Low economic performance hikes water volumetric tariffs

The annual Report for the Lesotho Electricity and Water Authority’s (LEWA) activities in the 2023/24 financial year showed a hike in water volumetric tariffs, standing charges and sewage tariffs respectively.

The purpose of the report is to provide stakeholders with information about the authority’s performance in delivering its legislated mandate during the period under review. It presents accomplishments realised and challenges met by the authority, as well as the audited financial statements of the authority for the period under review.

Presented by LEWA chief executive, Motlatsi Ramafole, the organisation says it considered a tariff review application from Water and Sewerage Company (WASCO). The company requested a Revenue Requirement (RR) of M298.84 million, which it indicated would be achieved through 14.8 percent, 4.7 percent, and 31.5 percent increases in water volumetric tariffs, standing charges and sewerage tariffs, respectively.

In addition, the company requested full (100 percent) cost recovery on new water connections effective from the start of the Financial Year 2023/24. LEWA followed prescribed processes in reviewing the application.

“As part of the above, the Authority held public consultations with a view of soliciting stakeholders’ comments. In determining the Company’s tariffs, several factors including low economic performance, high inflation and the need to strike a balance between sustainability of the company and affordability of tariffs by Proposed Revenue Requirement (RR) of M298.84 million customers were considered.

 “In the end, the Authority approved WASCO’s RR of M268.90 million for water and sewerage services. The above RR would be achieved by 4.9 percent and 1.3 percent increases in water volumetric charges and standing charges, respectively, as well as 1.6 percent increase in sewerage volumetric tariffs,” report stated.

 Furthermore, the Authority did not approve the full (100 percent) cost recovery on water connections as it found the Company’s justification for the same inadequate.

In the meantime, it approved an eight percent upward adjustment in water connection fees for the Financial Year 2023/24, pending findings from a comprehensive study the company has been directed to conduct. The effective date for implementation of the approved tariffs and charges was September, 1 2023.

Determining the Lesotho Electricity Company’s (LEC’s) Multi-Year Tariffs, LEWA considered a first Multi-Year Tariff Application for the period 2023/24-2025/26 from the LEC.

The company requested a Revenue Requirement (RR) of M2.09 billion, M2.10 billion and M2.13 billion for the Financial Years 2023/24, 2024/25 and 2025/26, respectively. The RR would be achieved by tariff increases of 23 percent, 15 percent and 15 percent on both Energy and Maximum Demand (MD) Charges across all customer categories in the three financial years, respectively.

“The company also requested to increase the standard connection fee from M2,000 to the actual cost that the company incurs for effecting connections within 50 metres of the existing network infrastructure. LEWA followed prescribed processes in reviewing the application. This being the first Multi-Year Tariff application, the Authority held extensive consultations through face-to-face meetings with the general public and selected key stakeholders, radio and television programs, and social media in order to gather stakeholders’ inputs,” Ramafole’s report noted.

He indicated that the decision regarding the company’s tariffs was mainly influenced by low economic performance, high inflation, the need to strike a balance between sustainability of the company and affordability of tariffs by customers. Having considered all the factors, and noting that the Financial Year 2023/24 had come to an end without any adjustment in tariffs, the Authority approved LEC’s RR of M1.32 billion, M1.52 billion and M1.64 billion for the Financial Years 2023/24, 2024/25 and 2025/26, respectively.

“ . . . To Increase Access to Electricity In order to facilitate the development and expansion of electricity service infrastructure in areas lacking such services and to supply electricity to a broader demographic area, a Universal Access Fund (UAF) was established and it is administered by the Authority in accordance with the LEA Act, as amended, and UAF Rules, 2011. In this regard, a budget amounting to M21 million was approved for electrification projects during the Financial Year 2023/24. However, only M8 million was collected under the UAF and the whole amount was allocated towards the electrification project of Ha Nooa, at Mantŝonyane Constituency in the Thaba-Tseka district. The project was estimated to benefit 512 customers.

 “A payment of M18.9 million was effected for electrification projects that were not completed in the previous Financial Year 2022/23. At the end of the reporting period, M24.8 million was committed for all projects that were in progress, including Ha Nooa project for which disbursement had not been effected at the end of the reporting period,” the report added.