Does CEC buy power from ZESCO Limited at uneconomic tariffs?

The tariffs CEC pays for the power it sources from the national utility, ZESCO Limited (ZESCO) is provided for in the contract existing at any time between the parties. The current contract is a 13-year bulk supply agreement (BSA), which stipulates the tariffs for the various services exchanged between the two utilities. It should be stated that these services flow both ways, meaning that it is not only CEC that receives and pays for services from ZESCO as ZESCO equally receives certain services from CEC and pays for them. Over the life of previous BSA and leading up to the current one, the tariff was periodically been revised upwards, contrary to claims that the tariff has remained low since 1997 when the first agreement between CEC and ZESCO came into effect, that retail customers pay more than the mines, and that CEC has received a disproportionate share of the mining power supply revenues. Further, the tariffs are regulated and approved by the Energy Regulation Board (ERB).

Over the years, all stakeholders (mines, ZESCO, CEC, government) have come together with respect to achieving a mining tariff that is beneficial to the continued sustainability of both the power sector and the mines. Therefore, stakeholders successfully negotiated and implemented upward adjustment to mining tariffs of 35%, 28% and 30% in 2008, 2011 and 2017 respectively, guided by the ERB’s Cost of Service Study of 2006. Another tariff increment was negotiated and agreed by stakeholders in 2017, achieving a uniform mines end-user tariff. Overall, between 2008 and 2017, the tariff increased by a factor exceeding 300%. These tariffs are not set by CEC but are an outcome of negotiation involving all relevant parties and regulated/approved by the ERB. The tariff structure has always been such that the larger share of CEC’s revenues from electricity sales to the mines is paid to its supplier, ZESCO. The recently completed Cost of Service Study, which was spearheaded by the regulator, is expected to inform electricity pricing so that all electricity consumers at the various points in the value chain should pay tariffs that are expected to be cost-reflective.