Escoms Change Management Intervention by Government free essay sample

MANAGEMENT CHANGE The Commercial Electricity Supply Industry Structure is dominated by a publicly owned and vertically integrated power utility. Electricity Supply Corporation Of Malawi Ltd, (ESCOM) which was established by an Act of Parliament in 1957 and was revised 1963 and 1998 respectively. (Power sector reform strategy 2003:27) In this essay we are going to explain the background of ESCOM, its Mission, challenges and the concept of intervention with reference to the interventions government has made to the corporation and also the strategies which government used for this intervention will be outlined. The Electricity Supply Commission of Malawi (ESCOM) LTD is a public utility which was incorporated under the companies Act of the Republic of Malawi in 1998 with its own articles of Association. It is owned almost wholly by the Government of Malawi (99%), while the remaining shares of 1% are held by Malawi Development Corporation (MDC). Its principal business is to generate, transmit, distribute and retail electricity services nationwide through its interconnected and off-grid power supply systems. The utility handles large portfolio of electricity and civil works, projects of development and maintenance nature to meet electricity demand. Currently the company is undergoing major reforms to align it with the provisions of the energy policy 2003 which calls for the liberalization of the power supply industry. Power Sector Reform Strategy 2003:4) MISSION STATEMENT OF THE CORPORATION The mission statement of the utility company is to generate, transmit and distribute electrical energy and provide related services, motivated by desire for excellence through the use of appropriate technologies, to satisfaction of customers and other stakeholders. It’s divided into four distinct business units namely: Generation, Transmission, Distribution and Holding. Power Sector Reform Strategy 2003:4) ESCOM is faced with big challenge of meeting the ever growing demand for electric power. This challenge has seen ESCOM put in extra efforts to meet the growing demand starting from generation, transmission and all the way to distribution. These challenges have put ESCOM at a cross-road for deciding to move forward while moving from the comfort zone of having surplus electricity in the past years to a strained period. The major challenge is building new capacity to satisfy the higher demand for electricity that accompanies strong national economic growth. The corporation has three hydro-electrical plants: Nkula A and B, Tedzani A and B, Kapichira and Wovwe. (ESCOM annual Report 1999) Access to electricity in Malawi is very low and demand is highly skewed in favour of industrial and large commercial customers who use nearly 60% of the total and this is according to the power sector reform strategy paper (2003) Domestic users’ account for 25%, and the remaining 15% goes to small commercial consumers. ESCOM’s records show very low coverage by SADC standards whose regional average access rate is 20%. The vertically integrated publicly owned Electricity Supply Industry Structure has proven to be neither effective nor efficient to this end, hence government of Malawi, has formulated the Power Sector Reform Strategy (PSRS) outlining priority action to implement reforms. The execution of the Electricity Supply Industry reforms is governed by an implementation schedule, which forms an integral part of this power sector reform strategy. The goals for the reforms are to increase the role of electricity in the national energy mix from the present low coverage to highest coverage by 2050. (ESCOM annual Report 1999) The elements of Electricity Supply Industry Reform programmed planned by government are as follows. To expand and revitalize the Electricity Supply Industry and provide an adequate, affordable and reliable power supply which will assist in industrialization, rural transformation, sustainable economic development and reducing poverty and to enable the Electricity Supply Industry effectively participate in the emerging regional electricity trading markets through the Southern African Paver Pool (SAPP) so to realize these goals Government of Malawi set the following objectives for Electricity Supply Industry reforms; Increase technical and economic efficiency, to improve the reliability and quality of electricity supply to eet the growing demand for electricity supply. To meet the growing demand for electricity at least cost is also one of the objectives. The other objective is to make electricity accessible to a large proportion of population. To increase capacity to meet growing demand to attract private capital and participation; to take advantage of power trading opportunities und er Southern African Paver Pool (SAPP) to promote use of solar and other renewable energy sources and protect the environment. Power Sector Reform Strategy 2003:4) The Government of Malawi formulated an Energy policy in the year 2003, which was meant to guide the development of the energy sector, including the Electricity Supply Industry. The Energy policy is guided by six objectives which are: improving efficiency and effectiveness of the commercial energy supply Industries, improve the security and reliability of energy supply systems, increase access to affordable and modern energy services, stimulate economic development and rural transformation for poverty reduction, improve energy sector governance and mitigate environmental safety and health impacts of energy production and utilization. The guidelines were aimed at increasing electricity access to the Malawians population. (Source energy Department of Energy Affairs 2003) The Electricity Supply Industry Reform Strategy expresses government of Malawi’s unambiguous support for private sector participation in the electricity supply industry. It provides clear guidelines to all existing and future participants, whether private or state, to have confidence in the electricity supply industry and that it will strengthen the prospects for achieving the fundamental objectives of increasing efficiency, ensuring that the sector is financially viable and thus increasing substantially the number of consumers receiving commercial supplies of electricity. Power Sector Reform Strategy 2003:8) According to a recent study on Energy law in Malawi by Kainja (2000), the evolution of the Electricity Supply Industry reforms in the country, can historically be divided into five phases, and these are: the pre-1948 phase which had a characteristic feature of the Electricity Supply Industry activities of the non-existence of a commercial electricity market. And the second phase of 1948-1958 which had a number of diesel gen-sets which grew to support the growing settler population of the British Government which ruled the country at that time, and institutional structures were put to turn electricity into a commercial commodity. Then the third phase of 1958 to 1998 came, which saw the Electricity Act into force in 1958, governing the instrument for the sector. The main features of this act were the establishment of a stationary corporation. The fourth phase was in 1998-2000 which saw the liberalization of Electricity Supply Industry which began with the corporation of ESCOM. The fifth phase is the 2000 to present, which analyzed or assessed the electricity Act, 1998 and it revealed a number of flaws in the Electricity Act 198 which were contributing to the Government of Malawi’s failure to realize its reform objectives of attracting private investments and reaping, economic and technical efficiency gains promised by the reform, so the shortcomings like weak institutional frameworks, lack of clarity in legal provision or reform strategy and retention of ESCOM as a virtue hence the development of the energy policy (2003) expressing its unambiguous support for greater private sector involvement, and it seeks to provide all necessary policy guidelines to enhance private sector confidence in the new market structures. (Power Sector Reform Strategy 2003:4) The Electricity Supply Industry Reform Strategy Plan is a three year period programme comprising a number of inter-related actions which must be carefully introduced in as series. This power sector re form strategy is a landmark (Department of Energy Affairs 2003) document in the on-going government efforts to expand and revitalize the Electricity Supply industry and make it efficient, effective and more responsive to private sector participation. Although we can say that the reforms are yet to trigger expected results of promoting private sector participation and a gender competition. We still see ESCOM as the sole provider of Electricity in Malawi with no competition resulting in daily blackouts which is not health to an ordinary Malawian who does not own a generator and even for those who own one with the scarcity of diesel we are yet to see the quality of service demanded by consumers. But well it is the sincere hope of Government that the Power Sector Reform Strategy practically implementable to make electricity more accessible to the people of Malawi. (Thomson Harry (2003:i) foreword by the then minister of Natural Resources and Environmental Affairs Lilongwe Malawi is endowed with a relatively large natural resource base for power generation in the form of biomass, coal, perennial rivers, high all year round solar radiation, and geothermal. However, due to capital, technological and human resource constraints a significant proportion of this resource still remains untapped. For example, Malawi’s hydro potential on the Shire River alone is estimated in the range of 300 to 385 MW, even the other rivers have potential too in the range of 445 to 985MW and of all these only 285MW have been developed. So we recommend those investors to come and tap the untapped resources for the better Malawi. (Power Sector Reform Strategy 2003:4) To sum up we can say that the Malawi government used the introduction of reforms in order to intervene in the Electricity Supply Corporation of Malawi (ESCOM) which of course we can say as of today that nothing good has come out of these reforms since there are more blackouts and ESCOM has no strong competitor as the Malawi community is still being inconvenienced with these blackouts. REFERRENCES ESCOM Annual Report 1999 ESCOM Ltd Blantyre Malawi Kainja G. D. 2000 Review of Energy Laws in Malawi Malawi Power Sector Reform Strategy 2003 Malawi government January 2003 Malawi Energy Policy department of energy Affairs, Ministry of Natural Resources and environmental Affairs Thomson H Foreword Malawi Power Sector Reform Strategy 2003