Malawi: Subsidy cripples electricity company

Malawi's sole electricity supplier ESCOM , is still making losses in customers connection costs, contrary to public outcries that the recent hike in fees from K9, 900 ($69) TO K25, 000 ($174) was meant to boost its profit earnings, a senior official has said.
Wiseman Kabwazi, ESCOM marketing manager disclosed that average cost connections for customers who do not consume a lot of electricity, such as households was K65, 000 but ESCOM was compelled to subsidize it in order for many customers to have access electricity. This compels the company to contribute over K30, 000 per each connection.

The statutory corporation connects 15, 000 customers annually, a figure Kabwazi said could reduce drastically if ESCOM did not subsidize costs incurred by the customer to get connected to electrical power.

“To come up with the price, we brought all the stakeholders together and came up with K25, 000 ($174) not because we wanted profits but because we wanted best service for the customer- that is, quick connectivity and the availability of components required to connect customers. And, at the moment, ESCOM is still subsidizing the costs for the customer heavily,” said Kabwazi.

He said, normally, ESCOM is supposed to connect new customers within a month, but now takes up to three months because of inadequate funds to buy equipment, a development he attributed to ESCOM’s heavy subsidies on the customer.

“We do not just fix prices, in fact, we face a lot of challenges in coming up with the best determination for the customer. Things like, should we make the contribution customers pay to get connected cheap and share the expenses, through tariffs, with the existing customer, or the new customer should pay a little bit and we contribute the rest so that our old customers are not affected in case we extend the costs to them? We thought it was better for us to share the costs with the new customer and not burden existing customers,” added Kabwazi.

The statutory corporation last raised the price for connecting new customers in August last year, and Kabwazi rule out the possibility of any price hike any time soon.