The Stranglehold on Energy

Editorial

Electricity production should serve the interests of all, not just a privileged few

At one time, energy production for public consumption in Mauritius was fully controlled by the state. The Central Electricity Board (CEB) was not only the distributor but also the sole producer of electricity for the entire nation. That changed in the mid-1990s when advisors from the World Bank and the IMF recommended that the government shift the CEB’s role to a mere distributor, leaving electricity production in the hands of private Independent Power Producers (IPPs). To be fair to the “twin sisters” – the World Bank and the IMF -, that was their era of pushing privatisation onto client states across the globe as a means to reduce high public sector capital expenditure demands for investments with low or slow returns, provided of course, that the deal with private producers (IPPs) was fair and equitable to both parties. In our case, this recommendation coincided with the declining profitability of the sugar industry, leading major sugar conglomerates to diversify into real estate and energy production.

The adoption of this policy saw the gradual decline of CEB’s role in energy production. Today, around 60% of the electricity supplied to Mauritians is generated by private sector IPPs. Since the first IPP authorization in 1997, several former sugar companies have established themselves as major power producers. The agreements between these IPPs and the CEB, vetted by the World Bank teams, were and remain heavily skewed in favour of the private producers. According to contractual terms, the CEB is obligated to purchase all the electricity generated by the IPPs before utilizing its own production capacity. This arrangement places the public sector in a subsidiary position, forcing the CEB to maintain idle backup capacity while prioritizing electricity from private producers. Bagasse, a major disposal headache for the sugar mills, became valued as an alternative fuel like imported coal and its price pegged to international rates.

The agreements between the CEB and IPPs essentially create a risk-free business model for the private energy producers, namely a captive market with no competitors. Any fluctuation in production costs — whether due to coal prices, inflation, changes in freight charges, exchange rate variations, or taxation — is automatically transferred to the CEB and pegged to forex rates. This means that Mauritian consumers and taxpayers ultimately bear the financial burden, while IPPs continue to enjoy high guaranteed returns.

The CEB, despite being a state-owned entity, is bound by these rigid contracts that prevent it from competing on a level playing field. It is forced to scale down its own production whenever IPPs increase their output, ensuring that private producers always get the lion’s share of the market. The public sector is effectively at the mercy of these agreements, raising serious concerns about transparency, fair competition, and the long-term interests of Mauritian consumers. Since those days of enthusiastic privatisation, the twin sisters may have moved on to more sober views, but it is the recipient countries that continue to bear the consequences over the imposed long-term contracts.

Call for Transparency

In a recent social media post, former Labour Party MP Nita Deerpalsing took aim at the Mouvement Militant Mauricien (MMM) regarding the ongoing CorexSolar controversy. Her criticism highlights broader concerns about the nation’s energy policies and the opaque manner in which decisions are made.

Nita Deerpalsing posed several hard-hitting questions to the MMM’s Commission du Développement Durable (Commission for Sustainable Development), demanding clarity on the party’s stance regarding the dominance of existing energy players. Meanwhile, environmental activist and independent journalist Rajen Valayden has suggested that Mauritius is on the verge of a major energy production scandal.

One of Nita Deerpalsing’s key points is that Mauritius’ energy sector is monopolized by just three major IPPs — Omnicane, Terragen, and Alteo. These companies control the bulk of the country’s power production, leaving no room for alternative producers to enter the market. With their contracts set to expire soon, she raises an important question: should the government open up the bidding process to ensure fair competition, or will it simply renew these monopolistic agreements without scrutiny? It is worth noting that capital expenditure investments incurred by the three majors have by now been largely amortised years ago, leaving very healthy bottom-lines in a non-competitive environment.

The lack of competition in Mauritius’ energy sector has far-reaching consequences. Without any challengers, the existing IPPs have no incentive to lower prices or improve efficiency. This has a direct impact on domestic electricity rates, which in turn affects the cost of production for industries and businesses. Despite the manufacturing sector’s frequent complaints about the exchange rate, little is said about the efficiency of local energy production and whether consumers of today are paying a fair price per unit of electricity.

The Absence of a Competitive Benchmark

In a functional market, competition ensures that prices remain fair and reasonable. However, since all IPP contracts are standardized, these producers operate as a quasi-collective monopoly. Without a benchmark to compare costs, there is no way to determine whether existing electricity prices are justified or if Mauritians are being overcharged. On another level, is there any justification for renewing contractual terms that look like a straitjacket with regard to the CEB and even our national energy security?

Nita Deerpalsing’s critique suggests that Mauritius Inc has actively blocked potential competitors from entering the energy sector. The failed attempt to establish CT Power in Albion is a prime example. The project was met with fierce opposition on the grounds that it would cause pollution and increase traffic congestion. However, existing coal-fired power plants run by IPPs were never subjected to the same level of scrutiny. The question remains: was CT Power’s environmental impact assessment any worse than those of the IPPs already in operation, which burn a mix of coal and bagasse? Or was its rejection simply a means of protecting the established players from competition?

One of the most pressing issues highlighted in Nita Deerpalsing’s post is the urgent need for greater transparency in energy pricing. She calls on the government to disclose how much profit the three major IPPs are making from a captive market. If Mauritians are paying significantly more than they should for electricity, it is essential to identify the root causes and implement corrective measures.

Another crucial point she raises is the issue of energy subsidies. If these private energy producers are enjoying excessive profit margins, should they continue receiving government support? Should taxpayers be subsidizing companies that are already making substantial returns at the public’s expense?

Furthermore, Nita Deerpalsing questions whether Mauritius should continue relying on just three energy producers, especially given their alleged past threats to cut supply when their contracts were at risk. Should the entire nation remain hostage to a handful of powerful conglomerates that could, at any moment, leverage their control over electricity production for even more financial gain?

A More Inclusive Energy Future

Beyond exposing flaws in the existing system, Nita Deerpalsing also pushes for a more progressive energy policy. She argues that Mauritius must lift unnecessary restrictions on private solar energy production. At present, individual producers are limited to generating only 5MW of solar energy, an arbitrary cap that prevents greater participation in the market. Why not allow households, businesses, and malls to produce as much solar energy as they can? Why not mandate large commercial complexes and parking facilities to install solar panels to meet at least part of their energy needs?

A well-planned transition toward decentralized energy production could reduce Mauritius’ dependence on a few dominant players while promoting sustainability. By encouraging small and medium-sized producers to contribute to the national grid, the government could reduce costs, improve energy security, and enhance the resilience of the power supply.

The monopolistic grip that a few private entities have on Mauritius’ energy sector is neither sustainable nor justifiable. The government must reassess the outdated contracts that favour IPPs at the expense of the public. Greater transparency, fair competition, and strategic diversification of energy sources are urgently needed to break the cycle of dependency on a handful of powerful producers.

Nita Deerpalsing’s critique sheds light on the glaring inefficiencies and inequities in the current system. Her call for reform should not be dismissed as mere political rhetoric. The future of Mauritius’ energy security, economic competitiveness, and environmental sustainability depends on addressing these fundamental issues. The time for complacency is over. Mauritius must take bold steps to reclaim its energy independence and ensure that electricity production serves the interests of all, not just a privileged few.

Mauritius Times ePaper Friday 21 March 2025