ZESCO and KCM seal power supply deal without CEC

ZESCO Limited says it has entered into a long-term agreement with Konkola Copper Mines following successful conclusion of negotiations. 

ZESCO Director Strategy and Corporate Services Patrick Mwila says the agreement between ZESCO and KCM is part of ZESCO’s long-term strategy of correcting imbalances in the power supply chain.

He says the artificial imbalances were the result of the Bulk Supply Agreement (BSA) that was signed between ZESCO and Copperbelt Energy Plc (CEC) on 21 November 1997 which had been commercially disadvantageous to ZESCO.

“These imbalances were aided by certain clauses which ensured only CEC could supply the lucrative Copperbelt mining market ever since the BSA was signed in 1997,” he said.

Mr. Mwila says the development is also in line with the Government’s new policy framework, which supports an open Electricity Supply Industry that is intended to encourage participation of various players in the three key segments of the value chain, Generation, Transmission and Distribution.

He says the landmark agreement will ensure ZESCO and consequently the Zambian economy and public are able to benefit from direct commercial agreements between ZESCO and potential generators of foreign exchange.

Meanwhile, Mr. Mwila says despite the initial failure to finalize a new power supply agreement to replace the now expired Bulk Supply Agreement, ZESCO has continued to make power available to CEC to allow it to supply its consumers who have already contracted for power supply from CEC and to supply ZESCO’s existing consumers in the Copperbelt.

He added that this is despite the fact that CEC continues to owe ZESCO millions of dollars in unpaid arrears.

“By eliminating monopolistic tendencies, the Zambian electricity sub-sector will soon realize efficiencies, as neither ZESCO nor any other owner of Transmission or Distribution Infrastructure can claim exclusivity for their use as third parties will be able to supply power across Zambia. ZESCO welcomes this competitive environment and the opportunity to prove that it can compete on a level playing field with the best competitors in the market,” he said.

“Specifically, ZESCO is now in a position to compete for the supply of power directly to those mining consumers in the Copperbelt who are able and willing to enter into new commercial relationships. Supply to such consumers was previously the preserve of CEC, but with the lapse of the BSA, the consumers, ZESCO and CEC are free to buy and sell power from anywhere and supply to anyone as long as the terms are commercially competitive. ZESCO also notes that under these circumstances, ZESCO’s traditional consumers may also be subject to competitive bids or solicitations from other potential suppliers, but we firmly support the new market framework and we are ready to prove that we can supply power more competitively than anyone else in the Southern African region.”

He said, “The “common carrier” declaration typically unlocks resources and avoids “hoarding” of Transmission capacity or even worse still, duplication of infrastructure by competing players in the ESI. Transmission and Distribution asset owners still remain fully in charge of their assets, but they must negotiate wheeling arrangements on commercial terms once they are approached by parties intending to trade. The law thus prevents any party from using its vantage point to block commercial trade and stipulates that if the parties fail to agree on wheeling terms for the power, any aggrieved party may then appeal to the Electricity Regulation Board to arbitrate and determine fair terms and conditions of supply.”

This article originally appeared on Lusaka Times