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Electricity rates remain unchanged

The Lesotho Electricity and Water Authority (LEWA) Board at its meeting held on Thursday 18 April, 2019 decided and approved that :-

( 1) LEC’s Revenue Requirement for Financial Year 2019/20 will be M901.48 million (instead of M1.075 billion as requested by the Company);

(2) There will be a Zero percent (0%) tariff increase on the Energy and Maximum Demand charges for all customer categories in 2019/20;

(3) The current charges for connection, wiring testing, wiring re-testing, survey, resurvey, licensing for wiring, meter testing and house extension remain unchanged for the Financial Year 2019/20;

(4) There will be a 2 level Block-increasing tariff with lifeline Tariff for domestic customers, The first Block is for consumers using between 0-30 units (kWh) which is priced at M0.7273/kWh .The second Block is for consumers consuming above 30 units (kWh) which is set at M 1.4782/ kWh; and

(5 ) The new tariffs become effective from 01 May, 2019.

REASONS FOR THE DECISION
Based on the facts and evidence presented to the Authority by both the Company and the public, the Authority found the justification for a 14,2% tariff increase on both Energy and Maximum Demand (MD) charges not consistent with LEWA’s Regulatory Principles and Guidelines. The Authority took into consideration, amongst other things, that:

( 1) In order to meet its Revenue Requirement of M1.075 billion, energy and maximum demand charges would need to increase by 17.0654%;
(2) The LEC’s Revenue Requirement for the Financial Year 2019/20 is M901.48 million and in order to meet it, the tariff will decrease by -1.9116% for both energy and maximum demand charges, without the introduction of lifeline tariff to cater for disadvantaged customers;
(3) Introducing pro-poor tariff is in line with Energy Policy approved in 2015 and it’s within the LEWA mandate to do so, Lesotho Electricity Authority Act, 2002, as amended and LEA (Electricity Price Review and Structure) Regulations, 2009;
(4)When introducing the lifeline tariffs, the LEC’s tariffs (for both energy and maximum demand charges) will not increaseThe Company will still be able to recover its Revenue Requirement of M901.48 million;
(5) LEC’s operating expenses are set at M116.44 million instead of M120.98 million requested by the Company;
(6) LEC is allowed full depreciation charge of M109.04 million in line with its proposal;
(7)The Company is allowed M432.48 million for bulk supply cost. The Company’s bulk supply costs are slightly inflated as they do not take into account energy from EDM resold to Eskom;
(8)LEC needs to migrate from “Megaflex Tariff” to “Nightsave Urban large Tariff” as it is cheaper;

In order to accurately determine Regulatory Asset Base (RAB), LEC needs to address the Authority’s concern regarding its continued practice of receiving revenue (connection fees) from customers, and creating Company’s assets (capitalising of customer financed assets) and LEC is allowed financing costs of M6.19 million instead

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