Lesotho Cost Of Service and Tariff Study

MRC Group is close to completing a comprehensive Cost of Service and Tariff for the Lesotho Electricity and Water Authority (LEWA).

The objectives are twofold: Firstly, to set electricity tariffs to promote economic efficiency and ensure financial viability. Secondly, to provide a basis for the transition from existing tariffs to economic cost reflective tariffs.

  1. MRC constructed a least cost expansion model for generation, transmission and distribution, to include renewables and off-grid developments including investment costs.
  2. Reviewed the structure of the power sector including the legal and regulatory framework.
  3. Strategy for rolling out the LEWA tariff adjustment and for the design of lifeline tariffs and plans for rural electrification and off-grid supply, taking into account social and economic impacts.
  4. Carried out electricity demand forecasts.
  5. Training of staff in LEWA and all other relevant stakeholders.

The study showed that the recent grid expansion in Lesotho has coincided with reducing average consumption per residential customer. These findings reinforce the growing view in the sector that consumption of newly electrified rural customers is low and electrification via the grid is uneconomic.

Our analysis showed that retail tariffs are below the cost-reflective level and the additional increases that would arise from expanding the grid to rural (and remote) areas is not offset by the additional demand served. These findings can be used by the regulator to justify the need to develop policies to stimulate Private sector companies to provide off-grid solar PV technology as an alternative cost-effective means to achieve electrification.