Electricity tariffs must double to sustain profits: EEU

The Ethiopian Electric Utility (EEU) emphasizes that the electric tariff should be twice or more than twice the current tariff for the EEU to be profitable.
“The current tariff in Ethiopia is amongst the lowest in Africa, and is far below the cost of electricity generation,” said, ShiferawTelila CEO of EEU, the state agency engaged in selling electric energy.
According to the CEO, the existing electric tariff lays on 0.045 dollar /4.5 cent/ per kWh while the average rate in the world is between 0.08 dollar /8 cent/ to 0.1 dollar /10 cents/.
“Our tariff should lay between 0.08 dollar /8 cent/ to 0.1 dollar /10 cents/ to be financially stable for the company,” said Shiferaw.
The CEO also indicated that the service is conducting a study to revise the current tariff to support its financial stability and access to finance for projects in order to improve its services. The current tariff was approved four years ago in 2018 considering the inflation and cost of living at the time, according the CEO and the new proposal is under preparation to make it a timely tariff revision. Once it is completed, it will be submitted to the council of ministers, explained Shiferaw.
“Low prevailing electricity tariffs have saddled the country with large debts and have threatened the credit worthiness of the government-owned power company,” said the CEO, adding, “It is difficult to boost electric access coverage and improve service delivery as the utility is not able to meet the societies’ energy demand with the current tariff it charges to consumers.”
“The electricity infrastructure projects require substantial amounts of capital,” Shiferaw underlined.
EEU during the last 2021/22 fiscal year had generated 20.94 billon birr in revenue. This was as indicated on Thursday August 18, 2022 during a press conference on the annual performances of the power company by the CEO who showed that the company had achieved 88 percent of its target.
From its plan to electrify 425 rural cities in the budget year, the enterprise achieved only 48 percent of its plan which is 204 cities. EEP’s plan to get 1.2 million new customers over the country including Tigray has achieved only by 32.84 percent getting 367,466 new customers making the total to 4.3 million customers.
As the CEO indicated, as a result of the TPLF attack in Amhara and Afar regions, the enterprise has lost more than 1.24 billion birr. As disclosed, about 87 percent of the damage and loss was reported in Amhara region while the rest was in Afar region.
The power utility company has planned to generate 33.5 billion birr in revenue from electricity sales, 43.1 billion birr including other sources and targets 1.2 million new customers. As the CEO highlighted, increasing customers, efficiency, and overall market is atop the company’s agenda. Shiferaw also pointed out that the firm plans to electrify 160 rural towns and build 27 new mini-grid solar projects.
EEU which is a customer of Ethiopian Electric Power (EEP) is providing electricity for the public that it buys from EEP under the power purchase agreement (PPA).
Expanding electricity access and securing reliable energy services will be fundamental to ensuring Ethiopia meets its growth and poverty reduction ambitions. Future energy demand is projected to increase dramatically because of rapid growth in population, the economy, urbanization and access to electricity needs.
The Ethiopian government has started to make major investments in the power sector, with two energy policy programmes in place: the National Electrification Programme (NEP II) and the Power Sector Reform bill. The NEP aims to achieve 100 per cent electrification by 2025, through on-grid and off-grid solutions. By 2025, 65% of the population will be grid-connected, with the remaining 35% relying on off-grid electricity. The grid will be extended to reach 96% grid connections by 2030. There is also a target to increase generating capacity by 25,000MW by 2030, comprising 22,000MW of hydropower, 1,000MW of geothermal and 2,000MW of wind.