Egypt: Turning off the lights?

Ghada Ismail , Friday 22 Jun 2018

The new electricity price hikes will affect everyone, involving an average increase of 27 per cent across the board, including the household and industrial and services sectors and those who consume the most and the least

Source: Ministry of Electricity

The government earlier this month announced a further increase in electricity prices as part of a price-restructuring plan adopted in 2014-2015.

The plan initially aimed to end state subsidies on electricity by the end of 2018-2019, but has now been extended for a further three years to ease the burden on consumers already hit hard by price hikes since the implementation of the government’s economic reform programme in November 2016.

The new prices will not be felt before August electricity bills come due, recording consumption in July. Nonetheless, the announcement has been met with dismayed reactions from people from across the social spectrum.

“I pay LE135 for electricity each month at the moment,” said Hamida, an elderly woman who said she had two ceiling fans, a fridge and an old television set at home. “I do not know how much my bill will increase by, but I hope it will not eat up my husband’s pension.”

Faiza, a 45-year-old mother of five who had been planning to buy an air conditioner for her home, is now scrapping the idea.

The new prices are encouraging people to ration their consumption of electricity. Dina, a Cairo doctor, said that since electricity prices had shot up last summer her family had tried to use fewer rooms and less air-conditioning.

The new electricity price hikes will affect everyone, involving an average increase of 27 per cent across the board, including the household and industrial and services sectors and those who consume the most and the least.

The government has said that it will continue to subsidise electricity prices for those consuming the least. The first bracket of electricity consumption for households (up to 50 kWh) is still charged at only 18 per cent of the cost of electricity consumed.

That increases to 23 per cent, and then 33 and 82 per cent, for higher consumption brackets. Those consuming more than 1,000 kWh do not benefit from subsidies and subsidise lower brackets by contributing about LE1.2 billion towards their bills.

Minister of Electricity and Renewable Energy Mohamed Shaker said that this year medium and higher consumers had subsidised the household sector to the tune of LE12 billion.

The announcement of the new prices has led to questions about the efficiency of the sector, leading to reassurances from officials.

The minister said recently that Egypt’s new Siemens power plant, built by the German company at a cost of six billion euros, would go online at the end of this month and enjoy unprecedented efficiency. It would save the country up to one billion euros per year in fuel, he added.

The sector has also seen the exchange of single-cycle power plants for combined-cycle plants, leading to increased efficiency in fuel consumption.

Losses from the grid were being reduced by modernising and upgrading the network, financed by loans and company resources, the minister said, and costing some LE42 million.

Salaries of the 150,000 ministry employees did not come to more than eight per cent of total costs, Shaker said, adding that fuel costs represented 60 per cent of the total.

There have been criticisms that the ministry has invested heavily in new electricity projects that are not needed.

However, Mohamed Al-Sobki, chairman of the New and Renewable Energy Authority, said that these had been planned and implemented in advance so that investors would not have to wait for electricity to start their projects.

He said the additional production capacity would come in useful once linkages with Saudi Arabia were in place. “Electrical linkages with Saudi Arabia, reaching 3,000 Megawatts (MW), will allow Egypt to export electricity and absorb the additional capacity,” he explained.

Similar projects are in the making with Sudan and Cyprus, and these will make Egypt a regional electricity production hub, he added.

Hafez Al-Salmawi, a professor of engineering, said the ministry should put out more detailed cost reports, adding that it was not enough to announce final costs per kW/h. “Transparency requires the publication of the budgets of the power plants and distribution companies, ensuring that they abide by the legislation in force,” he said.

Some people may also think that they are paying for the electricity of others. Street vendors and those living in informal housing may steal electricity by extending wires from street lamps and other installations, for example.

Spokesman for the Ministry of Electricity Ayman Hamza said around LE950 million had been collected this year in charges for stolen electricity, adding that measures were being taken to stop the practice.

The ministry would also be installing prepaid meters to reduce the problem, he said.

*A version of this article appears in print in the 21 June 2018 edition of Al-Ahram Weekly under the headline: Turning off the lights? 

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