Wednesday, January 18, 2023
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BusinessThree mlnhomesto feel utility tariff upswing

Three mlnhomesto feel utility tariff upswing

Coming into force since December 2018, the new electricity tariff, which was revised after 12 years, introduced an aggregate of 345 percent tariff rise on some three million household customers for the coming four years.

ShiferawTelila, CEO of the Ethiopian Electric Utility (EEU), told reporters on Thursday thatfor 12 years, household customers paid based on a US cent 1.8 per kilowatt hour (kWh) tariff. The newly introduced tariff sets prices to go up to US cents eight per kW. That means a 345 percentage rise in the prices of power utility.

For instance, a household that consumes 400kW per month, on a 0.9725 birr per kWh tariff, will pay 390 birr against the previous 110 birr (on the basis of 0.2730 birr per kWh previous tariff) for the same power consumption. This price is applied only to the current fiscal year. Next year, the price rises to 554 birr (1.3833 birr per kWh), two years later the same customer pays 717 birr (1.7917 birr per kWh) and at the end of the four year cycle, this customer ends up paying 880 birr (2.2000 birr per kWh) for 400kWh monthly consumption patterns.

Though, the prices, according to Shiferaw are meant to rise upto 345 percent on average:however, on individual basis, utility bills could go as high as 700 percent in the 4 years’ time, from the examples provided. 

Shiferawsaid that for the lowest range of power users i.e. from 50 kilowatt up to 200 kilowatt, subsidies arestill intact. The new tariff doesnot apply on consumption up to 50 kW. From 50kW to 100kW, there is a 75 percent subsidy applied and from 100 to 200kW, a 25 percent subsidy is considered. 

Hence, medium and high voltage users and industrial customers will be feeling the burn from the said tariff rise. Despite the outcry and discontent over the revised tariff, Shiferaw counters stating that the tariff is still the lowest when compared to neighboring Kenya. There, they pay 12 US cents for a kW, he said. Some argue households are facing doubling prices induced by the tariffs. Industries will increase prices of commodities in response to power tariffs and a general price increase in the prices of goods and services is inevitable.

A few months ago, while hurling for a tariff introductory meeting with manufactures and high voltage customers, the Ministry of Energy, Irrigation and Electricity was criticized for introducing exaggerated price tags for weak services while recurringblackouts sternly hamper production activities. In fact, many businesses depend on a backup power, mostly generators as blackouts occur very often.

Although both industrialists and household customers have expressed serious concerns, Shiferawstates that the EEU has come to a point of collapse and the new tariff only helps the utility provider to cover its operational costs. It will only reach a breakeven point probably four years later.

Regarding power blackouts and bill collection tools, according to both Shiferaw and his deputy DemekeRobba, a network upgrading and expansion project with a USD 165 million is underway to be finalized in Addis Ababa along with seven major cities of the country included to alleviate problems. In addition, a second phase network expansion project that will require USD 80 to 100 million is on the way for Addis Ababa and its environs.

EEU has announced that bill collection stations will be replaced and customers will be required to settle bills via digital platforms. High end customers will be directed to the Commercial Bank of Ethiopia (CBE) and households will have the opportunity to pay via internet and mobiles. Kiosks and supermarkets will also be alternative options for bill collections. So far, postpaid utility bills were outsourced for a private company: Kifiya Financial Solutions PLC. According to Shiferaw, the agreement has been terminated and by the end of this year, automated billing system will be replacing both prepaid and postpaid utility bill collections. 

 

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