Egypt: Hike in electricity prices

Ahmed Kotb , Saturday 10 Jul 2021

Egyptian households will be receiving higher electricity bills this month

Hike in electricity prices

Since 1 July, the Ministry of Electricity and Renewable Energy has increased electricity prices on residential units by between eight and 26 per cent depending on the consumption bracket.

The increase comes as part of an energy subsidies phasing-out programme that the government adopted in 2015. It was initially planned to gradually lift electricity subsidies over a period of five years. But the programme was extended to end in 2021 after the devaluation of the Egyptian pound in 2016.

Last year, the government announced an extension of the phase-out scheme until the 2024-25 fiscal year as a result of the coronavirus crisis in order to “alleviate the economic burdens on the public,” said Mohamed Shaker, the minister of electricity and renewable energy, who added that delaying the complete lifting of the subsidies had cost the government about LE26.7 billion.

According to the recent increases, the price of a kilowatt of electricity in the first tier of consumption ranging between zero to 50 kilowatts per hour (KWH) went up from 38 to 48 piastres, an increase of 10 per cent. The second segment of consumption from 51 to 100 KWH will pay 58 piastres instead of 48 piastres per KWH, an increase of 20.8 per cent, while consumers in the third tier, consuming 101 to 200 KWH, will now pay 77 piastres instead of 65, an increase of 18.5 per cent.

Consumers falling in the fourth and fifth levels with consumption of 201 to 350 KWH and 351 to 650 KWH, respectively, will have to pay 106 piastres instead of 96, or 128 instead of 118 piastres, per KWH, depending on their level of consumption, an increase of 10.4 and 8.5 per cent, respectively.

Those in the sixth tier with consumption of 651 up to 1,000 KWH will be charged 128 piastres per KWH of electricity usage, while consumers of more than 1,000 KWH will pay 145 piastres per KWH. The last two groups do not receive subsidies.

According to the Ministry of Electricity and Renewable Energy, household consumption accounts for more than 41 per cent of total electricity use in Egypt, while industrial consumption uses about 30 per cent. Prices of electricity for industrial use remain unchanged, and there will be no increase until the 2024-25 fiscal year, according to Shaker.

After a series of power cuts and a lack of a steady electricity supply from 2013 to 2015, Egypt was able to enhance its competitiveness and attract international companies to invest in energy production, transmission, and distribution projects. This improved Egypt’s ranking in the World Bank’s access to electricity index from 145th place in 2015 to 77th place in 2020.

Egypt’s electricity grid had a total capacity of about 59,063 megawatts (MW) at the end of 2020, compared to approximately 35,000 MW in 2015. Until 2014, Egypt experienced frequent power cuts that began to end in 2015 when several new power stations started operations.

The Egyptian Electricity Utility and Consumer Protection Regulatory Agency announced on Sunday that peak electricity consumption had reached 30,600 MW nationwide.

The government is obliged to raise electricity prices despite the large surplus in the network, according to a statement by the Egyptian Centre for Strategic Studies (ECSS). The most important is the fact that the selling price of electricity in Egypt is less than the cost of production.

The ECSS said the state had developed plans to restructure electricity prices to bring the selling price in line with the cost of production, a step aimed at ensuring the sustainability of the system in Egypt until 2024-25. This will contribute to improving the quality of services, as well as meeting the financial obligations of the sector internally and externally to achieve the required development.

Moreover, the ECSS pointed out that the large gas discoveries made in Egypt in recent years had contributed to providing the needed fuel for power stations in Egypt, instead of importing it, helping to bring the cost of production down.

But it said that the cost of production remained higher than the selling price of electricity to households, adding that the state supported low-income groups by meeting 60 per cent of the cost of electricity bills for consumers in the first consumption bracket whose usage does not exceed 50 KWH.

*A version of this article appears in print in the 8 July, 2021 edition of Al-Ahram Weekly

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