Zambia said to raise mines’ power prices as plants crippled

Zambia has increased power tariffs for mining companies as Africa’s second-biggest copper producer faces its most severe electricity crisis, made worse by a devastating drought, a letter sent to the companies shows.

The new charge of 10.35 cents a kilowatt hour took effect on Jan. 1, the letter, seen by Bloomberg, shows. Two people informed directly of the increases confirmed the move, asking not to be identified because the information hasn’t been made public.

While the previous tariffs weren’t published by the government or mining companies, Vedanta Resources Plc said Friday the charges at its Zambian unit increased by 25 percent, adding $3 million a month to its costs. The old prices differed from mine to mine.

President Edgar Lungu in November directed the Energy Ministry and the power regulator to increase electricity charges in the country to ease pressure on the budget amid rising costs because of imports and other costly measures to secure power. A drought has crippled Zambian hydropower plants, the source of most the country’s electricity. Mines consume more than half of the nation’s power.

Two officials from the energy ministry didn’t answer calls to their phones, while a third declined to comment. A spokesman for the Chamber of Mines in the capital, Lusaka, declined to comment. Energy Ministry Director Oscar Kalumiana said Dec. 9 that an increase was being discussed with mining companies.

Glencore Plc and Vedanta are among companies to have suspended some Zambian production and cut thousands of jobs after copper prices plunged to six-year lows and costs rose. The Chamber of Mines said Thursday there could be further shutdowns this year because of the “dire” situation.

The lobby group and some of its members challenged a 2014 government decision to increase power tariffs by more than 29 percent, a case that is still before the courts. Zambia’s Energy Regulation Board said Friday it couldn’t comment on the latest increase because of the litigation.

The energy regulator increased tariffs for households and businesses, excluding mines, more than threefold last month. Lungu reversed the decision for domestic users after customers said they couldn’t afford the higher prices.

“The government’s attempt to pass through some of the higher cost of power to miners will prompt further threats of job cuts, especially from higher cost producers like Vedanta’s Konkola Copper Mines,” Clare Allenson, a Washington-based analyst at Eurasia Group, said in an e-mailed note Thursday.

 – Bloomberg