TANESCO

The Tanzania Electric Supply Company Limited (TANESCO) is a government-owned parastatal organization responsible for generating, transmitting, distributing, and selling electricity across mainland Tanzania, while also supplying bulk power to the Zanzibar utility.^[1][2] Formed in 1964 through the merger of the Tanganyika Electric Supply Company Limited—originally established in 1931—and the Dar es Salaam and District Electric Supply Company Limited, TANESCO evolved from colonial-era private entities into a nationalized utility focused on hydroelectric expansion post-independence, including key projects like the Hale (21 MW, 1964) and Kidatu (100 MW, 1975) dams.^[3] As the dominant player in Tanzania's power sector, TANESCO owns and operates the majority of generation, transmission, and distribution infrastructure, serving over 1.5 million customers as of mid-2015 amid efforts to electrify rural areas and integrate natural gas-fired plants like Ubungo.^[4][5] Its installed capacity has grown from approximately 1,602 MW in 2020 to higher levels through reforms encouraging independent power producers and major additions such as the 2,115 MW Julius Nyerere Hydropower Project, reflecting government priorities to meet rising demand projected at 17,611 MW by 2044.^[6][7] Despite these advances, TANESCO grapples with systemic challenges including high transmission and distribution losses exceeding 20 percent due to theft and technical inefficiencies, chronic debts to independent producers totaling billions of shillings, and vulnerability to hydropower disruptions from droughts, which have triggered outages even amid occasional surpluses.^[8][9][10] Ongoing sector reforms aim to enhance financial viability and operational reliability, though arbitration disputes with producers and recovery drives underscore persistent fiscal strains.^[11][12]

History

Colonial Origins and Early Development

The first public electricity supply in Tanzania was introduced by German colonial authorities in 1908 in Dar es Salaam, then the capital of German East Africa (Tanganyika), primarily to power railway workshops, administrative buildings, and European residences.^[13] This initial infrastructure relied on small-scale diesel generators and served limited urban and industrial needs, reflecting colonial priorities of facilitating extraction economies and administrative control rather than broad access.^[14] Following the British conquest of Tanganyika after World War I and its administration as a League of Nations mandate from 1919, electricity development remained constrained. In 1931, the Tanganyika Electric Supply Company Limited (TANESCO) was established on November 26 as a private entity to manage generation and distribution, alongside another firm for northern regions; it focused on expanding supply in key urban centers like Dar es Salaam and sisal plantations.^[1] Early efforts included rudimentary hydroelectric installations, such as at Mtera, but overall capacity grew slowly, with total installed power under 10 megawatts by the 1940s, prioritizing colonial settlements, ports, and export-oriented agriculture over rural or indigenous communities.^[15] Development accelerated modestly in the late colonial period amid post-World War II imperial welfare policies, yet electricity access remained below 1% of the population by 1961 independence, confined largely to urban elites and infrastructure supporting British economic interests.^[16] Private companies like TANESCO operated under government oversight but faced chronic underinvestment, leading to frequent shortages and reliance on imported fuels, which underscored the extractive focus of colonial energy policy.^[14]

Post-Independence Nationalization and Expansion

Following Tanzania's independence from Britain on December 9, 1961, the government pursued the consolidation of fragmented colonial-era electricity utilities to centralize control and support national development goals. In 1964, the Tanganyika Electric Supply Company (established in 1931) and the Dar es Salaam and District Electric Supply Company (DARESCO) were merged under state ownership, forming the Tanzania Electric Supply Company Limited (TANESCO), with the government as the sole shareholder; the name was officially adopted in 1968.^[3][17] This nationalization unified generation, transmission, and distribution under a single parastatal entity, replacing private operations that had limited coverage primarily to urban areas and export dependencies, such as power sales to Mombasa, Kenya.^[18] The move aligned with broader socialist policies under President Julius Nyerere, emphasizing public control of key infrastructure to meet rising industrial, commercial, and rural demands, though it introduced state monopoly risks later evident in inefficiencies.^[17] TANESCO's early expansion focused on hydropower development to boost installed capacity, which had been modest at under 50 MW pre-merger. Construction of the Hale Hydropower Plant (21 MW) began in 1962 and was commissioned in 1964, providing initial baseload power in the northeast.^[3] The Nyumba ya Mungu Hydropower Station (8 MW) followed, commissioned in 1969 on the Pangani River.^[3] Thermal supplementation came via the Ubungo Diesel Power Station in Dar es Salaam, completed between 1967 and 1969 to address peak urban loads.^[3] These projects, supported by international loans including a 1967 World Bank facility for 21 MW of diesel generation, enabled TANESCO to achieve adequate performance through the 1970s, with capacity growing to support exports and domestic growth.^[19][18] Major scaling occurred with the Great Ruaha River projects: Phase I at Kidatu (100 MW) started in 1968 and commissioned in 1975, linked by a 350 km transmission line to Dar es Salaam.^[3] Phase II at Mtera Dam added another 100 MW, doubling Kidatu's effective output to 200 MW by 1980–1981.^[3] Complementary infrastructure included the Hale-Moshi transmission line in 1975. Rural electrification efforts extended grids to districts like Musoma and Tukuyu in 1966, and Handeni and Tarime in the 1970s, though coverage remained low at under 5% nationally by decade's end due to prioritization of urban-industrial needs.^[3][20] This era marked TANESCO's transition from a regional supplier to a national utility, laying foundations for hydropower dominance despite emerging maintenance challenges from over-reliance on large dams.^[21][18]

Reform Attempts and Partial Restructuring

In the early 1990s, Tanzania's power sector faced chronic shortages exacerbated by a 1993 drought, high costs, and TANESCO's inefficiencies as a state monopoly, prompting initial reform efforts under the 1992 National Energy Policy, which aimed to liberalize generation by allowing independent power producers (IPPs).^[22] This policy marked the first step toward partial unbundling, ending TANESCO's exclusive control over generation, though transmission and distribution remained under its monopoly.^[23] By 1997, TANESCO was placed under the Parastatal Sector Reform Commission (PSRC), established in 1992, with explicit commitments to commercialization, unbundling, and potential privatization to reduce fiscal burdens and attract investment.^[24] Subsequent attempts included a five-year private management contract awarded to Southern Energy in 2002, intended to improve operational efficiency and financial viability, but it yielded limited results due to disputes over tariffs, legacy debts, and inadequate regulatory enforcement, ending in 2006 without structural changes.^[25] The Energy and Water Utilities Regulatory Authority (EWURA) was established in 2003 via the EWURA Act to oversee licensing, tariffs, and competition, facilitating IPP entry, while the Rural Energy Agency (REA) was created in 2007 to promote off-grid electrification through private partnerships.^[22] These measures achieved partial success: IPPs such as Independent Power Tanzania Limited (IPTL, operational from 1998) and Songas (2004) now supply over 40% of Tanzania's generation capacity, reducing reliance on TANESCO's hydro-dependent plants.^[23] Despite these advances, full unbundling stalled amid political resistance, vested interests in state control, and TANESCO's persistent debts—reaching $1.2 billion by 2015—leading to repeated load-shedding and emergency power purchases.^[24] Reform rhetoric persisted, with 2013 plans under the Scaling-Up Renewable Energy Program targeting TANESCO restructuring alongside gas-fired expansions, but transmission and distribution privatization remained unexecuted.^[26] In 2021, the government announced intentions to unbundle TANESCO by awarding distribution concessions to six private firms starting 2022, aiming to mobilize private capital for grid expansion, though implementation has been gradual and contested, with calls in 2025 for acceleration to address a $12.9 billion funding gap by 2030.^[27][28] Overall, reforms have diversified generation but preserved TANESCO's integrated dominance, constraining efficiency gains and private investment in core infrastructure.^[29]

Corporate Governance

Management and Leadership

TANESCO's leadership is structured under a Board of Directors, which provides oversight and strategic guidance as a wholly state-owned parastatal. The board is chaired by Dr. Rhimo Nyansaho, a banker previously serving as director of business development at Azania Bank, appointed by President Samia Suluhu Hassan in December 2023 following the dissolution of the prior board amid ongoing power sector challenges.^[30][31] The current board comprises eight directors: Dr. Lucy-Mary Mboma, Eng. Isaac Ambrose Chanji, Bw. Boma Obunga Raballa, Adv. Grace Philotea Joachim, Dr. Hellen Bandiho, Balozi Zuhura Bundala, Prof. Ninatubu Lema, and Prof. Idris S. Kikula.^[30] Executive management is headed by Managing Director Lazaro Jacob Twange, appointed on May 7, 2025, after serving briefly as District Commissioner for Ubungo; his predecessor, Gissima Nyamo-Hanga, died in a road accident on April 13, 2025, while addressing regional electricity issues.^[32][33][34] Twange oversees operations through deputy managing directors specialized by function: Eng. Anthony Mabuga Mbushi for generation, Eng. Abubakari Issa for transmission, and Eng. Athanasius H. Nangali for distribution.^[32] Supporting directors handle key areas including legal services (Adv. Sundi Mahalu), acting finance (Mussa Ngozingozi), internal audit (CPA. Buyamba N. Buyamba), human resources and administration (Magreth Mwandu), procurement (Faraja Mbwambo), acting communications (Irene Gowelle), security (Adv. Lenin B. Kiobya), and acting environment and governance (Tluway Sappa).^[32] Leadership appointments reflect direct presidential influence, aligning with Tanzania's model of state control over parastatals, where the executive prioritizes energy stability and infrastructure expansion amid frequent outages and debt pressures.^[35] Recent changes, including the 2023 board reconstitution and 2025 MD transition, have emphasized continuity in addressing supply deficits, though outcomes depend on fiscal reforms and investment inflows.^[36][37]

Ownership Structure and State Control

Tanzania Electric Supply Company Limited (TANESCO) is wholly owned by the Government of the United Republic of Tanzania, which holds 100% of the company's shares as the sole shareholder.^[38][39] The Ministry of Energy and Minerals acts as the legal custodian of these shares on behalf of the government and exercises primary policy oversight, ensuring alignment with national energy objectives.^[5] As a parastatal entity, TANESCO is governed by the Public Corporations Act (Cap. 257 R.E. 2002) and the Companies Act (Cap. 212 R.E. 2002), which mandate state accountability while allowing operational autonomy under governmental supervision.^[40][24] State control manifests through the government's appointment of TANESCO's board of directors, which comprises nine members responsible for strategic direction, financial management, and compliance with national directives.^[24] The board reports to the Ministry of Energy and Minerals, which influences key decisions on infrastructure investment, tariff approvals, and sector planning, often prioritizing national development goals over commercial imperatives.^[5] This structure reinforces centralized authority, with the government retaining veto power over major contracts and expansions, as evidenced by its role in negotiating power purchase agreements with independent producers.^[41] Despite reform initiatives since the 1990s— including the end of TANESCO's monopoly under the Parastatal Sector Reform Commission in 1992 and a short-lived management contract with NETGroup Solutions from 2002 to 2006 that aimed to introduce private operational expertise—ownership has remained exclusively state-held, reverting to full government control post-contract due to performance shortfalls and policy shifts.^[38][25] More recent proposals for unbundling TANESCO's functions and inviting private operators, announced in 2021, have not altered the core ownership framework as of 2023 financial disclosures, underscoring the Tanzanian government's sustained preference for direct stewardship amid concerns over sector reliability and debt.^[27][40] Regulatory independence is nominally provided by the Energy and Water Utilities Regulatory Authority (EWURA) under the Electricity Act of 2008, yet practical state influence persists through ministerial policy integration and EWURA's alignment with government priorities.^[38]

Regulatory Oversight and Policy Influences

The Energy and Water Utilities Regulatory Authority (EWURA), established under the EWURA Act Cap. 414 of 2006, provides technical and economic oversight of TANESCO as the autonomous regulator for Tanzania's electricity sub-sector.^[42] EWURA's mandate includes issuing and enforcing licenses for electricity generation, transmission, distribution, and supply; setting and reviewing tariffs to promote cost recovery; and monitoring compliance with performance standards, such as service quality and safety protocols.^[42] In fiscal year 2024/25, EWURA licensed 68 new energy projects, including those interfacing with TANESCO's grid, to expand capacity while ensuring regulatory alignment.^[43] TANESCO operates under the Electricity Act No. 10 of 2008, enacted on June 6, 2008, which delineates the framework for regulated electricity activities, mandates licensing by EWURA, and enables independent power producers (IPPs) to supply TANESCO while preserving its vertically integrated monopoly in transmission and bulk supply.^[44] This legislation formalized partial reforms initiated in the early 1990s to mitigate TANESCO's operational inefficiencies, such as overstaffing and financial losses, through gradual unbundling and private involvement in generation, though full separation of functions has progressed slowly due to state control priorities.^{[45] [24]} National policies exert significant influence on TANESCO, guided by the 2003 National Energy Policy's focus on reliable supply, efficiency, and rural access, supplemented by the 2015 electrification strategy targeting accelerated connections via grid extensions led by TANESCO and off-grid initiatives coordinated with the Rural Energy Agency.^{[38] [46]} These directives, often shaped by fiscal constraints and donor conditions from entities like the World Bank, have driven TANESCO's expansion targets, including 250,000 annual grid connections by the mid-2010s, but tariff policies remain volatile, frequently subsidizing rates below costs to align with affordability goals, thereby straining utility finances. In August 2025, policy evolved further with government approval to invite private investment in transmission projects for the first time, aiming to alleviate TANESCO's infrastructure bottlenecks amid rising demand.^[47]

Operations

Power Generation Sources

TANESCO generates electricity primarily from hydroelectric and natural gas sources, with supplementary contributions from thermal plants using heavy fuel oil (HFO) and diesel, as well as limited renewable installations including solar and biomass. As of December 2024, the total installed capacity on the mainland grid reached 3,404.20 MW, encompassing hydro, natural gas, HFO, diesel, biomass, and co-generation facilities.^[48] Hydroelectric capacity accounted for 2,011.27 MW, representing the largest share due to major projects like the Julius Nyerere Hydropower Plant on the Rufiji River, which has progressively added units since initial commissioning.^[48] Other key TANESCO-owned hydro plants include Mtera (228 MW), Kidatu (204 MW), and smaller facilities in the Pangani and Rufiji basins, though output varies significantly with seasonal rainfall and drought conditions.^[49] Natural gas-fired generation, sourced from domestic fields such as Songo Songo, forms the backbone for baseload and reliable supply, comprising approximately 63% of capacity in earlier assessments but adjusted with hydro expansions.^[50] TANESCO operates plants like Ubungo I (100 MW) and Ubungo II, while procuring substantial power from independent power producers (IPPs) including Songas (Tegeta and Ubungo expansions, totaling over 500 MW combined).^[51] This shift toward gas since the early 2000s has mitigated hydro's intermittency, though it increases costs due to fuel logistics and infrastructure demands.^[50] Thermal plants using HFO and diesel, such as those at TPDC and various emergency units, provide peaking and backup capacity totaling around 4-18% of the mix, essential during dry seasons when hydro availability drops below 30% of potential.^[49][50] Renewable diversification includes solar projects like the 50 MW Kishapu plant and small biomass co-generation, contributing less than 1-2% but growing under regulatory incentives from EWURA to reach 75% renewables in the long-term mix.^[49][48] TANESCO also integrates imports from neighboring countries and small power producers (SPPs) for isolated grids, enhancing overall source reliability.^[52]

Transmission and Distribution Infrastructure

TANESCO operates Tanzania's national transmission grid, consisting of high-voltage lines interconnecting power plants and major load centers with 72 grid substations.^[53] As of the latest regulatory data, the transmission network spans 8,303.87 km, including 1,524.75 km at 400 kV, 3,860.95 km at 220 kV, 2,335.17 km at 132 kV, and 583 km at 66 kV.^[53] This infrastructure facilitates the bulk transfer of electricity from generation sources to distribution substations, supporting peak demands exceeding 1,600 MW in recent fiscal years.^[54] The transmission system has undergone significant expansion through projects like the Backbone Transmission Investment Project, adding high-capacity 400 kV lines to integrate hydropower from the south and reduce northern deficits.^[55] By fiscal year 2023/24, line lengths reached 7,524 km, increasing to 7,809.67 km by March 2025 amid ongoing interconnections such as the Rusumo Falls link synchronizing grids with Burundi and Rwanda in March 2024.^[54][56][57] Distribution infrastructure managed by TANESCO covers 213,278.32 km of medium- and low-voltage lines, enabling supply to over 5.2 million customers as of December 2024.^[53][48] This includes approximately 33 kV lines totaling 66,992 km, 11 kV lines at 12,737 km, and low-voltage 0.4 kV networks spanning 117,868 km, though exact breakdowns vary by reporting period.^[48] Low-voltage distribution alone reached 199,974.6 km by early 2025, reflecting incremental growth to extend access in rural areas.^[56] Challenges in distribution include high losses, averaging around 15-20% annually, attributed to aging lines and overloads, prompting investments in reinforcement and metering.^[56] Recent reforms allow private participation in transmission projects, potentially accelerating upgrades to accommodate planned generation additions of 6,200 MW by decade's end.^[47][58]

Import, Export, and Customer Services

TANESCO imports electricity from neighboring countries to supplement supply in border regions where local generation is insufficient. As of fiscal year 2021/22, the company imported 24 MW from Uganda to serve the Kagera region and 11 MW from Zambia for the Rukwa region, under long-term power purchase agreements.^[59] Imports from Kenya support the Tanga region, while additional cross-border wheeling arrangements enable access to power from further afield.^[60] In December 2024, TANESCO finalized a power purchase agreement with Ethiopia's Electric Power to import 100 MW, transmitted via the operationalized Kenya-Tanzania Power Interconnector Project (KTPIP), marking the first such wheeling in Eastern Africa.^[61] This import is projected to reduce costs by 32 billion Tanzanian shillings annually through cheaper hydropower rates compared to domestic thermal alternatives.^[62] Electricity exports remain limited and opportunistic, primarily to manage surplus during high hydro periods. TANESCO has engaged in trial exports to Kenya via the KTPIP since early 2025, though volumes are small and focused on regional balancing rather than large-scale trade.^[63] In March 2025, the company initiated negotiations with a Zambian firm to export power to Zambia, potentially expanding southward trade amid Tanzania's growing generation capacity exceeding 1,700 MW installed as of 2024.^[64] These activities are regulated by the Energy and Water Utilities Regulatory Authority (EWURA) and supported by regional interconnectors, including the planned Zambia-Tanzania line completion in November 2025, which could facilitate bidirectional flows.^[65][53] Customer services encompass billing, fault reporting, new connections, and complaint resolution, delivered through digital and traditional channels to over 10 million end-users. In March 2025, TANESCO launched toll-free line 180 ("mchongo 180") for free access to services like outage reports and meter inquiries, integrated with its call center operations.^[66][67] Complementary platforms include WhatsApp at +255 748 550 000, email at [email protected], and the Nikonekt mobile app for prepaid token purchases, bill payments, and usage tracking.^[68] Emergency fault reporting operates via dedicated lines and online portals, with response commitments outlined in EWURA-approved service charters targeting 24-hour resolution for urgent issues.^[69][70] New supply applications require submission at regional offices, followed by feasibility assessments and infrastructure extensions, though delays often arise from capacity constraints.^[71]

Financial Performance

Revenue Generation and Business Metrics

TANESCO generates the majority of its revenue through electricity sales to domestic, commercial, and industrial customers on the mainland, supplemented by bulk sales to the Zanzibar Electric Company (ZECO) and other income sources such as connection fees, interest on overdue bills, and government grants. In FY 2023/24, electricity sales constituted 85% of total revenue, amounting to TZS 2,055.52 billion out of a total of TZS 2,418.26 billion, reflecting a 15% year-over-year increase driven by higher consumption and new connections.^[72] Large power users (LPUs), numbering approximately 3,836 and comprising just 0.17% of the customer base, contribute over 44% of revenue, primarily through high-voltage industrial tariffs (T3 category).^[73][72] Key business metrics underscore revenue growth amid expanding access. The customer base grew to 4,982,259 by June 2024, up 12.65% with 559,595 new connections, boosting sales volume to 11,068.40 GWh—a 12.20% increase from 9,864.77 GWh in FY 2022/23.^[72] Revenue distribution by customer category highlights reliance on non-domestic segments: Domestic and general users dominate the customer count but yield lower per-unit revenue compared to industrial loads from mining, manufacturing, and exports.^[72] Earlier performance in FY 2021/22 showed total revenue of TZS 2,282.9 billion, with electricity sales at 7,765 GWh to 3,788,207 customers, achieving a record after-tax profit of TZS 109.45 billion amid improved hydrology and cost controls.^[74] Revenue protection efforts, including smart metering and anti-theft measures, have supported collection rates, though vulnerabilities to non-payment and losses persist, with overall metrics indicating steady expansion tied to infrastructure investments and demand from export-oriented industries.^[74]

Tariffs, Pricing, and Cost Recovery Issues

TANESCO's electricity tariffs are regulated by the Energy and Water Utilities Regulatory Authority (EWURA) under a multi-year framework that incorporates projected costs, revenues, and adjustments for inflation, fuel prices, and other variables.^[75] Tariffs are differentiated by customer class, with domestic consumers divided into tiers: a subsidized lifeline rate for up to 50 kWh monthly consumption, followed by increasing blocks for higher usage to promote efficiency, while commercial and industrial tariffs include demand charges and higher energy rates to facilitate cross-subsidization from larger users to residential ones.^[76] As of March 2025, average residential tariffs stood at 229.59 Tanzanian shillings (TZS) per kWh (approximately USD 0.093), and business tariffs at 236.37 TZS per kWh (USD 0.096), positioning Tanzania's rates as the lowest in East Africa due to ongoing subsidies.^{[77] [78]} Despite periodic adjustments—such as EWURA's approvals for increases below TANESCO's requests to mitigate affordability concerns—tariffs have failed to achieve full cost reflectivity, excluding adequate recovery for depreciation, capital investments, and long-term debt servicing.^{[75] [79]} In the financial year 2023/24, overall service cost recovery reached only 96%, with operating cost recovery ratios fluctuating around 135-141% in prior years but insufficient to offset high power purchase costs from independent power producers (IPPs) and transmission losses exceeding 15%.^{[80] [59]} This shortfall stems from elevated expenses for thermal generation during hydropower droughts, IPP contracts with take-or-pay clauses, and non-technical losses from theft and illegal connections, which elevate the average cost of supply above tariff revenues.^{[79] [80]} Government subsidies, often channeled as budget support or debt conversions, bridge the viability gap but perpetuate fiscal strain and moral hazard by shielding TANESCO from market discipline, with subsidies covering unfunded shortfalls equivalent to billions of TZS annually.^{[80] [78]} For instance, cross-subsidies from industrial users—who face rates up to 30% above domestic levels—fund lifeline blocks but discourage manufacturing investment and export competitiveness, while TANESCO's accumulated debts to IPPs exceeded 238.7 billion TZS as of early 2025.^{[76] [81]} The International Monetary Fund has emphasized that non-cost-reflective pricing undermines TANESCO's operational maintenance and infrastructure upgrades, recommending phased tariff hikes tied to efficiency improvements to eliminate subsidy dependence.^[82] Without such reforms, persistent under-recovery risks escalating sovereign contingent liabilities, as evidenced by government equity conversions of TANESCO's on-lent debts totaling 5 trillion TZS (2.6% of GDP) in late 2022.^[83]

Debt Accumulation and Fiscal Sustainability

TANESCO has accumulated substantial debts primarily through arrears to independent power producers (IPPs) under long-term power purchase agreements (PPAs), where contracted costs exceed revenues from regulated tariffs that fail to fully recover operational and capital expenses.^[24] As of June 2023, the company converted over TZS 2.8 trillion in such debts to equity, reflecting prior accumulation that strained its balance sheet and necessitated government recapitalization to avert default risks.^[48] A notable example includes TZS 238.7 billion owed to Independent Power Tanzania Limited (IPTL) as of March 2025, stemming from unresolved Tegeta ESCROW fund agreements dating back to at least June 2024. This IPTL obligation highlights how "take-or-pay" clauses in PPAs compel payments regardless of off-take, exacerbating fiscal pressure amid high fuel and capacity costs.^[24] Fiscal sustainability remains precarious due to persistent mismatches between cost-reflective pricing and approved tariffs, which prioritize affordability over recovery and result in annual government subsidies via budget transfers.^[80] TANESCO's debt-to-asset ratio stood at 0.36 in 2022, underscoring leverage vulnerability, compounded by non-technical losses from theft and illegal connections, as well as technical inefficiencies in aging infrastructure.^[80] Government interventions, such as the 2023 debt conversion, have temporarily bolstered equity-to-assets ratios but do not address root causes like delayed tariff reforms under the Energy and Water Utilities Regulatory Authority (EWURA), leaving the utility reliant on fiscal support that diverts public funds from other priorities.^[48][80] Efforts to mitigate accumulation include targeted debt recovery from large debtors; for instance, the Zanzibar government cleared its full TZS 5.8 billion arrears to TANESCO in August 2025, while the company launched door-to-door collections for post-paid customer debts in June 2025 to curb further buildup.^[84] As the sole off-taker for IPPs, TANESCO's ongoing financial fragility undermines investor confidence in the sector, potentially hindering expansion of generation capacity and perpetuating cycles of borrowing and bailouts absent structural reforms like cost-based pricing.^[85][86]

Challenges and Criticisms

Service Reliability and Frequent Outages

TANESCO's electricity supply reliability has historically been undermined by frequent outages, with system-wide interruptions averaging 26 events per customer annually (SAIFI) and 1,536 minutes of downtime per customer (SAIDI) in fiscal year 2022/23.^[72] These metrics reflect vulnerabilities in the network, including unplanned faults on 33kV transmission lines and distribution feeders, exacerbated by aging infrastructure and environmental factors.^[87] By fiscal year 2023/24, performance improved significantly, with SAIFI dropping to 14 events and SAIDI to 554 minutes per customer, alongside a reduction in customer average interruption duration (CAIDI) to 40.8 minutes, due to investments in generation capacity like the Julius Nyerere Hydropower Project and operational enhancements.^[72] However, these levels remain elevated compared to international benchmarks for reliable grids, where SAIFI often falls below 1 and SAIDI under 100 minutes annually. A primary causal factor is TANESCO's heavy dependence on hydropower, which constituted approximately 67.7% of installed capacity as of mid-2023, rendering the system prone to hydrological variability. Droughts have repeatedly triggered load shedding; for instance, in September 2023, a 400-megawatt shortfall from low reservoir levels and maintenance issues led to nationwide rationing.^[88] Similar disruptions occurred in 2022, affecting 14 grid-connected regions due to crippled hydropower output.^[89] As of January 2025, residents reported outages lasting 30 minutes to an hour, occurring multiple times daily, particularly in urban areas like Dar es Salaam, underscoring persistent supply-demand imbalances amid rising consumption.^[90] The economic toll of these outages is substantial, with businesses losing an estimated 15% of annual sales according to the World Bank's 2022 Enterprise Survey, driven by production halts and reliance on costly backups like diesel generators.^[91] Transmission and distribution losses, compounded by faults and overloads, further degrade reliability, though regulatory targets—such as SAIDI below 1,536 minutes for supply networks—were met in late 2024.^[92] While recent data indicate progress toward meeting performance ceilings, the absence of diversified non-hydro sources perpetuates vulnerability to climatic shocks, limiting overall service stability.^[72]

Corruption, Theft, and Infrastructure Vandalism

TANESCO has faced persistent corruption allegations, particularly in power purchase agreements and procurement processes. The Independent Power Tanzania Limited (IPTL) scandal, emerging in the early 2000s, involved corrupt payments to government officials to secure a deal for a 100 MW emergency power plant, leading to inflated tariffs and financial guarantees that burdened TANESCO with payments even when the plant was non-operational.^[93] This prompted parliamentary investigations and the resignation of senior officials, including the attorney general and housing minister, in December 2014.^[94] Similarly, the 2000s Richmond Development Company scandal saw TANESCO enter an opaque contract for rental generators, later ruled fraudulent, resulting in overpayments estimated at hundreds of millions of dollars and further prosecutions.^[95] In 2014, TANESCO's former CEO was charged with embezzling public funds, highlighting internal graft in fund management.^[96] These cases, often involving kickbacks and escrow account manipulations, have eroded public trust and contributed to TANESCO's debt accumulation, with critics attributing them to weak oversight in state-owned utilities.^[97] Electricity theft by unauthorized connections and meter tampering represents a major non-technical loss for TANESCO, constituting part of the company's overall system losses estimated at 20-21% of net generation as of the early 2010s, with theft exacerbating revenue shortfalls.^[98] Tanzanian law criminalizes electricity theft with imprisonment penalties, yet enforcement challenges persist due to widespread informal settlements and metering gaps.^[99] In response, TANESCO launched a nationwide meter inspection campaign in August 2025, identifying defective and tampered meters, which recovered TZS 1.7 billion in potential revenue losses by October 2025.^[100] Specific incidents, such as a Dar es Salaam resident illegally connecting to a landlord's supply in August 2025, underscore relational dynamics in urban areas where theft enables access amid high costs and unreliable service.^[101] Infrastructure vandalism, primarily copper theft from transformers and power lines, has inflicted direct financial and operational damage. Between January and May 2024, TANESCO reported losses of TZS 700.5 million from the vandalism of 63 transformers nationwide, with Mkuranga district in coastal Tanzania leading incidents due to lucrative scrap markets.^[102] In Geita region, copper wire theft alone caused TZS 224.8 million in losses, disrupting supply and requiring costly replacements.^[103] A 2024 study in Iringa municipality found that 68.2% of TANESCO infrastructure vandalism stemmed from theft motives, often targeting high-value components amid poverty and weak policing.^[104] Arrests in December 2024 involved suspects stealing copper wires valued at TZS 300 million from TANESCO assets, highlighting organized syndicates.^[105] TANESCO's whistleblower platform has aided recoveries, such as identifying damaged poles in Dar es Salaam suburbs in September 2025, but persistent vandalism contributes to outages and elevates maintenance costs.^[106]

Institutional and Policy Barriers to Efficiency

TANESCO's operations as a vertically integrated state-owned monopoly are constrained by limited managerial autonomy, with frequent political interventions overriding commercial decisions. In January 2017, President John Magufuli dismissed the TANESCO managing director following the Energy and Water Utilities Regulatory Authority's (EWURA) approval of an 8.53% tariff increase, which was deemed insufficient by the utility but politically contentious.^[107] Similarly, in April 2021, the government blocked a proposed tariff adjustment and removed the managing director, prioritizing short-term affordability over long-term financial viability.^[108] These actions exemplify how executive oversight distorts incentive structures, discouraging efficiency-focused reforms and perpetuating reliance on fiscal bailouts. Policy frameworks exacerbate inefficiencies through non-cost-reflective pricing mandated by government directives, which suppress tariffs below operational costs and necessitate subsidies averaging $1.3 billion annually as of 2017.^[28] This approach, intended to enhance access, instead fosters underinvestment in maintenance and expansion, with TANESCO's system average interruption frequency index (SAIFI) reaching 11 outages per customer annually and duration index (SAIDI) exceeding 26,000 minutes in 2021-2022—far above regulatory benchmarks.^[80] The absence of systematic updates to the Power System Master Plan and vague guidelines for private sector involvement further hinder strategic planning and resource allocation.^[80] Regulatory shortcomings compound these issues, as EWURA's 2021 Electricity and Natural Gas Tariff Application and Rate Setting Rules remain unimplemented over two years later, stalling transitions to sustainable pricing models.^[80] Political influence extends to both TANESCO and EWURA, undermining independent decision-making on procurement and project approvals, while institutional capacity gaps limit enforcement of standards and coordination across agencies.^[109] The bundled utility structure, lacking separation of generation, transmission, and distribution, obscures cost accountability and invites ongoing subsidization, reinforcing a cycle of fiscal unsustainability over market-driven efficiency.^[28]

Reforms and Future Developments

Privatization Efforts and Market Liberalization

Tanzania's power sector reforms, initiated in the early 1990s under influence from international financial institutions, aimed to liberalize the market dominated by the state-owned Tanzania Electric Supply Company (TANESCO). In 1992, the government promulgated the first national energy policy, opening electricity generation to independent power producers (IPPs) while retaining TANESCO's role as the single buyer and operator of transmission and distribution.^[110] This partial liberalization sought to attract private investment to address chronic capacity shortages, but TANESCO's vertical integration persisted, limiting competition in other segments.^[111] By 1997, TANESCO was designated for full privatization as part of broader parastatal restructuring, with commitments made to the International Monetary Fund (IMF) to unbundle the utility into separate generation, transmission, and distribution entities.^[24] However, these efforts stalled; in 2005, the government removed TANESCO from the active privatization list, citing operational complexities and the need for internal viability improvements before divestment.^[112] The 2008 Electricity Act reinforced reform intentions by mandating unbundling and authorizing IPPs to sell directly to large consumers under certain conditions, though TANESCO continued as the dominant off-taker, paying capacity charges that strained its finances—reaching $18 million monthly to key IPPs like Songas and IPTL by the mid-2000s.^[113][114] Market liberalization advanced modestly through IPP integration, which by 2020 accounted for over 40% of installed capacity, yet full unbundling remained unimplemented, hindering private entry into transmission and distribution.^[115] In July 2020, the government announced plans to list TANESCO shares publicly to foster competition and reduce its monopoly, aligning with World Bank-backed tariff hikes intended to enhance financial sustainability and investor appeal.^[116][112] Initiatives like the U.S. Power Africa program supported TANESCO's operational reforms to prepare for unbundling, emphasizing commercial practices over outright privatization.^[12] Recent developments signal renewed momentum toward liberalization. In February 2025, proposed legal amendments enabled private investment in transmission infrastructure construction, extending beyond generation to address a projected $12.9 billion grid funding gap by 2030.^[117][28] By August 2025, Tanzania opened transmission projects to private participation for the first time, aiming to mobilize capital while maintaining state oversight through the Energy and Water Utilities Regulatory Authority (EWURA).^[47] Despite these steps, critics argue that persistent delays in unbundling perpetuate TANESCO's inefficiencies, as bundled monopolies deter investors and sustain fiscal burdens from under-recovery and debt.^[28] The European Union's Energy Sector Reform Programme, launched around 2022, further targets TANESCO's turnaround to facilitate sustainable private sector integration without full divestment.^[118]

Independent Power Producers and Small Projects

Independent Power Producers (IPPs) have played a pivotal role in Tanzania's electricity sector liberalization efforts since the early 2000s, providing private-sector generation to alleviate TANESCO's capacity constraints and diversify the energy mix beyond hydropower. As the sole off-taker, TANESCO negotiates power purchase agreements (PPAs) with IPPs, which operate facilities fueled by natural gas, heavy fuel oil, and hydropower, contributing roughly 20-26% of total supply in recent years, though this share has declined from peaks near 30% in the early 2010s due to expanded TANESCO hydro projects and emergency plants.^{[113][119][52]} Notable IPPs include Songas Ltd., which supplies gas-fired power from the Ubungo plants totaling around 210 MW, and Independent Power Tanzania Ltd. (IPTL) with a 100 MW heavy fuel oil facility, both feeding the national grid via long-term contracts.^[24] These arrangements have enabled capacity additions amid TANESCO's historical underinvestment, but IPP viability hinges on TANESCO's creditworthiness, with government interventions occasionally covering payment shortfalls.^[85][23] Small Power Projects (SPPs), formalized under 2004 guidelines and capped at 10 MW per installation, target decentralized generation for rural and peri-urban areas, often leveraging solar, wind, or small hydro to extend grid access where extension costs are prohibitive. TANESCO or affiliated distributors serve as primary off-takers under standardized tariffs, with SPPs comprising isolated mini-grids or grid-connected plants that feed excess power.^[120][113] By December 2020, TANESCO executed PPAs for 19.6 MW across six renewable-focused IPPs, including three solar plants totaling 15.4 MW, accelerating SPP deployment under revised rules that streamline approvals and guarantee purchases.^[121][122] These initiatives align with broader reforms to attract private investment, with TANESCO actively soliciting proposals for SPPs in wind, solar, and geothermal up to 100 MW in priority regions like Singida.^[123] Despite progress, IPP and SPP expansion faces hurdles from TANESCO's fiscal strains, including delayed payments that elevate project risks and financing costs, prompting strategies like escrow accounts or partial risk guarantees.^[85] Reforms emphasize enhancing PPA bankability through policy stability and regulatory oversight by the Energy and Water Utilities Regulatory Authority (EWURA), aiming to scale private contributions to meet projected demand growth of 6-8% annually.^[124]

Recent Infrastructure Projects and Strategic Plans

In 2025, TANESCO advanced the Kishapu solar power project in Ngunga Village, Shinyanga Region, achieving 63.3 percent completion by June, with the initiative aimed at bolstering renewable generation capacity through grid-connected photovoltaic installations.^[125] Similarly, the company issued tenders in April for constructing a 100 MWp solar photovoltaic plant, inviting eligible contractors to develop utility-scale solar infrastructure to diversify energy sources and reduce reliance on hydropower variability.^[126] On the hydropower front, TANESCO initiated consultancy services for supervising the 87.8 MW Kakono Hydropower Project in Kagera Region, focusing on construction management to expand baseload capacity amid seasonal water fluctuations.^[127] Transmission infrastructure saw notable progress, including contracts awarded in August 2025 to two firms for building a 220 kV transmission line and associated substations, enhancing grid connectivity and evacuation from new generation sites.^[128] In March 2025, TANESCO launched efforts to reinforce electricity infrastructure in Kigamboni District, Dar es Salaam, encompassing 35 voltage improvement projects to mitigate losses and support urban load growth.^[129] Priority investment lists from TANESCO highlight additional pursuits, such as a 222 MW hydropower plant at Rumakali with a 95 km 220 kV double-circuit line, and a 100 MW wind project seeking independent power producer partnerships for joint development.^[130][131] TANESCO's strategic framework includes the 10-Year Corporate Strategic Plan for 2024/25–2034/35, which addresses revenue management, infrastructure expansion, and financial sustainability to achieve universal access targets.^[48] Complementing this, the Power System Master Plan 2024 Update outlines investments in 2,115 MW of new generation capacity and 779.63 km of transmission lines to support economic growth and per capita consumption goals of over 300 kWh by 2035.^[132][133] The plan emphasizes renewable integration, including hydro, geothermal, and solar expansions, alongside opening transmission projects to private investment for the first time to accelerate grid modernization.^[47] TANESCO aims for 1.6 million annual new connections, prioritizing rural electrification and partnerships with independent producers to align with the National Renewable Energy Strategy 2024–2034.^[134][135]