Tuesday, December 13, 2016

LET HOUSEHOLDS PAY A HIGHER TARRIF

It’s a simple concept.

It is based on the premise that there are only two ways to spend your money – you either eat/consume or invest it.

When you consume your money you will get instant gratification – a full belly, an emotional high from the new shoe, gizmo or car or the envy of your peers. When you invest your money – committing money with the hope of earning a return, you make and can accumulate more money.

"So to get rich you have to shift your expenditure away from consumption and towards investment.
Simple but not easy...

What works for individuals works for companies and countries.

Which brings me to the power tariff. It’s that time of the year when the Electricity Regulatory Authority (ERA) goes out into the public to get our views about the possible adjustment of the tariff in the coming year.

As it is now domestic consumers pay sh626 a unit, commercial consumers pay sh566.9, medium industrial sh524.7 and the large industrial consumer sh349.5 per unit.

Going by the above domestic consumers pay at least 80 percent more than the large industrial consumers and just over 20 percent more than the medium industrial concerns.

If I had my way domestic consumers should pay at least sh1000 a unit or three times what the largest consumers currently pay.

Going by the previous prescription of how our nation can be rich we need to shift more and more resources to the more productive sectors of society.

In our homes little economic value is created using our power – hopefully none of us is cooking using power anymore, so most of our power usage is for lighting and entertainment. Of course the argument can be made that these recreational activities – reading, watching TV or listening to music, enhance our value through learning and improved peace of mind, but that is often for a small number of people.

A large scale manufacturer who employs hundreds of people and may very well expand production or at the bare minimum be a bit more competitive in the market, has the benefits accruing from his business being spread much further afield.

The arguments against this are many but just to pick a few.

There is a fear that too high a tariff will encourage more power theft. While this may be the reality it is to be held hostage by wrong elements in society, emboldening them while messing up the business environment.

Greater investment from the power companies and government in stamping out power theft – even by well-connected individuals, cannot be put off because we are worried about raffling a few feathers.

"Strangely enough opposition to too high a domestic tariff comes from the same businessmen who want to see their own tariffed lowered. They argue that if power tariffs are raised it will lead to a higher cost of living for their workers and putting them – the employers, under pressure to raise wages...

This sounds like they want to eat their cake and have it. They probably are avoiding the higher choices that would come with making their companies more efficient by cutting wastage in their administration budgets or having to share their savings from a lower tariff with their employees.

That really should be handled by themselves. Government should work for the greater good.

However anecdotal evidence suggests a higher tariff will not necessarily lead to a higher standard of living or are unnecessary degree of discomfort.

For one people will become more frugal with how they consume their power – we shall turn off the lights when we walk out of rooms, we will do away with our electric cookers (finally), we may even install solar energy if not to light the house but at least to boil our bathing water and we will have to stop the wasteful business of having security lights on all night.

On that last point the increased revenue from domestic consumers can be used to help roll out solar powered street lights so we won’t have to keep our security lights on all night.

Already the almost universal switch to energy saving bulbs has made 30 MW available on the grid according to the energy ministry.

So our lifestyle won’t suffer that much.

"But secondly and probably more important is that the rollout of the pre-paid power meters is already affecting power consumption patterns. The feedback is instant and in fact power has become more affordable because not only can we pay for the power as we need it but also that we don’t have to wait to be slapped with a massive bill at month end or whenever the Umeme people choose to deliver the bill ...

Of course the only challenge for the people who run the electricity industry is that the people who will have to bear the brunt of this tariff hike – we the urban elite, will make so much noise, disproportionate to our small number, that government will be cowed into making one concession or the other.


When that happens government should just call our bluff.

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