Egypt introduces higher electricity tariffs to households, part of subsidy cut plan

Ahram Online , Monday 8 Aug 2016

Egypt's electricity minister Mohamed Shaker (Photo: Al-Ahram)

Egypt's electricity ministry announced on Monday the new tariffs for household consumers as a part of the government’s plan to phase out the energy subsidy within five years as of July 2014.

The new tariffs, which were scheduled to be implemented last July, aim to trim the state's subsidies for the electricity sector to reach EGP 4 billion in 2017 and zero in 2018, said minister Mohamed Shaker during a televised press conference held in Cairo.

“The electricity subsidy was estimated at EGP 12 billion in this year’s budget, but we raised it to EGP 30 billion, and without the new prices the subsidy bill would have been inflated to EGP 48 billion,” Shaker said.

Shaker said that the average cost of producing electricity (Kilowatt-hour) has risen from roughly EGP 0.47 in 2014 to EGP 0.64 currently.

The minister attributed the rise to the difference in the official exchange rate and the total investments that were carried out by the ministry since 2014 through 2015 and 2016 at a cost of around EGP 75 billion to add 6,882 extra megawatts to the grid’s capacity through new stations and maintaining existing ones.

The Central Bank of Egypt devalued the local currency by 13.5 percent in March 2016 against the US dollar to reach EGP 8.78 in an attempt to eradicate the black market. 

“Since June 2015, we [the ministry] have not reduced even one megawatt from the grid’s loads,” Shaker told reporters.

According to the ministry, the new monthly tariffs for household brackets will be as follows:

- Those (4.2 million subscribers) who consume up to 50 kw-h will pay EGP 0.11 instead of EGP 0.07
- Those (2.6 million subscribers) who consume from 51 to 100 kw-h will pay EGP 0.19 instead of EGP 0.14.
- Those (8.2 million subscribers) who consume from 100 to 200 kw-h will pay EGP 0.21 instead of EGP 0.16.
- Those (7.7 million subscribers) who consume from 200 to 350 kw-h will pay EGP 0.42 instead of EGP 0.30.

The first tile will see the highest increase, representing more than 46 percent, but will still be the most subsidised, according to the minister.

The first four brackets represent 57 percent of the total subscription to the state's electricity services nationwide.

- The consumption category between 350 and 650 kw-h will pay EGP 0.55 instead of EGP 0.40.
- The consumption category between 650 and 1000 kw/h will pay EGP 0.95 instead of EGP 0.71.
- The consumption category of more than 1000 kw/h will pay EGP 0.95 instead of EGP 0.84.

Electricity tariffs had not changed for more than a decade until 2004, when the government announced a plan to raise prices – another rise touching certain consumers happened in 2008, and finally the subsidy reform plan started in 2014.

Power plants built by Germany's Siemens in Egypt are set to start production by end of this year and will reach full capacity in May 2018, Shaker said.

Egypt signed an 8 billion euro deal with Siemens in June 2015 that calls for three combined-cycle power plants with a capacity of 4,800 megawatts each, plus 12 wind farms, and is designed to boost the country's electricity generation by 50 percent.

*The official exchange rate for $1 = EGP 8.78

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