By Agness Changala
Energy Regulation Board (ERB) Chairperson Raynolds Bowa says Zambians will only benefit from reductions in international oil prices once the country’s exchange rate stabilises.
And Bowa has said the ERB has managed the fuel supply quite well and not experienced serious issues of petroleum supply within the country.
Speaking to Daily Revelation in an interview, Bowa observed that while the international oil process was moving downwards the exchange rate was moving in the opposite direction.
“So I think that it is not really reasonable to expect to benefit from reductions in the international price until such time we are able as a country to stabilize our exchange rate. Once we manage that one, ahhh then you can call me and will tell you that the price is going down internationally and we expect to benefit,” Bowa said. “For now, because of the movement on the exchange rate, it is difficult to see the benefit in price arising for the Zambians.”
He however said the country should be optimistic that it will do well in the coming year.
“But then again we have got the beautiful year ahead of us and we must be optimistic that we will do well as a country in the coming year. And if we do better, than we have done in the previous year, then surely some benefits should show,” he said.
Earlier, reviewing the year in the electricity sector and fuel sector, Bowa said the ERB is happy that towards the end of 2023, the board received the cost of service study report, which determines an independent cost of producing and supplying electricity.
He said having received the report, the ERB was able to project for the next five years what is going to be a reasonable cost of electricity which allows the consumers to purchase electricity and pay for it.
Bowa said this will also allow the electrical utility to continue to survive as a business and continue to invest in the growth and capacity to supply.
“So we dealt with that and in the course of this we approved ZESCO’s tariff migration plan for the next five years. So on the electrical side, we are settled there,” Bowa said.
He said the report was commissioned a long time ago but it was released by the consultant in December 2021.
Bowa said in the first half of 2022, the ERB was consulting with the government to make sure that the government understood the implications of the report and would be supportive of the decisions that the board would take.
He said in the middle of June 2022, the government was in alignment and had prepared the green paper and white paper subsequently in which they consulted with the citizens as to what was going to happen.
Bowa said after the process was completed, ERB undertook a review of ZESCO’s application for revised tariffs which was to be done in consultation with reference to the report.
“So we completed that process and I believe we had worked out the tariffs somewhere around October, we announced it and it came into effect. So that tariffs now are effective from 2023 to 2027 and we should be on stable ground for the next five years because everybody knows what the price will be, they can all plan for that. ZESCO also will know how much revenue they are going to receive and they can plan their projects accordingly,” he said.
And Bowa said there were some changes that occurred soon after there was change of the government.
He explained that previously, the government used to procure petroleum products on behalf of the country.
“That was no longer feasible and the new government said no, this is a private sector driven initiative. Additional to that, they took the decision to close the Indeni Petroleum Refinery. That too was a prudent decision because as a country we have operated that refinery for 50 years and 50 years there had been insufficient investment in that asset. It had reached the limit of its useful life and so we closed it down,” Bowa said.
“They then took another decision which was that the pipeline from Dar es Salaam would now be used to deliver diesel into the country rather than bring it by road as we had been doing and together with that decision to utilize the pipeline for finished products, comes the inevitable decision that because that pipeline does not have sufficient capacity to deliver all of our requirements as a country, we will need to make investments into that pipeline to expand its capacity over the several years.”
Bowa said the ERB’s reasonable expectation is that this should be completed within the next few years from 2024.
He explained that at the moment, 80 percent of diesel requirement is arriving by pipeline, then the balance of 20 percent is coming by road and all of petrol comes by road, kerosene and aviation fuel also comes by road.
“It also means that because the product is being procured by the private sector players, our pricing in the country must be such that it’s attractive to these players to enable them to bring the product into Zambia. If you notice, almost all of them are international companies, there is no obligation to bring their fuel to Zambia. They can take it to any of our neighboring countries if our price doesn’t make sense to them,” said Bowa.
“And so our primary consideration in arriving at a price is to ensure that the price that we put in the market is such as to allow for product to arrive here. If we get it wrong it means we will have fuel shortages and so we should congratulate ourselves as people that this kind of thing hasn’t happened in the last two years. Mind you, the private sector supplying has only been doing it for two years from late 2021 until now.
So we have got the price right. The idea is to have a balance where the consumer is not paying too much but it’s still profitable for the supplier.
And that’s the job of the ERB and so far we appear to have managed it quite well and we have no serious issues of petroleum supply within the country. And so I think that the year has ended on a good note.”
