Egypt raises electricity prices to trim state subsidy bill

Bassem Abo Alabass, Thursday 3 Jul 2014

New tariffs should cut the government's energy subsidies by almost 70 percent, says the electricity minister, as Egypt tries to meet growing fuel demands

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

Egypt's electricity minister Mohamed Shaker held a press conference on Thursday to announce the new tariffs for both households and commercial sectors, representing a new increase in energy prices.

According to Shaker, the new tariffs, which started this July, aim to trim the state's subsidies for the electricity sector by 67 percent over five years to reach LE9 billion – instead of the LE27.4 billion already allocated in the fiscal year 2014/15.

"Without the new tariffs, the electricity subsidy in the 2014/15 state budget would have recorded LE38 billion," Mohamed El-Yamany, the ministry's spokesman, told Ahram Online.

El-Yamany added that the ministry pays an average price of LE0.47 to produce one kilowatt of energy per hour, while the average selling price registers LE0.22.

"This difference in prices between production and selling has burdened the ministry with LE163 billion in debts to the ministries of finance and petroleum until June 2013," El-Yamany said.

Electricity tariffs didn't change for more than a decade until 2004, when the government announced a plan to raise prices – later halted in 2008 as a result of the international economic crisis.

The new rise per kilowatt/hour (kw/h) will vary from LE0.02 to LE0.07 increasingly.

According to the ministry, the new monthly tariffs for households' brackets will be as following:

- Those (4.2 million subscribers) who consume up to 50 kw/h will pay LE0.07.

- Those (2.6 million subscribers) who consume from 50 to 100 kw/h will pay LE0.14.

- Those (8.2 million subscribers) who consume from 100 to 200 kw/h will pay LE0.16.

- Those (7.7 million subscribers) who consume from 200 to 350 kw/h will pay LE0.24.

- The consumption category between 350 and 650 kw/h will pay LE0.34.

- The consumption category between 650 and 1000 kw/h will pay LE0.60.

- The consumption category of more than 1000 kw/h will pay LE0.74.

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

Energy consumption is currently peaking at around 22,000 megawatts (Mw) per day, much less than the 34,000 mW used in the hottest months of summer.

Power cuts have become more frequent in Egypt since August 2008, but are mostly limited to the summer. The phenomenon of blackouts in winter first started in December 2012, but intensified this year due to fuel shortages.

According to official figures, electricity recorded more than 55 percent consumption of the country's total natural gas production.

In June, the petroleum ministry's spokesman told Ahram Online that it provides power stations nationwide with around 80 million cubic metres of natural gas, 26,000 tonnes of the low-quality fuel mazut and 1,500 tonnes of diesel per day in an attempt to avoid ongoing regular blackouts.

Short link: