhile Federation of Rhodesia and Nyasaland and indeed Northern Rhodesia itself which eventually became Zambia on 24th October, 1964.

ZESCO (then Zambia Electricity Supply Corporation Limited) was formed by an Act of Parliament on the 3rd December, 1969 and became operational in July 1970.

Upon its formation, ZESCO took over electricity supply and distribution from the various municipalities and the three existing utilities: the Victoria Falls Power Board, formed in 1951 to operate a small hydroelectric power station at Victoria Falls; the Central Electricity Corporation, which had been supplying the Lusaka area since 1953; and the Northern Electricity Supply Corporation, formed in 1960 to take over rural electricity undertakings.

The amalgamation of the municipal and other electricity utilities gave ZESCO responsibility for energy planning in the electricity sub-sector under the Central African Power Corporation (CAPCO which was responsible for bulk supply), and the responsibility of all power transmission and distribution with the exception of the Copperbelt, which continued to be supplied by ZCCM’s Power Division.

CAPCO was dissolved in 1987 and some of its functions were transferred to the newly formed Zambezi River Authority (ZRA).

ZRA is jointly owned by Zambia and Zimbabwe and its main functions are to operate, monitor and maintain the Kariba Dam complex, and to investigate the construction of new dams on the Zambezi River. Kariba North and Kariba South hydropower stations, however, are managed by the power utilities, ZESCO in Zambia (Kariba North) and the Zimbabwe Electricity Supply Authority (ZESA) in Zimbabwe (Kariba South).

On the other hand, the Kariba North Bank Company (KNBC) was formed by the Zambian government in 1970 to build the Kariba North Bank power station. It was commissioned between 1976 and 1977. By an earlier agreement, KNBC appointed CAPCO as its agent to undertake the construction of the project. This arrangement also envisaged that KNBC would lease the power station to CAPCO. The Kariba North Bank power station is owned, maintained and operated by KNBC, but the operations are under the supervision of ZESCO.

In 1992 ZESCO had 5,175 employees, of which 1,660 were skilled and semi-skilled. The distribution was as follows:

Engineers 100
Technicians 400
Administration and Accounts 1,160
General Workers 3,515

ZESCO was and is still required by law to submit proposals on tariff increments to the Minister of Energy or Power (the ministry has changed names over several governments but not function) for approval. The laws of Zambia (the then repealed Electricity Act CAP 811 and now replaced by CAP 433) require that the utility gives 30 days notice in the national press before tariff increments.

According to the law, consumers have a right to object to the increments by appealing to the Minister through the Electricity Council (EC) a function now exercised by the Energy Regulation Board (ERB).

In the early years the Minister of Power, Transport and Communications (now Minister of Energy), advised by the EC, approved the tariffs proposed by the Corporation. Later, after the EC became moribund, the NEC advised the Minister. The NEC ceased to operate towards the end of 1987. With the incorporation of ZESCO within the ZIMCO (Zambia Industrial and Mining Corporation Limited) structure and the absence of the advisory bodies, the procedure for tariff approval changed. ZIMCO also played a role in the tariff approval procedure, so did the Prices and Incomes Commission. These bureaucratic procedures often delayed approval of the proposed tariffs. In some cases, proposals on tariff increases could not be approved because of political considerations.

The current power crisis brought on by the drought of the 2023/2024 rainy season and now exacerbated by the proposed shutdown of the Kariba dam is not new in the history of the energy sector in Zambia.

For instance, on 26th March 1989 a fire at Kafue Gorge resulted in the loss of 900 MW. Power supply in the country became extremely grave, notwithstanding the immediate assistance Zambia received from neighbouring countries like Zimbabwe and Zaire, through their respective utilities. After the fire, ZESCO was unable to meet both the national demand and exports of electricity to neighbouring countries. Immediately, the Corporation had to negotiate with Société Nationale d’Electricité (SNEL) in Zaire and ZESA in Zimbabwe to import power of 100 MW and 50 MW respectively.

ZESCO incurred huge financial losses in terms of power imports and loss of exports of US$10.3 million and US$6.9 million respectively (As indicated in the Report of the Commission of Inquiry, 1990).

Another incident was that of the drought experienced in 1992 which had a big impact on the electricity sub-sector, severely reducing water levels in the dams and causing a sharp decline in power generation. Consequently, all power exports to Zimbabwe were suspended from June 1992 and the country was forced to import power from Zaire to meet the shortfall. Load shedding was introduced in September 1992 in varying degrees.

Most recently was the power crisis of 2014-2016 which I will return to in subsequent parts of this series.

For those who may not understand fully, the shortage of power means that ZESCO cannot sell enough power to raise the required levels of revenue. On the international market, it means that the Corporation has to import electricity instead of exporting as is usually the case. In addition to the unfavourable scenarios of earning less local revenue and being required to pay hard currency for imported electricity, contribution to government revenues in the form of sales tax is affected.

In a statement issued on 18th August 2024, ZESCO Limited said that it had applied to the Energy Regulation Board for an emergency tariff adjustment to meet the cost of replacement power intended to cushion the effects of the drought induced hydropower generation deficit that is expected to increase as the levels of water available for power generation continue on a downward trend.

The proposed adjustments were intended primarily to generate revenue to facilitate the purchase of additional power from imports and enable the deployment of inland diesel power generation plants. These proposed changes aim to address the ongoing power crisis and minimize its impact across various sectors of the economy.

The power utility said the basis of the Emergency Tariff Adjustment Application was supported by the gazette issued by the Energy Regulation Board (ERB) on 12th April, 2024 regarding the declaration of a state of Emergency pursuant to Part (ii) Article 18 of the Electricity Act No. 11 of 2019.

ZESCO argued that having fulfilled the conditions of subsections (1) and (2) of Article 18 of the Act, it submitted a tariff adjustment in accordance with Article 18 subsection (3) of the Electricity Act which states that “Where the emergency is declared, the licensee shall submit the proposed tariff adjustment to the Energy Regulation Board for approval”.

The proposed alteration of tariff structures and variation of tariffs for residential, commercial and maximum demand customer categories were aimed to facilitate partial cost-recovery and demand-side management.
ZESCO’s application aimed to raise US$14 million monthly, as part of the broader effort to secure US$68 million required to procure 300MW of electricity. The additional power was to be sourced as follows:
• 70MW from South Africa
• 50MW from Mozambique
• 180MW from inland diesel generators

However, on 23rd August, 2024 the Energy Regulation Board declined ZESCO’s application for an adjustment of tariffs. This refusal by the regulator has put the utility company in a quandary. While it has elated consumers and silenced political opponents of the government, it has in fact exacerbated ZESCO’s woes in an already charged atmosphere of at least 18 hours of load-shedding everyday for most domestic and commercial consumers.

……..PART TWO FOLLOWS

Photo: A 1999 Tender advertisement by TANESCO for a joint venture for a 330KV Interconnector project with ZESCO.