Power to the people!

Power to the people!

ROMA-THE first 30 units of electric power you buy for your household in Lesotho is less than half the price you pay for any units above 30.
The idea is to ensure that the poor have access to energy because they mostly use those 30 units or less per month.

This is an application of research work by scientists and economists at the National University of Lesotho (NUL) on behalf of the Lesotho Electricity and Water Authority (LEWA).
The work is published in a top-level international journal called “Energy Policy.”

Here is a simplified version of the scholarly article as presented by Matsoso Mothala from the NUL Energy Research Centre.
Every year, you get the news that the Lesotho Electricity Corporation (LEC) has requested to increase the price of electricity per unit (kilowatt-hour or kWh) to so much and LEWA has decided to moderate it to so much.

Of course LEWA always finds itself between a rock and a hard place, where it has to balance the legitimate costs of providing electricity by the LEC and poor Basotho’s inability to pay for the increasing costs.

How about such a balance was informed by research? LEWA apparently asked itself.
“First, LEWA wanted to ensure that the LEC’s prices were based on the true cost it incurs to deliver electricity,” Mothala said.
“However, it was found that if the LEC were to base its prices on the true costs of electricity provision, Lesotho’s poor would not afford electricity at all. The prices would be too high for them.”

That was based on the fact that while electricity coverage in Lesotho has increased over the past 20 years, the average use of electricity itself (electricity consumption) has been going down during the same period.
You bring electricity to a certain village and the people start ululating.
Come the next months, you realise that most of the subscribers use it only for lighting at night.

There is a story of one lady who claimed to use electric lights at night “only to search for a box of matches so she could fire a candle”.
There is a reason for all this.

Lesotho is not one of the richest countries in the world.
“According to the latest World Bank estimates, when we did the study, 50% of Lesotho’s population was living under the poverty line,” Mothala said.
Now you know why LEWA and NUL had to join forces.

Here was a million dollar question to be answered, “how do you balance the fact that on one hand, the LEC has to increase electricity prices to meet its costs while, on the other hand, it has to ensure that the country’s poor do not suffer?”

In the study, the NUL found that a whopping 64 000 of electrified households in Lesotho used only 30 units (30 kWhs) of power or less per month, 30 000 used between 30 to 50 kWhs, 64 000 used between 50 to 100 kWhs and 54 000 used above 100 kWhs per month.
Of course these are rounded figures.

Who are the 64 000 households who only used 30 units or less per month to survive?
They were among the poor who could not afford to pay more.
So how could they be assisted?

What if the poor were subsidised by those who could afford?
Now, before you cry out, “Communism! Communism!” wait a minute and listen to how it works.
“We recommended that the first 30 units of the month be charged at 50 to 60 cents per unit (prices may be different today due to inflation) while any units above that much would be charged above M1.50 per unit,” he said.
This approach is given a big term “cross-subsidization.”

It ensures that those who can afford electricity pay a bit more so that those who cannot are also able to meet their own needs without having to bankrupt the electricity company.
At this point, it’s easy to adopt a “me versus them” attitude if you are one of those who think they are doing the subsidising.

But here is the reality. Remember that “everyone” has his first 30 units at a low price.
So you are not forced to buy more than 30 units, but if you do, then expect to pay more to subsidise others (and yourself).
Who knows?

You may wake up one day to find that “you” can only afford the 30 units per month.
“We have determined in our study that those 30 units per month are enough to power the basic needs of poor households,” Mothala said.

After mining and studying lots of data, the NUL team had to benchmark its recommendations according to the South African situation and the recommendations of the Sustainable Energy for All (SE4 All).

South Africa uses a similar method to subsidize 50 kWh per month for its connected households.
However, SE4 for ALL recommends that a subsidy for 30 kWh per month is enough to cover the basic energy needs of a household.

“Adopting the South African model would subsidise too many people to an extent that those who use more than 50 units per month would pay heavily for them. So the SE4 for ALL recommendation was adopted.”
As we talk, LEC has already implemented this model.

Own Correspondent

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