ECB questions NamPower’s debt-collection strategy

The Electricity Control Board (ECB) is not impressed with the manner in which the country’s power utility, NamPower, is handling its debt-collection affairs - a situation which has resulted in it being owed over N$1 billion by defaulting clients.

In some cases, defaulting clients accumulated debts beyond 90 days without any drastic action being taken by NamPower.

The ECB said the power utility's failure to manage its accounts is one of the leading causes of the financial distress it finds itself in.

“The debt-collection plan should have been implemented much earlier,” ECB CEO Robert Kahimise said last week at a press briefing.

The briefing was called to announce the outcome of NamPower’s 16.87% tariff hike application.

NamPower was hopeful that the requested hike would give it financial relief in the interim while hunting down non-paying clients. However, it was dealt a severe blow after ECB decided to only grant an increase of 8.97%.

Explaining why the regulator opted not to grant NamPower its wish, Kahimise said the decision was a balancing act to ensure that the approved hike ensures the power utility's sustainability.

He added: “In reviewing the tariff, the ECB considered several factors, including the impact of the tariffs on the electricity supply industry, consumers and the economy at large. In particular, the current economic climate was considered. The ECB is cognisant that prices of goods and services have been increasing, and this is negatively affecting consumers.”

“We have confidence that the 8.97% will aid NamPower. And if NamPower can recover funds from its clients, even better,” Kahimise said.

Debt remedy

“Despite past appeals to customers with overdue accounts, very few are making an effort to settle their outstanding accounts,” cash-strapped NamPower said in a statement last week.

It has listed two regional electricity distributors, a regional council and 19 local authorities as the biggest culprits, further threatening to implement load shedding if debts are not settled.

But despite the finger-pointing, Kahimise said both NamPower and its non-paying clients must improve their debt-collection capabilities.

“Utilities must have debt-collection strategies that utilise technology. If utilities do not have the majority of their clients on prepaid, they are facing the possibility of a growing debt. If you do not give clients the choice of consumption, it will adversely affect the utility,” he said.

Kahimise implored utilities - including NamPower - to keep their debtors' days below 60.

“The characteristics of the various distributors are different, with a client base that varies. The profiles from the distributors has an impact on how they manage their credit-control policies,” the CEO said.

He added: “If you look at NamPower’s debt collection that was published, you will see that the majority of those local authorities are mostly in the north and south, with a collective debt between //Karas and Hardap surpassing N$400 million.”

New model

Kahimise said there is a need to create a model that consolidates electricity distribution in order to avoid the constraints facing NamPower currently.

In a bid to beef up their debt-collection efforts, some local authorities have turned to third parties such as debt-collection agents to collect money on their behalf.

The decision to appoint debt collectors has, however, faced criticism from members of the public, who are of the view that local authorities should not involve third parties.

Critics have also questioned why local authorities are spending extra money to hire debt collectors while there are staff employed to ensure that credit policy, which includes debt collection, is fully implemented.