EEC WANTS TO RAISE E8.7 BN FROM CUSTOMERS

MBABANE – The Eswatini Electricity Company (EEC) aims to raise over E8.7 billion through its proposed tariff increase.

The Times SUNDAY’s analysis has revealed that the government company wants to increase the tariffs by at least 52 per cent. This money would be raised in two tranches, E4.2 billion will be raised in the financial year 2025/26 and over E4.5 billion in 2026/27.  According to the Eswatini Energy Regulatory Authority (ESERA), the 2025 increase amounts to 25.51 per cent and 27.06 per cent the following year – translating to 52.57 per cent. The request for additional funds, comes at a time when last year, ESERA, the regulator, approved a 10.14 per cent increase for the 2023/24 financial year and a 8.02 per cent increase for 2024/25.

ESERA is expected to decide by February 1 next year whether to grant or not, the request. The organisation, which is also a public entity, has launched a public hearing to span three months. It is meant to assist the entity in making its final decision. EEC is a Category A State-owned enterprise in terms of the Public Enterprise Control and Monitoring Act No.8 of 1989, wholly-owned by the Eswatini Government. The power utility company’s objectives are to generate, transmit, distribute and supply electricity, and also to import and export it into and out of Eswatini.

Operational

Meanwhile, the request comes in the backdrop of a very healthy operational position for the company. While keeping the lights on and moving the country towards First World status, over the past five years, the company posted impressive earnings, accumulating a total profit of E2.297 billion.  This then begs the question as to what happened to this money?
 EEC made history by declaring and paying a dividend to government as the sole shareholder. The dividend paid amounted to E19 million and was in respect of profits for the year ended March 31, 2021. The dividend payment is guided by the Dividend Policy on Public Enterprises for the Kingdom of Eswatini.

Meanwhile , in 2023 alone, EEC made a profit of E83 million, following a E211 million profit in 2022, E379 million in 2021 and E438 million in 2020. Even further back, the company posted profits of E649 million in 2019 and E537 million in 2018. This strong financial performance is coupled with a healthy asset base valued at E5.7 billion. Additionally, EEC has made significant progress in providing electricity to the nation. As of 2023, 249 014 households are connected to the grid, with 10 316 new connections made that year. The company also serves 937 major clients and 19 380 commercial clients. However, it is these same consumers who will bear the brunt of EEC’s pursuit of greater revenue. Despite the company’s clear profitability, its push for a substantial tariff increase raises concerns about the impact on households and businesses already grappling with rising costs.

Major challenge

The public company cites current electricity prices’ inability to cover the full costs of supplying power across the various tariff categories as a major challenge. According to the Tariff Review Proposal for the financial years 2025/26 and 2026/27 (two years), EEC highlighted that currently, electricity prices do not cover the full costs of supplying electricity across the various tariff categories.“This application, therefore, continues the migration to cost-reflective tariffs.” EEC also needs the money to cater for its expansion plans and ensure the sustainability of its operations as per the 10-year master plan to 2031.

The company’s 2023 financial report outlines its ambitious strategy to provide 100 per cent electricity access to all citizens, while maintaining long-term financial stability. The focus of the strategy prioritises generation efficiency and expansion. Over the period to date, there has been numerous feasibility studies conducted in relation to future generation expansion. There are also a lot of efforts being made to secure funding to implement the projects that have been identified.  “We have set ourselves to work harder to ensure that the strategy is effectively implemented for EEC to give 100 per cent access to electricity to all citizens and also ensure that the business remains financially sustainable.”

Last year, EEC increased the overall distribution lines from 23 193 kilometres to 24 537 in the last financial year and the organisation seeks to increase this network. However, the critical question remains to be answered: Why should the electrification of the entire country come at such a high cost to consumers, especially when the company appears to be in a financially stable position? The tariff increase is being sought in the first year of EEC’s new five-year corporate strategy, dubbed Vutsela 2022–2027.

Expansion

This strategy aims to ensure that EEC remains financially viable and continues to contribute positively to Eswatini’s gross domestic product (GDP). The central focus of this strategy is the expansion of local power generation capacity. Several major projects have been identified to boost EEC’s capacity, including the augmentation of the Maguga Power Plant, adding 10 megawatts (mW) of power and the construction of a new Lower Maguga Power Station that will add 23mW.  Together, these projects will contribute 30mW of additional capacity, on a combined cost of E1.8 billion. There is also a thermal power project that is also in the pipeline. The goal is to meet the country’s growing electricity demand and ensure a reliable energy supply for future developments.

However, the question remains: Should the financial burden of these projects fall primarily on consumers, especially when the company is already profitable? While EEC’s investment in energy infrastructure is crucial for Eswatini’s economic growth and energy sustainability, the timing and scale of the proposed tariff increase has raised concerns about its impact on the general public. With a solid profit track record and significant assets, it begs the question of whether the company could explore alternative funding mechanisms to reduce the burden on consumers.

Could a more gradual approach to its expansion strategy be more prudent? Rather than implementing a steep increase all at once, could EEC phase in the tariff hike over a longer period? Additionally, could the company explore other sources of financing, such as public-private partnerships or external loans, to ease the financial pressure on consumers?

Solutions

Consumer Mandla Dlamini says the ongoing debate over the tariff hike underscores the need for equitable solutions that balance the country’s long-term energy goals with the immediate needs of its citizens. “As EEC moves forward with its ambitious plans to electrify the nation and enhance its power generation capacity, it must consider how to fund these initiatives without placing undue strain on the very consumers it seeks to serve,” he said.He said the company’s strategic vision is essential for Eswatini’s future, but it is equally important to ensure that the journey toward electrification is inclusive and fair, taking into account the financial realities of the population.  The Eswatini Consumer Association has complained about the proposed tariff increases. Prime Minister Russell Dlamini said there was no way Cabinet can approve of the proposed tariffs because emaSwati cannot afford them.

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