27 Aug 2024
Re: Tariffs and policy
The Chamber raised concerns about the capacity within TAU to deal with current issues, particularly in light of recent departures from senior positions. TAU advised that they have been on a lengthy recruitment drive, with currently little success, particularly in the specialist engineering areas.
The Chamber also expressed concern at the ongoing burden of the high tariff, and its impact on depressing the economy. TAU advised that they continue to ‘lose money’ at the current tariff, due to losses sustained during COVID, increased fuel prices, high FOREX, and high receivables. TAU has not paid any dividends to the government since COVID. TAU contrasted our high tariff with other countries with lower tariff but lower reliability. TAU policy is stated to focus on high up-time. TAU advised that the “fuel surcharge (5c)” continues to be insufficient to cover additional fuel costs, and is still short by 10-15c.
The Chamber remains concerned at the prospect of even further tariff increases, and the lack of any tangible progress towards increasing renewable energy. Chamber notes that renewable energy decouples electricity cost from the USD exchange rate and oil prices, features which make its adoption an economic as well as environmental imperative. Renewable energy hardware costs are dropping in price consistently, and if TAU does not go down the renewable path, consumers may soon ‘go it alone’ – with dire consequences for TAU’s revenues.
The Chamber notes the unfortunate reliance on foreign consultants, who frequently answer more to the agenda of their international funders, rather than providing practical solutions that suit the local environment. This is particularly evident in the typical public procurement processes, which can unnecessarily drive up the price of projects to the point where they don’t get done, or are not fit for purpose. Artificially high renewable energy project pricing can inaccurately suggest that the projects are not viable, or would not reduce tariffs, while private sector experience suggests the opposite.
The Chamber has proposed that TAU trial the use of local Expressions of Interest for ‘design and build’ projects – or even design/build/own/operate/transfer (DBOOT) – where the focus is on achieving a measurable outcome rather than relying on a prescriptive foreign design.
TAU sought feedback on the proposed Independent Power Producer project that they launched, offering to pay producers 25 cents per unit for electricity on a 10 year contract. Chamber noted that 25 cents is significantly lower than the current fuel component of the tariff, and that 10 years is insufficient security for projects that typically have a 9 year payback period. TAU acknowledged the 10 year term issue, and will consider an amendment.
The Chamber has questioned the level of autonomy that the TAU board has with regards to major financial decisions, tariffs and capital expenditure, and whether there is political pressure brought to bear on key decisions.
TAU indicated they continue to have issues with 90 day+ receivables, and this notably includes the business community, often stemming from outstanding accounts accrued during COVID. The Chamber agrees that payment needs to be enforced in the same way as by any other commercial supplier, and discussed the possibility of use of pre-paid metering in appropriate cases.
The Chamber intends to maintain a regular dialogue with TAU, particularly while tariffs are of such major concern. TAU has agreed to continue the discussion.