Late news on electricity

Ahmed Kotb , Saturday 8 Jul 2023

The government has been late in revealing its plans for electricity tariffs this year.

Late news on electricity
Late news on electricity


Many Egyptian households are not looking forward to the government’s planned announcement of the prices of electricity amid record levels of inflation.

The new rates, to be applied from the start of the new fiscal year on 1 July, will be the first hikes since July 2021 as the government opted last year to keep rates on hold due to inflationary pressures.

The daily newspaper Al-Masry Al-Youm published a schedule of the increases on Tuesday without citing sources. Ministry of Electricity Spokesperson Ayman Hamza told Al-Ahram Weekly that the published figures were “speculation” as the ministry has not released them.

However, he did not say that the prices would not increase or deny the validity of the new prices revealed by the newspaper.  

According to the newspaper, five out of the seven household consumption brackets for electricity will witness increases in tariffs, with those with the least consumption (zero to 50 kW) paying LE0.58 per kW compared to LE0.48 currently.

Consumers falling in the fifth tranche, which ranges from 351 to 650 kW, will pay LE1.31 per kW, up from LE1.28 earlier. Those belonging to the sixth tranche, whose consumption ranges between, 651 and 1,000 kW, as well as those in the seventh tranche with consumption more than 1,000 kW, will not pay any extra.

Consumers in the sixth and the seventh tranches are already not receiving subsidies on their electricity bills.

Residential electricity bills are set to rise by as much as 21 per cent, according to the six-year plan the government revealed in 2014 to phase out electricity subsidies by 2025. It has delayed the annual cuts in subsidies three times in the course of the last nine years, resulting in the state bearing nearly an additional LE25 billion due to increases in natural gas and fuel prices.

Last year, President Abdel-Fattah Al-Sisi said that around 17 million Egyptian households were paying subsidised electricity prices that were around 50 per cent less than what their monthly electricity consumption actually cost.

Observers are divided about the reasons the new rates have not yet been announced officially, some attributing it to the fact that the first days of July coincided with the Eid Al-Adha (Bairum) holiday, while others believe that the cabinet is mulling over the idea of postponing the hikes until next year in order not to add to the burdens of consumers.

Annual inflation rates in May hit their highest level in six years to settle at 32.7 per cent compared to 30 per cent in April.

In 2021, electricity prices increased by rates ranging between 8.5 and 26 per cent for household use, while the price of electricity for the industrial sector was fixed until 2024-2025. Prices have remained unchanged since July 2021, as the government is taking into account the effects of the Russian-Ukrainian war and global and local inflation on citizens.

The state has also announced plans to rationalise electricity consumption in government agencies and ministries in order to save the gas used to operate power stations for exports.

According to Prime Minister Mustafa Madbouli, the actual cost of producing a kW-hour of electricity is LE1.09. This was when the exchange rate was LE18 to the dollar. The official rate is now LE30.9.

The move to lift subsidies on electricity aims to alleviate the financial burdens on the government while encouraging energy conservation and promoting a more sustainable energy market. However, this decision has sparked debates among experts, who have expressed concerns about the potential impact on consumers and the overall economy.

According to Ahmed Al-Dahshan, a professor of economics at Cairo University, the government’s decision to lift electricity subsidies gradually is a necessary step towards achieving sustainable economic growth. The subsidies have been straining the budget for years, and the reform will allow for the better allocation of resources to sectors that need them the most, Al-Dahshan said.

“The current subsidy system has long been a financial burden on the government, with billions of Egyptian pounds allocated annually to maintain affordable electricity prices for consumers. By reducing these subsidies, the government aims to reduce its budget deficit and create a more efficient and competitive energy market,” he said.

However, concerns about the potential impact on consumers, particularly those from low-income households, have been voiced, with additional financial burdens falling on already vulnerable populations.

Sara Mahmoud, a social policy analyst at the Egyptian Centre for Economic and Social Rights, a NGO, said that while lifting subsidies is necessary, it is vital that measures are put in place to mitigate the impact on low-income households.

“The government must ensure that vulnerable communities are protected through targeted assistance programmes and support mechanisms, to prevent them from facing undue hardships,” she said.

She added that the gradual reduction of subsidies is expected to encourage investment in renewable energy sources and promote energy efficiency measures. “By striking a balance between economic viability and social welfare, Egypt can pave the way for a more sustainable and resilient energy sector,” she stressed.

According to Fatima Hassan, a renewable energy specialist at the Egyptian Renewable Energy Authority, the reduction of electricity subsidies will encourage the shift towards renewable energy sources, which will have long-term benefits for the environment. This move aligns with Egypt’s commitment to reducing greenhouse gas emissions and instituting a greener energy mix, she said.

She emphasised the importance of raising awareness about the need for energy conservation and efficient electricity usage. By promoting energy-saving practices, such as using energy-efficient appliances and adopting renewable-energy solutions, consumers can mitigate the impacts of higher electricity prices and contribute to a more sustainable future.

The gradual reduction of subsidies on electricity, according to Hassan, allows consumers and businesses to adjust to the new pricing structure, providing time for consumers to adapt their energy-consumption patterns and invest in energy-efficient technologies, ultimately leading to long-term savings.

* A version of this article appears in print in the 6 July, 2023 edition of Al-Ahram Weekly

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