ECB’s decision leads to financial constraints for NamPower

The decision by the Electricity Control Board (ECB) last year to not approve a tariff increase by the Namibia Power Corporation (NamPower) is biting into the company’s financial health.

Responding to questions sent by The Namibian, NamPower says the ECB’s decisions led to financial constraints and impacted its ability to generate desired profits.

“This affects NamPower’s ability to cover operational costs, invest in infrastructure, and achieve desired profit margins and long-term financial sustainability,” says NamPower.

The company asserts that increasing prices is unavoidable as long as NamPower has to service the market.

NamPower says it had to request an increase in tariffs to match inflation.

“It is important to note that annual tariff increases will always be a reality – since inflation is a key driver of all costs incurred to provide electricity.

The annual increase requests are driven mainly by increases in energy cost and to collect under-recoveries from past years,” says NamPower.

Last year, the ECB announced an 8% tariff increase, which was later rescinded due to public concerns about affordability.

This increase was originally scheduled to take effect from 1 July 2024 to 30 June 2025.

To mitigate the resulting shortfall for electricity distributors, the Ministry of Mines and Energy allocated N$365 million.

Of this amount, N$221 million was earmarked for NamPower to ensure continued electricity supply and fulfill its mandate, while the remaining N$144 million was allocated to other distributors.

During that time, NamPower had requested a 14.58% increase.

In an interview with Desert FM on Tuesday, ECB chief executive Robert Kahimise said they are aware of the under-recoveries that NamPower is facing, which could lead to a double-digit increase in electricity tariffs.

He said the institutions agreed to reduce those under-recoveries through a yearly tariff review.

“As a regulator entrusted with a mandate of tariff setting, we are well aware of the under-recoveries of NamPower.

What we agree to between the two entities is to gradually reduce those under-recoveries through tariff reviews,” said Kahimise.

Kahimise said they had previously allowed for a gradual reduction of these under-recoveries, taking into account the impact on consumers.

“But we will see what can be allowed this time around in reducing those under-recoveries to NamPower,” he added.