Review Of Escom Tariff Under The Automatic Tariff Adjustment Formular (ATAF)
BACKGROUND
The Malawi Energy Regulatory Authority (MERA) considered a review of the ESCOM’s electricity tariff under the Automatic Tariff Adjustment Formula (ATAF).
TRENDS IN INFLATION AND EXCHANGE RATES AND THE IMPACT ON ELECTRICITY TARIFFS
MERA noted that inflation and exchange rate were at 22.1% and MK693.50/US$, respectively, as at 3rd May, 2016. This was therefore used as a basis for consideration of tariff adjustments for March 2017.
Since 3rd May 2016, the Kwacha depreciating from K693.50/US$ to K733.50/US$ as noted on 31st July 2017. On the other hand, inflation has substantially decreased to 11.3% as noted in June 2017.
Applying these economic fundamentals to ATAF resulted into a -5.10% potential electricity tariff adjustment. The MERA Board considered the backlog of base tariff increase that has not yet been implemented and resolved that the electricity tariff be maintained at the current average of K57.72/kWh to enable ESCOM partly bridge the revenue gap created by the delays in tariff implementation.