Electricity Supply Corporation of Malawi (Escom) says the freeze of funds from the Millennium Challenge Corporation (MCC) has not affected its programme of connecting new customers to the national electricity grid.

MCC, a United States government development assistance agency, placed a hold on Malawi's programme in July 2011 after concerns about Malawi's commitment to the rule of law, economic and political governance. Among other grounds, it cited the way the country's leadership responded to the July 20 demonstrations, in which 20 protestors were killed.

A week after the protests, MCC issued a statement that said it was "deeply concerned by recent events in Malawi and is placing an immediate hold on all program operations in order to review its partnership withMalawi, including whether to recommend to its Board of Directors to suspend or terminate its assistance."

MCC had signed a five-year, $350 million (approx. K56, 700, 000) programme with the government of Malawi on April 7, 2011. From it, six million Malawians were expected to benefit from the compact that also sought to reduce power outages by enhancing hydro-power generation efficiency, and improve service delivery of electricity to consumers, among others.

The MCC compact's objective is to improve availability, reliability and quality of power supply, and creating an enabling environment for future expansion by strengthening sector institutions and enhancing regulation and governance of the sector.

With the funding from MCC, Escom was expected to enhance sustainability and efficiency of hydropower generation, increase the potential kilowatt hours to electricity consumers, and reduce energy costs to enterprises and households, improve productivity in agriculture, manufacturing, and service sectors. According to MCC, inappropriate pricing and high technical and non-technical losses cost Malawi the equivalent of seven percent of GDP.

NICO Asset Managers Limited reporting in its July 2011 Monthly Economic Report said the (MCC/Malawi) agreement, along with an expected K12.7 billion from the World Bank for the local energy sector, could help uplift the manufacturing and tourism sectors.

But after the MCC funding was frozen, there has been uncertainty over chances of enhancing the country's power generation, supply and distribution sector.

However, Escom's public relations manager, Kitty Chingota, has said that suspension of Malawi's agreement with MCC has not affected new customers' connection efforts.

"The suspension of Millennium Challenge Compact has not affected our connection 'drive', as you call it," Chingota said. She said, instead of being derailed, Escom has the capacity to carter for more customers. She said the sole utility power supplier is registering an average 2 000 new applicants every month.

"Escom can connect more than the number of customers (2000) that apply on monthly basis," Chingota said.

While the future of the MCC funding is uncertain, the Republic of China has promised Malawi a new hydro-power station. This was revealed in December last year by Deputy Minister of Natural Resources, Energy and Environment, Vera Chelewani, on her return from a Hangzhou Regional Centre for Small Hydropower in China.

Chelewani said a small plant would be established at Henga Valley Hydro-power station at Vunguvungu Falls (Northern region). The site has the potential to produce between 20 and 40 megawatts of power, in line with the Malawi Electricity Investment Plan.

Apart from depending on hydro-electric power, Malawi has outlined plans to supplement its power supply needs with coal. Among other projects, the country plans to embark on a new coal power plant in Karonga.