Independent power generators, Tanesco unbundling and climate change fu

20May 2017
Our Reporter
The Guardian
Commentary
Independent power generators, Tanesco unbundling and climate change fu

DISCUSSION is still going on as to the way in which the government might finally succeed to split the power supply parastatal TANESCO into three parts so that each can conduct wider outreach in activity, not just servicing one another as integral components of one company or enterprise.

DISCUSSION is still going on as to the way in which the government might finally succeed to split the power supply parastatal TANESCO into three parts so that each can conduct wider outreach in activity, not just servicing one another as integral components of one company or enterprise.

One major problem that hinders any real movement in that direction is how the debt that TANESCO is carrying on its shoulders would be offset so that the new companies start on a clean slate, and in addition, within a matrix that ensures that no new debt starts piling up.

That is one reason why the recent cancellation of tariff increase ignited doubts, by intensifying the debt. Not just would the overall debt pile up by privileging concerns with tariffs and impact on plans for wider investments in industry, but also indicated that even if there was a split into three operating firms, the managerial culture at the political level would remain populistinstead of realistic.

It wouldn’t matter to this outlook what the real costs are and how they should be offset in order to avoid a debt climb, but still use power generation and supply (after transmission) for the same ends, namely the pursuit of industries and treating power as a service dimension. It is precisely in that way that transmission and supply service power generation, as ‘the realthing.’

A past conference on transmission being held early 2015 saw Tanzania sending a rather low key delegation to Nairobi as it was in the midst of a major dispute on the power sector, as a major independent power supply firm was embroiled in share transfer and debt recognition issues that soaked state institutions into the dispute.

Unless there is a formula for ending such disputation on stakeholder ties within themselves and with the state in conducting commerce, splitting up the TANESCO franchise into three on precisely the same managerial and ownership relations as at present risks multiplying those problems by three. It would make government nearly impossible.

For one thing, there is a better political climate to handle such shift as political fanning of disputes among stakeholders as was the case with Independent Power (T) Ltd wouldn’t have as much avenue, and perhaps no avenue at all, as compared to the past.

The dispute concerning the pricing of gas to Dangote Cement (T) Ltd laid bare a new rule, that isn’t regulatory and executive agencies which make key decisions but the presidency, in which case fighting between these state bodies for their respective spheres of influence is eliminated.

This cohesion is far better for real managerial expectations, though it cuts the scope for influence peddling,participation, etc.

The same has also been noticed of the way in which the rapid bus transit system started operating during thefifth phase, having largely stalled earlier as nearly everything about it was being put to question.

Finally two key issues were resolved by the pro-active presidency, first the matter of taxes to be disposed of, and then the fares the public was supposed to pay, as well as the reach of the new buses in terms of privileged routes andterms thereof, etc.

The projected fares were cut down from about 900/- minimal per trip to a manageable 650/- because it wasn’t the stakeholders who made the decisions as they would have done in the past, and then touch off corruption cries. In that case there is a realistic chance that the fifth phase can administer an unbundling of the power company so that it becomes a triad of generation, transmission and supply, as it would be the state that arbitrates in pricing mechanisms, such that no spiral of price giving and price taking sows chaos in the power sector.

When such a feat is done, it minimally presumes that the state (the government as sole shareholder of TANESCO) absorbs the current debt into a historical liability so as to stop it from spiraling. It then unbundles the company into a triad of specializedfunctions and price mechanisms set in conjunction with the state to eliminate potential chaos….

The terms of operating of the generation sphere need to be agreed, into how different units of power generation, those that are now state-owned and those which are independent, as to finding ways to exercise harmony by (for instance) trading shares of the state so that a common method of costing and realization of returns is used.

It seems to be the difficult part but strictly speaking it is only difficult in mathematical terms, while the real difficulty is ‘soft power,’ not cash or managerial method but political will, whether the state is ready to accept a share harmonization by converting state assets (or liabilities) into shares.

Even debts can be absorbed into share sales. When appropriate formulas have been found to make power generationboth pluralistic in terms of investments and cohesive in terms of regulatory pricing and competition, a stretch ofnew and overdue investments is likely to come ashore, but now all that is in the sphere of imagination.

The government (via the Energy and Minerals deputy minister) was telling legislators of Chinese and World Climate Change funding for at least two projects, both of which on the basis of those remarks cost $936m.

He did not tell MPs that these expectations are likely to be eroded by what Finance Minister Dr Philip Mpango has described as interminable aid negotiations, halting funds.

There is for instance a viable picture of power generation at the moment that on the whole the country produces more power than it needs on a day to day basis, but still experiences repeated those power cuts on any particular day.

The reason is a tight relationship between generation, transmission and supply, as it is the same company doing all this and tends to economize to the utmost, to cut on its expenses, whereas unbundling creates greater scope for what would now be described as overcapacity.

Basically it means having fallback capacity at the generational level as well as in transmission and supply options being immediately switched on if problems occur somewhere, as that is part of opportunities for independent power generators and suppliers of equipment like Symbion, Wartsila, TANELEC, etc.

They would not be withheld from procuring and installing as it would be a wider sphere of commerce, awaiting rationalization, competition.