Through two separate tolls, namely the Government National Electricity Standard Cost Levy and the Standard Domestic Charge, BPC taxes Batswana a staggering average of P223 million per year to cover a part of its operating costs. In addition to this, electricity tariffs are hiked significantly every year to cover for BPC’s endless losses and perennial mess. Staff Writers KEABETSWE NEWEL and TLOTLO KEBINAKGABO report
Every time Batswana buy electricity for domestic consumption, they are charged 5 thebe per kilowatt hour for the Government National Electricity Standard Cost Levy and the Standard Domestic Charge respectively. The two levies are an addition to Value Added Tax (VAT). However, they are to be used specifically to bankroll some projects and operations of the cash-strapped BPC.
According to Dineo Seleke, the Marketing Manager at BPC, the Government National Electricity Standard Cost Levy is used to subsidize the National Electricity Standard Connection (NESC). The National Electricity Standard Cost (NESC) is a uniform cost of electricity connection across Botswana. It is applicable only to new household connections in all recognized electrified settlements, villages, towns and cities.
Such households are to be within the boundaries of a locality electrified net-work supply area as determined by Botswana Power Corporation (BPC). The NESC was introduced in October 2010. As a result of the levy, it enables BPC to charge a standardized connection fee of P5600 that Seleke says has accelerated household connections. But quite curiously, she says BPC does not use the Government National Electricity Standard Cost Levy directly. “The Levy is used to fund connection subsidies,” she offers.
The national electrification project falls under the responsibility of BPC. It is the BPC which further implements the electrification. The levy is charged and collected by BPC for use. Through this levy, Batswana are charged 5 thebe per kilowatt hour, according to BPC. The way the levy works is that the more power one buys for domestic use, the more one pays the levy. As an example, when one buys P50 worth of electricity for household use, one will be taxed P2.41 in Government National Electricity Standard Cost Levy. The figure rises to P4.81 when one purchases P100 worth of electricity for domestic use.
According to Seleke, BPC makes around P165 million per year from charging Batswana for for their household consumption. BPC sells around 3.3 billion kWh of electricity annually. At around 1.2 billion kWh, the household sector is one of the largest consumers of electricity and compares well with the commercial sec-tor which consumes just around the same amount. The mining sector consumes around 600 million kWh while the rest goes to various other sectors.
But BPC does not tax Batswana only through the Government National Electricity Standard Cost Levy. There is an-other levy called the Standard Domestic Charge which also bills the domestic consumer a certain fee per kilowatt hour. In a year, Seleke says BPC collects P58 mil-lion from Batswana as Standard Domestic Charge but would not go into details as to what its purpose is. However, it emerges that the Charge is used by BPC to cover some of its operational costs.
The Botswana Gazette asked Seleke about the relevance of the levies, given that BPC is funded by the taxpayer in terms of the Consumer Tariff Subsidy for the cost of its operations and in view of repeated tariff hikes. She answered that maintenance/operating costs are financed through revenue generated from BPC Operations in the main electricity sales. Seleke added that mega projects such as refurbishment of Morupule A Power Station, electrification of villages and trans-mission lines are financed through direct funding from government as a shareholder. She also said construction of major infrastructure projects like Morupule B are funded mainly through a long-term loan that BPC repays from its operation revenue. “The NESC/Gov’t Levy specifically aims to standardize the domestic connection costs across the country by subsidizing connection costs exceeding P5000,” she offered. “The Fixed Charge applies to all customer categories to cover fixed operating costs and is not a levy but part of the tariff structure.”
While there is direct funding from the taxpayer, Batswana are also taxed through the Government National Electricity Standard Cost Levy to also subsidize electrification of villages. Cumulatively, while Batswana are taxed up to P223 million annually in levies to subsidize BPC operations and projects, they also feel the pinch of rising electricity tariffs which BPC recently said will be used to cover for shortfalls at Morupule B. It is the same power plant which Seleke says is financed through long term borrowings that are repaid by revenue from BPC operations. Two weeks ago, Seleke’s principal, the Interim CEO of the power utility, Edward Rugoyi, found himself backed against the wall as he struggled to explain why BPC should be given permission to in-crease electricity tariffs when it has been bleeding money through Morupule B, the multi-billion pula flagship power project which is nowhere close to completion seven years ago after the scheduled date of commissioning. Rugoyi had sought permission from the Botswana Energy Regulatory Authority (BERA) to increase tariffs by 5 percent in 2021 and 4 percent in 2022. He argued that the increment was necessary in order to close the under-recovery gap between the Total Cost of Electricity Supply and the Total Sales Revenue.
“BPC continues to accumulate losses due to low availability of Morupule B and the increasing cost of importing power,” he said. “This precarious financial position will continue if BPC tariffs are not cost-reflective. While it has cushioned against non-cost reflective tariffs, the government subsidy has been decreasing over the last five years, resulting in a revenue mismatch.”
BPC was given P800 million last year, a decline from P1.4 billion in 2018. While over P11 billion was spent on Morupule B and a further P8 billion shared between it and the older power station on the same premises, the power plant is still dysfunctional. The money, which Seleke said was taken out as loans to finance this mega project, will be paid by the taxpayer. Two weeks ago, Rugoyi said only two units are functional at Morupule B, producing 230MW. “Remedial works at Unit 4 were delayed by COVID-19 lockdowns while Unit 1 is expected to be finished by 2023,” he said.
Morupule B was supposed to have an output of 600MW. Consequently, BPC imports over 580MW of electricity mainly from South Africa, the Southern African Power Pool (SAPP) and Nampower in Namibia. The costs of the power imports pile up to a staggering P250 million per month, which means that approximately P3 billion is blown on power imports in 12 months. The taxpayer foots this huge sum of money because of the mess at Morupule B where delays never end. While the 600MW expected from Morupule B was expected to cushion the taxpayer from losing so much money, its completion remains a pie in the sky. Ac-cording to Rugoyi, COVID-19 will only make matters worse. Chinese contractor, China National Electric Engineering Company (CNEEC), is busy doing remedial works at Morupule B, the 600MW power station at Palapye. The remedial works, which Seleke says will be paid for by the contractor, are expected to exceed P2 billion.