The Chamber of Mines of Zambia has expressed concern over the announcement by Zambia’s Energy Regulation Board (ERB) to increase electricity tariffs to mining companies under the Bulk Supply Agreement by 28.8 per cent, effective 2 April.
The Chamber of Mines said while the mines understand the need for utilities to earn a fair return on their investment to be able to efficiently and sustainably operate and maintain the infrastructure, cognizance must be taken of the long term nature of the mining business by providing an investment climate with stable and predictable planning parameters over the business horizon.
“Due to the long term nature of mining investments, corresponding long term planning from a policy and regulatory perspective is necessary to attract and retain investment in this sector.
It should be pointed out that power supply to mining companies is governed by commercial contracts entered into mutually by ZESCO (Zambia Electricity Supply Corporation) and respective companies taking into account the full commercial circumstances prevailing at the time of entering into such contracts, and anticipated to occur over the life of the contract,” the organisation said Thursday in a statement.
It noted that the mining sector agreed to extra ordinary tariff increases of 35 percent in 2008 and 30 per cent in 2011 outside existing contracts on the understanding that investments would be made to improve the quality of power being supplied to the industry.
“With the falling of commodity prices on the global market which has been forecasted to remain low over the medium term against the rapid increase in production costs, the mining customers are asking for a robust, transparent and long term tariff migration path.
“This would help the mining companies to adequately plan for their critical inputs. Unfortunately, the statement from the Energy Regulation Board is notably vague on how it expects the parties to these contracts to implement its ruling, which has once again been made in total disregard of the existence of commercial contracts, and without any prior formal communication to the affected parties in the mining sector.”
The Chamber of mines warned that if this ruling is sustained, mining companies will not be able to absorb this cost, especially the high cost producing companies, pointing out that the tariff increase is not sustainable at all.
It appealed to the Energy Regulation Board to review its decision to increase tariffs to the mining sector as this will exert excessive pressure on the mining companies.