|ECB wants REDs to be exempt from tax|
|Written by Augetto Graig|
|Wednesday, 11 July 2012 23:04|
THE Electricity Control Board (ECB) Chief Executive Officer, Siseho Simasiku, has called on government to subsidise Regional Electricity Distributors (REDs) to give relief to Namibian electricity consumers who have recently been forced to absorb a 17.5% tariff increase across the board.Simasiku was speaking at a consultative meeting with members of the Parliamentary Standing Committee on Economics, Natural Resources and Public Accounts on 10 July. Controversially he asked that government consider exempting the REDs from paying taxes, saying this will make the REDs more financially viable. He said that with the assistance of the Ministry of Finance, tax exemptions are available and the ECB would fully support such a move.
To date three of five REDs have been established throughout the country, being NORED in the northern regions in 2002, CENORED in the central-northern parts in 2003 and Erongo RED along the coast in 2005. The remaining REDs to be established and operationalised are SORED in southern Namibia & Central RED in the central regions.
The REDs pay a surcharge to the local authorities and regional councils to protect the revenue stream these enjoyed before the creation of the REDs. According to Simasiku, government should subsidise this surcharge to give relief to consumers who face ever escalating electricity prices for the foreseeable future. He pointed out that currently, due to inflation, the surcharge decreases in constant terms. He said advantages of government subsidy include that the end-user would get to pay on average 13.12 cents per kilowatt hour, which is significantly less than the highest rate of well over 40c/kWh which Grootfontein residents pay at the moment.
Additionally it would alleviate the administrative burden on REDs; they would be protected from risks associated with the local authority surcharges. Government would need to add an additional N$213 million to cover the costs, he explained.
Simasiku suggested an alternative whereby government would subsidise the difference, if the surcharge is set at 15c/ kWh, which would give relief to end-consumers in the most expensive areas, while also reducing risks to the REDs. This option would cost government an additional N$82.2 million, he explained. Another alternative is to fix the surcharge at 15c/kWh and then review it every 2 to 3 years and to allow for inflationary increases. He argued that in the long run this will be in the best interest of the LAs/RCs since the surcharge will keep up with inflationary pressures.
Finally Simasiku explained that the ECB is looking at ways to stop Nampower from encroaching on the big RED clients, such as mines and bulk-users who often buy electricity directly from the national electricity supplier.