ZESCO, CEC ink 13 year new Bulk Supply Agreement

ZESCO Limited is pleased to announce the successful signing of a 13 year Bulk Supply Agreement with the Copperbelt Energy Corporation (CEC) effective 1st April 2022. This Agreement was signed two years after the expiry of the Bulk Supply Agreement between the two institutions that had been in existence from 21st November 1997 to 31st March 2020. The expiry of the old Bulk Supply Agreement was preceded by unsuccessful attempts to negotiate a successor agreement which was followed by a two-year period of trade on disputed terms between the two parties.

In recognition of the unsustainable nature of the relationship, the two parties resumed negotiations in January 2022 with a view of having an agreement in place effective 1st April 2022.

I would like to assure the general public that the newly signed Bulk Supply Agreement between ZESCO and CEC will enable the two parties to transact in a fairer manner.

Some of the major items that have been addressed in the new Bulk Supply Agreement are as follows;

The Tenure of the agreement has been set at 13 years. This term is a delicate balance between having an adequate period of time to cover long term investments and giving the two parties the flexibility to get back to the table and iron out any matters that may arise; within a reasonable period.

The just signed Bulk Supply Agreement contains newly agreed and more cost reflective Energy and Demand charges payable by CEC for its power purchases from ZESCO, and reciprocal tariffs for Transmission Use of the System, Domestic Wheeling and International Wheeling.

In addition, the Bulk Supply Agreement allows and contains clear terms of supply for either party to supply power to customers within the country across each other’s networks. The agreement also allows either party to develop power generation, transmission, distribution and supply infrastructure, in any part of the country. Therefore, this does away with the territorial exclusivity clauses that existed in the previous agreement, and opens up the Zambian Electricity Sector Industry to competition, as envisioned by the ongoing reforms in the energy sector such as the development of the open access framework.

The allowable power and outage hours for both parties were adjusted to 120hrs over five years from 144hrs and 180hrs for ZESCO and CEC respectively. This reflects increasing operating efficiency by both parties. The supply limit in the Bulk Supply Agreement was also adjusted, to reflect CEC’s expected level of consumption.

Unlike the old Bulk Supply Agreement, the new agreement contains tariff adjustment provisions that can be used by the two parties to adjust the tariff if necessary, during the term of the agreement. These provisions are in addition to the annual indexation of the tariffs that adjusts them for inflationary effects. Further, this Bulk Supply Agreement also demands the setting up of payment security by the two parties in order to reduce the risk of non-payment for the services rendered.

From the foregoing, it can be appreciated that the two parties have put a lot of work into the new Bulk Supply Agreement in order to remedy the pain points they faced in the previous agreement. The parties have also recognized that no agreement is perfect and that any adjustments necessary to better the agreement, need to be done in an amicable and timely manner.

As ZESCO, we are aware of the public interest in our relationship with CEC and are grateful for the support from Government and the general public during the renegotiation process.

We gladly look forward to a mutually beneficial relationship between the two parties.