The Economics Association of Zambia (EAZ) has observed that there were many onerous terms and conditions that ZESCO endured during the more than twenty (20) years that the bulk supply agreement (BSA) ran.
EAZ Copperbelt chairperson Mathews Muyembe said it was clear that ZESCO has always sought through the years to respect the contractual terms and conditions which were primarily, initially prescribed to prop up the mining economy during the painful transition from ZCCM (Zambia Consolidated Copper Mine) conglomerate to the post privatisation era and in mid- to late nineties.
In the statement to ZANIS in Lusaka Today Mr. Muyembe stated that there were a lot of onerous terms in the BSA.
“The BSA gave CEC an ‘exclusive franchise ‘ for the supply of power on the Copperbelt. This entailed that only CEC could supply all mining and mining related activities. This exclusivity was very restrictive and provided a monopoly to CEC with regard to supply of power to the mining customers on the Copperbelt.
“This meant that though ZESCO was investing in assets to ensure firm supply to the mines, it was never truly able to recover the full cost from the mines, which it was unable to negotiate with on pricing and supply.
“As a result of this exclusivity, at the creation of the Chambeshi Economic Zone, ZESCO constructed a new substation at own cost to supply the new economic zone, but was later fined and had to pay $10 million to CEC,” Mr. Muyembe stated
Furthermore, the Copperbelt EAZ Chairperson noted that in March 2000, CEC transferred the supply of power from the townships to ZESCO under the First Amendment of the BSA upon the realization that it was not profitable given the regulated retail tariffs.
He recalled that the Economics Association of Zambia took note on the possible lack of transparency on metering by CEC.
“As operators of its infrastructure, CEC did not grant or provide access to its meters or metering data to show the true consumption by the mines that showed the true peak on the ZESCO system. As such, CEC enjoyed the additional benefit from what is known as ‘simultaneous maximum demand.
“This is a situation which occurs as a result of the mining companies reaching their maximum demand consumption at different times to the Maximum Demand readings at ZESCO CEC bulk supply points,” he said.
Mr Muyembe further pointed out that given the nature of the mines on the Copperbelt, loss of power would lead to potential loss of life and mining infrastructure assets and ZESCO has therefore invested in excess of One Hundred and Seventy Million United States Dollars ($170 million) in projects on the central corridor to provide secure and reliable power supply for the Copperbelt and beyond.
“We would also like to note that anyone currently can be an Independent Power Producer in Zambia and enter into agreements with any consumer then negotiate with ZESCO for wheeling of power through ZESCO distribution lines. If ZESCO does not agree to the terms, the IPP can seek help from the Energy Regulation Board to force ZESCO into an agreement. That in itself is declaring ZESCO a common carrier,” he said.
He further said the energy reforms that EAZ has been calling for will commercialize ZESCO activities and not turn ZESCO into an insurance company underwriting market demand for independent power producers.