this is very good news kwa wanaopenda maendeleo,i didnt know serikali kimy kimya kumbe walibadilisha electricity act 2008 and reverse Tanesco monopoly,its a good start lakini still kuna mengi ya kubadilisha,na hii ya tanesco kujifanya wanataka kucharge wengine kwenye transmission lines is not fair kabisa,wakumbuke it was public investment miaka yote sio wao,kila kampuni ilipe fee sawa kutumia hizo lines wakiruhusiwa Tanesco kufanya wanachofanya cost zote zitamrudia mwananchi
Tanzania: Power Tariffs Will Not Come Down - Artumas
Alvar Mwakyusa
23 August 2010
Consumers have been warned not to expect lower power tariffs despite the interest expressed by potential independent power producers (IPPs) in entering the sector, following the government's decision to allow more private sector participation in the generation, transmission and distribution of electricity.
The green light given to the new players is expected to intensify competition, but this, industry players explain, will not automatically result in low power prices. The stakeholders point at the required heavy capital investment.
What is certain, however, is that the monopoly enjoyed they Tanzania Electric Supply Company (Tanesco) in electricity supply is set to end soon, as the IPPs have been allowed on compete with the parastatal in selling power to consumers.
The outgoing Parliament amended the Electricity Act, 2008, to allow the IPPs to transmit, distribute and supply power to consumers. The several IPPs already operating in the country have hitherto only been allowed to generate power and sell it to Tanesco under special contracts.
Though the company has not given an indication as to how many foreign investors have expressed interest in entering the sector, the IPPs are expected to give the loss-making public power utility a run for its money. The consumers will have a wider choice and more reliable supply, but it's too early to celebrate, as the prices are likely to remain high.
Speaking to The Citizen in an interview last week, Artumas Tanzania managing director Mr Salvator Ntomola said investment in the power sector was still costly because of an unfavourable business climate.
To bring the power prices down, Mr Ntomola said the government would have to make "meaningful concessions and offer more investments incentives".
Artumas, which generates and supplies power in the southern regions of Lindi and Mtwara from natural gas, is also involved in the drilling for natural gas in Mnazi Bay in Mtwara.
"There won't be a quick price reduction if the climate remains unfavourable for investments. The government should show commitment and offer players in the sector incentives to reduce start-up costs."
On the other hand, Tanesco managing director Mr William Mhando also said there would also not be any quick power prices increases. However, he said Tanesco was prepared to face any competition.
"We would have an advantage over the newcomers because we have transmission infrastructure. Those coming to invest here will have to use our infrastructure at a fee," Mr Mhando told The Citizen in Dar es Salaam.
The competition might also not be as stiff as many people might think because the law still protects the state power utility by giving it the right of first refusal. This means that other suppliers will only be able to deal with customers if Tanesco fails to do so.
Mr Mhando said that aspect of the law should not worry consumers or investors because more than 80 per cent of Tanzanians had still no access to electricity.
"The most import aspect of the competition will be in the increased reliability, access and power supply. A large part of the country is still in the dark and the suppliers will have a field day," he said.
Energy and Minerals Minister Mr William Ngeleja also cautioned against the expectation of lower power prices.
He told The Citizen in an interview in Dar es Salaam last week: "It won't be a free market per see. Prices will still be regulated by Ewura (Energy and Water Utilities Regulatory Authority) to protect the consumers."
Mr Ngeleja said a number of investors had shown interest investing in the power sector. However, he would neither give the exact number nor name those interested or their countries of origin, saying it was too early in the process to do so.
"In fact, the private producers had expressed their interest to invest in sector even before the new law was passed," he said.
For his part, Mr Ntomola lamented that the government had once promised to offer incentives through the Tanzania Investment Centre (TIC) but other government agencies frustrated the exercise as they refused to cooperate.
"The Tanzania Revenue Authority (TRA) and Ewura are crucial organs in facilitating investments in the power sector," he said.
But the TIC executive director, Mr Emmanuel Ole Naiko, assured existing and potential investors in the sector of his organisation's support.
"The private sector is the way forward. By having legislation that would end with Tanesco's monopoly shows the government's commitment to attracting other players into the sector to increase efficiency," Mr Ole Naiko said in a telephone interview.
"The issue of IPPs has also been articulated in the Public Private Partnerships (PPPs) Act and this means that the private producers could partner with the public sector in undertaking such project," he added.
Over dependence on hydro-electric power and rising demand led to a serious power shortage crisis since the early 1990s, as Tanesco could only produce 697MW against the demand of 769MW.
This forced the government to open up power generation to private producers and in 1994, commissioning the diesel powered Independent Power Tanzania Limited (IPTL), with an installed capacity of 100MW. However, the company's operations have been marred by controversy over its high capacity charges.
Another IPP, the gas-powered Songas, came as power shortages and load shedding continued. Songas capacity is 182MW.
Currently Tanesco has sought permission to increase its power tariff by 62.3 per cent by 2013, partly to offsets its huge debts. This year alone, the public utility expects a Sh34.1 billion loss.
Hardly 10 per cent of the population of 40 million has access to the national power grid mostly due to the inability of the public power utility to invest in new infrastructure to generate and distribute power.
According to Energy minister Ngeleja, the Electricity Act 2008, is among the measures the government has put in place to attract investors in the power sector.
"We hope the new legislation will solve power hitches in the country and ensure there is enough electricity for economic activities," the minister said.
Canadian energy producer Artumas Group has been turning natural gas into commercial electricity since 2004, when it won a concession to explore Tanzania's Mnazi Bay gas field.
The company signed an agreement with the government to launch the Mtwara Energy Project in December 2008, two years after it had began producing electricity at the Mnazi Bay.
But despite having signed its deal a few months before the Act was passed, Artumas was denied the licence it needed to secure donor support for the Mtwara project.
Following several months of petitions, Ewura granted Artumas an exemption in February to obtain a licence and finally start producing and distributing electricity to the two regions.
While IPPs have produced power in the past, Artumas has won the rights to transmit its power from Mtwara directly to consumers, an important step towards easing Tanesco's monopoly.
The IPPs, which were allowed only to generate power while Tanesco remained in charge of distribution and transmission are, Independent Power Tanzania Ltd (IPTL) and Songas.
In 2006, a major power shortage crisis led to the contracting of Richmond Development Company under a $120 million emergency power generation. The controversial IPP was later found to have been a shell company and this led to the resignation of the then Prime Minister, Mr Edward Lowassa, and two Cabinet ministers in early 2008.
Much as the government was willing to have the IPPs to supplement Tanesco's capacity in generation, distribution and transmission, the Richmond scandal sparked the need for greater vigilance in the government and Parliament.
And, when the Electricity Act of 2008 was presented to Parliament in 2008, the majority of the MPs were keen to ensure there was no repeat of 2006.
By the end of year 2008, the IPPs had a total installed capacity of 282MW. Tanzania's interconnected grid system has a capacity of 773MW, of which 71 per cent is hydro generate power.
The largest hydropower complexes are the Mtera and Kidatu dams on the Great Ruaha River.
Copyright © 2010 The Citizen. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com).
Tanzania: Power Tariffs Will Not Come Down - Artumas
Alvar Mwakyusa
23 August 2010
Consumers have been warned not to expect lower power tariffs despite the interest expressed by potential independent power producers (IPPs) in entering the sector, following the government's decision to allow more private sector participation in the generation, transmission and distribution of electricity.
The green light given to the new players is expected to intensify competition, but this, industry players explain, will not automatically result in low power prices. The stakeholders point at the required heavy capital investment.
What is certain, however, is that the monopoly enjoyed they Tanzania Electric Supply Company (Tanesco) in electricity supply is set to end soon, as the IPPs have been allowed on compete with the parastatal in selling power to consumers.
The outgoing Parliament amended the Electricity Act, 2008, to allow the IPPs to transmit, distribute and supply power to consumers. The several IPPs already operating in the country have hitherto only been allowed to generate power and sell it to Tanesco under special contracts.
Though the company has not given an indication as to how many foreign investors have expressed interest in entering the sector, the IPPs are expected to give the loss-making public power utility a run for its money. The consumers will have a wider choice and more reliable supply, but it's too early to celebrate, as the prices are likely to remain high.
Speaking to The Citizen in an interview last week, Artumas Tanzania managing director Mr Salvator Ntomola said investment in the power sector was still costly because of an unfavourable business climate.
To bring the power prices down, Mr Ntomola said the government would have to make "meaningful concessions and offer more investments incentives".
Artumas, which generates and supplies power in the southern regions of Lindi and Mtwara from natural gas, is also involved in the drilling for natural gas in Mnazi Bay in Mtwara.
"There won't be a quick price reduction if the climate remains unfavourable for investments. The government should show commitment and offer players in the sector incentives to reduce start-up costs."
On the other hand, Tanesco managing director Mr William Mhando also said there would also not be any quick power prices increases. However, he said Tanesco was prepared to face any competition.
"We would have an advantage over the newcomers because we have transmission infrastructure. Those coming to invest here will have to use our infrastructure at a fee," Mr Mhando told The Citizen in Dar es Salaam.
The competition might also not be as stiff as many people might think because the law still protects the state power utility by giving it the right of first refusal. This means that other suppliers will only be able to deal with customers if Tanesco fails to do so.
Mr Mhando said that aspect of the law should not worry consumers or investors because more than 80 per cent of Tanzanians had still no access to electricity.
"The most import aspect of the competition will be in the increased reliability, access and power supply. A large part of the country is still in the dark and the suppliers will have a field day," he said.
Energy and Minerals Minister Mr William Ngeleja also cautioned against the expectation of lower power prices.
He told The Citizen in an interview in Dar es Salaam last week: "It won't be a free market per see. Prices will still be regulated by Ewura (Energy and Water Utilities Regulatory Authority) to protect the consumers."
Mr Ngeleja said a number of investors had shown interest investing in the power sector. However, he would neither give the exact number nor name those interested or their countries of origin, saying it was too early in the process to do so.
"In fact, the private producers had expressed their interest to invest in sector even before the new law was passed," he said.
For his part, Mr Ntomola lamented that the government had once promised to offer incentives through the Tanzania Investment Centre (TIC) but other government agencies frustrated the exercise as they refused to cooperate.
"The Tanzania Revenue Authority (TRA) and Ewura are crucial organs in facilitating investments in the power sector," he said.
But the TIC executive director, Mr Emmanuel Ole Naiko, assured existing and potential investors in the sector of his organisation's support.
"The private sector is the way forward. By having legislation that would end with Tanesco's monopoly shows the government's commitment to attracting other players into the sector to increase efficiency," Mr Ole Naiko said in a telephone interview.
"The issue of IPPs has also been articulated in the Public Private Partnerships (PPPs) Act and this means that the private producers could partner with the public sector in undertaking such project," he added.
Over dependence on hydro-electric power and rising demand led to a serious power shortage crisis since the early 1990s, as Tanesco could only produce 697MW against the demand of 769MW.
This forced the government to open up power generation to private producers and in 1994, commissioning the diesel powered Independent Power Tanzania Limited (IPTL), with an installed capacity of 100MW. However, the company's operations have been marred by controversy over its high capacity charges.
Another IPP, the gas-powered Songas, came as power shortages and load shedding continued. Songas capacity is 182MW.
Currently Tanesco has sought permission to increase its power tariff by 62.3 per cent by 2013, partly to offsets its huge debts. This year alone, the public utility expects a Sh34.1 billion loss.
Hardly 10 per cent of the population of 40 million has access to the national power grid mostly due to the inability of the public power utility to invest in new infrastructure to generate and distribute power.
According to Energy minister Ngeleja, the Electricity Act 2008, is among the measures the government has put in place to attract investors in the power sector.
"We hope the new legislation will solve power hitches in the country and ensure there is enough electricity for economic activities," the minister said.
Canadian energy producer Artumas Group has been turning natural gas into commercial electricity since 2004, when it won a concession to explore Tanzania's Mnazi Bay gas field.
The company signed an agreement with the government to launch the Mtwara Energy Project in December 2008, two years after it had began producing electricity at the Mnazi Bay.
But despite having signed its deal a few months before the Act was passed, Artumas was denied the licence it needed to secure donor support for the Mtwara project.
Following several months of petitions, Ewura granted Artumas an exemption in February to obtain a licence and finally start producing and distributing electricity to the two regions.
While IPPs have produced power in the past, Artumas has won the rights to transmit its power from Mtwara directly to consumers, an important step towards easing Tanesco's monopoly.
The IPPs, which were allowed only to generate power while Tanesco remained in charge of distribution and transmission are, Independent Power Tanzania Ltd (IPTL) and Songas.
In 2006, a major power shortage crisis led to the contracting of Richmond Development Company under a $120 million emergency power generation. The controversial IPP was later found to have been a shell company and this led to the resignation of the then Prime Minister, Mr Edward Lowassa, and two Cabinet ministers in early 2008.
Much as the government was willing to have the IPPs to supplement Tanesco's capacity in generation, distribution and transmission, the Richmond scandal sparked the need for greater vigilance in the government and Parliament.
And, when the Electricity Act of 2008 was presented to Parliament in 2008, the majority of the MPs were keen to ensure there was no repeat of 2006.
By the end of year 2008, the IPPs had a total installed capacity of 282MW. Tanzania's interconnected grid system has a capacity of 773MW, of which 71 per cent is hydro generate power.
The largest hydropower complexes are the Mtera and Kidatu dams on the Great Ruaha River.
Copyright © 2010 The Citizen. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com).
