Zera reviews fuel pricing mechanism

Zimbabwe Energy Regulatory Authority (Zera) is reviewing mechanisms which will guide government to come up with alternative ways to determine local fuel prices, a company official has said.

Fidelity Mhlanga

Zera CEO Gloria Magombo told businessdigest on the sidelines of a Zimbabwe National Chamber of Commerce conference in Victoria Falls last week that the pricing of fuel varied from country to country, depending on the level of subsidy by government.

“As the regulator, we are reviewing the pricing mechanism. We will then advice government to see whether they can look at other alternatives or mechanisms of pricing fuel. But as we speak, we have a methodology which we apply and it assists us to reach a price,” she said.

Magombo said she was happy government had liberalised the fuel sector.

She said there were about 32 fuel procuring companies and over 500 fuel retail sites owned by companies, individuals and franchises, adding the regulator was creating a database of licensed players to record and monitor prices.

Magombo noted that Angolan fuel prices were lower than those in sub-Saharan Africa. Angola, is, however, an oil-producing nation. Currently, petrol prices are pegged at US$1,47 to US$1,53 while diesel cost between US$1,28 and US$1,38 per litre.

As of 29 June 2015, globalpetrolprices.com ranked Zimbabwe 128 out of 171 countries, with local petrol prices pegged at US$1,40.

The price of crude oil on the international market has been on a free-fall since June last year from around US$118 to about US$45 per barrel.

Magombo said fuel dealers can put a maximum mark-up of 7%, wholesalers peg at 4%, with retailers putting a 4% mark-up due to fierce competition in the sector.

Turning to electricity, Magombo said since the inception of Zera, energy tariffs have remained static despite slowly rising output.
She said each country had peculiarities which allow them to price electricity in a unique way. Zambia which predominantly generates hydro-power, maintains a low-energy costs policy.
Magombo said the Ministry of Energy was crafting a renewable energy and biofuel policy to be implemented by Zera.

The crafting of these policies will provide requisite information to investors anticipating to invest in both renewable and bio-fuel sectors.

While the renewable energy policy went to tender and was awaiting adjudication, the bio-fuels policy is still going through consultative stages.

She said while work at Kariba South power station to augment 300 megawatts to the national grid was underway, it was expedient to save energy through a virtual power station.

“Virtual power station is when we save energy to make it available to other users. Its critical in Zimbabwe because we are not using electricity efficiently. We did an audit to measure how much we can save. We went into hotels, agriculture, mining, manufacturing and households. So from each of those audits, we found out that we can save 380 megawatts (MW) of electricity. We have started to construct the Kariba south power station which will be completed in 2018. In between, we can create that virtual power station by optimising the use of electricity,” she said.

Zimbabwe is saddled by a power deficit, producing 1 203MW against demand of 2 200MW due to obsolete machinery and limited investment in the energy sector.

To date, Zera has registered 22 Independent Power Producers (IPPs) with only eight of them now functional.
Most IPPs are crippled by lack of capital, which if capitalised can channel 600MW to the national grid.