Opinion; Why Malawi needs Power Markets Limited

By King Jassi, opinion on his Facebook page

I’ve noted that most people dont really understand this animal called PML while others are pedaling misinformation to justify the unjust move of killing this innocent baby in the power market. 

Some people at Escom say this instituion brings unnecessary costs to players in power sector hence should go to ensure operational cost effectiveness and ease pressure on power tariffs. Some in Tonse government say the institution was created by DPP inorder to siphon money from the power sector and its hierarchy is full of ‘cadets’ hence it has to go. 

So weak justifications if you ask me. Let me give it a background for people to understand the essence of PML and how it holds the key for the needed huge private investment in the power market. 

Before that, a few weeks ago I was privileged with an invitation to dinner by the World Bank to debrief a few media practitioners on some report they were releasing a day later. 

The Country Manager and his team were there and we embarked on some informal discussion about the economy and the bank’s intervention. One official said in passing that the uncertainty of Power Market Limited was holding off some private investment into electricity generation and needed to be addressed speedily because the protracted energy crisis is hugely weighing against Malawi’s economic progress. 

Now thats just a hint on the essence of PML. In 2016 or there about I was involved in developing communication strategy for power market reforms when the issue of Escom unbundling was a hot topic amid strong resistance from the utility company. Even workers were trying all they could to block the move. 

I had a chance to have the insights of the reforms with some understanding hence my worry over this stance taken by government. 

Single Buyer system in electricity market was not a DPP move to siphon money, much as it would be possible to milk it the way they milked Escom and all other state owned enterprises. 

It came about after some rigorous process that looked at various models around the market to get what can work in Malawi as a way to set up an efficient power sector that is private sector driven, migrating from state financed sector. 

The unbundled Escom came into effect at the passing of the Electricity Amendment Act of 2016 that led to the introduction of two new licences namely Single Buyer (SB) and System and Market Operator (SMO). 

The functions of SB and SMO were placed in ESCOM while waiting for the establishment of specific companies for the functions. Power Market Limited (PML) was established to undertake the functions of Single Buyer, taking over from ESCOM.

However, Escom has been clinging to these functions, resisting to surrender up until it managed to convince the politicians and now the Cabinet resolved to dissolve PML altogether. 

Why does Malawi need PML? 

Single buyer system is practices world over. I can single out Malaysia which has seen a quick growth since its introduction in 2012. 

It was designed to create a more efficient, open and sustainable energy landscape for Malaysia. 

“The overall drive behind these reforms was promoting an incentive-driven energy landscape. An energy ecosystem that rewards efficiency helps provide a framework that ensures continued sustainability, and represents a model which is being widely adopted around the world. Supporting that goal is a key priority of Single Buyer,” says an article by Energywatch.com. 

The functions of a single buyer include: 

1. Pocuring electricity to meet demand, alongside Operating Reserve requirements, at lowest possible cost

2. Facilitating security of electricity supply

3.monitoring the adequacy of fuel supply to electricity generation.

4. Promoting transparency in performance

5. Enabling competition in generation, and confidence in the energy sector

One key thing about a single buyer is private sector confidence to invest in electricity generation. Even the EU power market policy ensures highest degree of separation of functions between energy suppliers and system operators.

Single Buyer’s ring-fenced operating model is touted by experts for helping to improve cost-efficiencies while reducing potential conflicts of interest with fellow stakeholders in the energy market. This helps to promote a flexible ecosystem which can adapt to transforming energy demands.

The incentive-based approach supported by account unbundling is practiced around the world, as governments aim to reduce consumer bills, enhance customer service and encourage positive market investments.

European Union: Energy market legislationin the EU mandates a high degree of separation between energy suppliers and network operators. This operational mandate stems from a desire to provide increased market transparency that improves competition, efficiency, and ultimately provides a more positive energy market for consumers.

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