INCREASE TARRIFS: ZESCO Must Charge What Power Costs- UPND Member George  Mtonga

INCREASE TARRIFS: ZESCO Must Charge What Power Costs

Why Zambia needs a phased 60% tariff increase over three years, and what that money must buy

By George N. Mtonga, MBA

Zambia has spent a decade pretending electricity is cheap. It is not. We pay for it one way or another. The question is whether we pay at the meter, where the cost is visible, or through debt that our children will inherit.
This is not an argument for making life harder for Zambians. It is an argument for being honest about a bill that is already due.

The Numbers Do Not Lie
ZESCO’s audited 2024 accounts tell the story plainly:
Revenue: K30.8 billion.
Loss: K15.4 billion.
Borrowings: K61.1 billion.
Unpaid bills to suppliers: K54.0 billion.
Emergency power imports: K9.7 billion in a single drought year.

The year before was worse. In 2023, ZESCO lost K39.5 billion, driven by K13.8 billion in exchange losses, K15.9 billion in provisions for customers who will never pay, and a K4.8 billion write-down on equipment. The auditors flagged serious doubt about whether the company could keep operating.

The core problem is simple. ZESCO buys power from independent producers at about 11 US cents per kilowatt-hour and sells it at an average of 7.5 cents. It loses money on every unit it resells.
No business survives selling below cost. A state utility can only delay the reckoning.

How We Got Here
Zambia’s tariff problem is not new. Governments of every stripe have treated electricity prices as a political tool rather than an economic one. Tariffs were held down in election years and raised reluctantly in crisis years. Meanwhile, the cost of building dams, buying from private producers and servicing foreign-currency loans kept climbing.

In April 2023, the Energy Regulation Board approved a five-year framework to move tariffs gradually towards cost. It was the right idea. Then came the 2024 drought. Kariba and Kafue ran low, the President declared a national disaster, and the framework was suspended in favour of emergency tariffs to pay for imported power. Those emergency tariffs ended in October 2025, and the multi-year framework resumed in November 2025.
We now have a second chance to do this properly.

We should not waste it.
Every Unpaid Kwacha Lands Somewhere
Subsidies do not disappear when they are left out of the budget. They move.
Into public debt. The International Monetary Fund now counts ZESCO’s unpaid bills to power producers as part of Zambia’s public debt. As of mid-2025, ZESCO owed US$181 million to domestic producers and US$81 million to foreign ones. Every Zambian carries that debt, whether or not they have a meter.

Into the IDC’s books. The Industrial Development Corporation carries a K6.7 billion loan to ZESCO for Kafue Gorge Lower, backed by a government guarantee. The IDC also cut its valuation of ZESCO by K20.7 billion in 2024. That is national wealth lost on paper in a single year.

Into the courts. When ZESCO failed to pay Maamba Collieries, the arrears reached US$432 million and ended in international arbitration. Unpaid bills become legal judgments, and legal judgments become sovereign risk.
Into the Treasury’s promises. ZESCO’s auditors accept that it can continue operating only because the government has formally committed to support it.

Cheap tariffs are not a gift to the people. They are a loan taken out in the people’s name.
The Hidden Cost of “Cheap” Power
There is another bill we rarely count: the cost of power we do not get.

By mid-2025, some households were receiving as little as five hours of electricity a day. Businesses ran diesel generators at many times the cost of grid power. Factories cut shifts. Small traders lost stock. Students studied by candlelight.

A tariff that is too low to fund maintenance and new generation is not affordable electricity. It is electricity that does not arrive.

The most expensive unit of power is the one that never reaches the socket.
Discipline Is Already Working
There is good news, and it matters for this argument.

ZESCO’s unpaid bills to domestic power producers stood at US$1.5 billion at the end of 2022. By mid-2025 they had fallen to US$181 million. That did not happen by accident. It happened because tariffs rose, collections improved and
were paid down.

The lesson is clear. When ZESCO is allowed to charge closer to cost, it pays its bills. When it pays its bills, investors return. Over the past two years, ZESCO has signed agreements with private developers for hundreds of megawatts of new solar capacity, and more than 1,500 megawatts of new generation is expected on the grid in 2026.
Stopping now would undo that progress.

How Much Is Enough
The arithmetic is simple.
To cover the cost of power alone, the average tariff must rise from 7.5 cents to 11 cents per kilowatt-hour. That is an increase of about 47 percent, and it only stops the bleeding.

To reduce debt and invest in the grid, ZESCO needs roughly 12 cents per kilowatt-hour. That is an increase of about 60 percent from today’s average.

Done at once, that would be a shock. Done in stages, it is manageable. I propose an average increase of about 17 percent a year for three years:
November 2026: about 17%
November 2027: about 17%
November 2028: about 17%
Compounded, that adds up to roughly 60 percent by 2029.

What the Money Must Buy
At 2024 sales volumes, a 60 percent increase raises about K18 billion a year. That money should be ring-fenced and split roughly three ways:
About K10 billion to close the operating deficit, so ZESCO stops needing bailouts.
About K4 billion to pay off arrears and debt, starting with the power producers whose unpaid bills scare away new investors.

About K4 billion for maintenance and grid expansion, so the next drought does not become the next crisis.
Rising sales from new solar and thermal plants will make this easier, not harder. Every new megawatt sold at a fair price strengthens the balance sheet.

Who Should Pay
The increase must not fall on the poor.
Protect poor households. The low-rate lifeline block used by low-income households should stay frozen. Protecting it is the precondition for public trust.
Implement what is already approved. The multi-year framework already provides for the next step. The top residential band, for the heaviest users, is scheduled to rise from K3.45 to K4.04 per unit, about 17 percent. That step should go ahead on schedule, not be quietly shelved.

Renegotiate mining contracts. Mining customers provide more than half of ZESCO’s revenue, K17.2 billion in 2024, largely under long-term contracts. That is where the real gap lies. Those contracts must be brought up to cost.

Price exports properly. Power sold to neighbouring countries brought in K7.2 billion in 2024. It must be priced at regional market rates, never below what it costs to produce.
The burden should fall hardest on those most able to bear it: large users, mines and export buyers.

A Tariff Is a Contract
Citizens will accept higher prices only if they get something in return. Every increase must come with conditions:
Government pays its own bills. Ministries, schools, hospitals and other state institutions must settle what they owe ZESCO. The state cannot ask citizens to pay more while it pays nothing.
Losses fall on a published schedule. Theft, illegal connections and technical losses must come down to targets the public can check.

ZESCO publishes quarterly accounts. Anyone should be able to see where the money goes.
Staff and overhead costs are benchmarked. ZESCO’s costs should be compared openly with efficient regional utilities.

The regulator decides. The Energy Regulation Board, not politicians, must set prices, free of election-season pressure.
A tariff increase without these conditions only feeds waste. With them, it is an investment in reliable power.

Answering the Critics
Three objections deserve a direct answer.
“Households already paid heavily under the emergency tariffs.” They did. Under the emergency tariffs, the top residential band reached K6.39 per unit. That is precisely why the lifeline block must be protected and why the heaviest burden must shift to mines and large users. A phased increase of 17 percent a year is far gentler than the emergency shock households have already absorbed.

“Fix ZESCO first, then raise prices.” Both must happen together. Efficiency gains alone cannot close a gap of this size. Even a perfectly run utility cannot survive buying at 11 cents and selling at 7.5. That is why every increase must be tied to published loss-reduction and cost targets.
“Raising mining tariffs will scare off investment.” Mines need reliable power more than they need cheap power. A copper mine forced onto diesel generators during load-shedding pays far more than a cost-reflective tariff. Investors fear blackouts and broken contracts, not fair prices.

The Window Is Open
The timing favours action.
The kwacha is stronger. It appreciated 18.2 percent in 2025 and a further 12.9 percent by March 2026, lowering the kwacha cost of power bought in dollars.
Inflation is under control. It fell to 7.1 percent by March 2026, back within the central bank’s target range

Public debt is falling. It is projected to decline from about 100 percent of GDP in 2025 to 73 percent by 2028. An unreformed ZESCO is the biggest threat to that path.

The World Bank agrees. It recommends reaching cost-reflective tariffs by 2027, with protection for vulnerable households.
Stable prices and a stronger currency will not last forever. The time to fix ZESCO’s finances is when the shock is smallest. That time is now.

The Choice Before Us
Zambia is already paying for its electricity. We are paying in load-shedding, in public debt, in legal judgments and in investors who stay away. The only question left is whether we pay honestly, at the meter, where the cost can be seen, managed and protected for the poor, or whether we keep paying through debt that grows every year we delay.

A nation that will not price its power honestly will eventually have no power to price.