EEU gears towards inflation-oriented tariffs

Contrary to the usual trend, the Ethiopian Electric Utility (EEU) discloses that it is looking into ways of applying inflation based regular tariff revisions.
About four years ago, the government had approved a significant electricity tariff revision which was applied progressively in different phases which came to a close this year. However, it is widely argued that the inflationary conditions have made the revision meaningless.
EEU, which is responsible for the retail of electricity across the country, through its officials recently stated that the inflation has consumed the tariff adjustment.
The public enterprise’s financial soundness has been pinned to be critical and owing to the fact that it is under the Ethiopian Investment Holding, the sovereign fund that controls 27 huge public enterprises, financial resources are key.
A proper tariff system has been noted to not only benefit the financial stability of the utility company but also in realizingaccess to finance for projects to improve its services.
So to attain the target, government has been applying tariff adjustments for certain periods for the service but devaluation and inflation have made it a hurdle to gaining needed results.
According to ShiferawTelila, EEU CEO, the price hike and inflation has affected the financial position of the utility firm.
The CEO explained that the tariff revision issue is the mandate of the central government, “however, conducting a comprehensive study and tabling the results to government shall be carried out by EEU.”
Shiferaw told Capital that the government has been applying the adjustments for about four years now. As he highlights, possible further revisions as per study are applicable. Moreover, he expressed that government has also taken directions to consider tariffs harmonized with inflation rather than imposing periodic adjustments.
Esubalew Tenaw, Director of Change and Good Governance Directorate at EEU, further explained that the sector needs huge investment. As Esubalew revealed, the global and local price hike for instance on petroleum, inputs and steel has become a challenge to the energy sector.
“Wecannot revise our tariff in connection with the inflation rate so the price adjustment that was applied in the recent past was taken by the price hike,”Esubalewexplained.
Most of the electric development is dependant of imported materials.
Shiferaw said that even if the equipment is produced here, the input is still coming from abroad, “Thus, about 65 percent of the sector investment demandsforeign currency.”
At the end of June last year, EEU had garnered 4.3 million customers. In the 2021/22 budget year, EEU’s revenue stood at 20.9 billion birr increasing by 5.5 percent from the preceding year.
In the revised three year plan, the utility has targeted to generate 40.2 billion birr revenue form electricity sales by 2025 from 7.9 million customers.
With regards to its infrastructure,it has medium voltage transmission lines stretching 54,300 km,lower voltage lines at67,706 km and44,977 transformers.
As per the last census in Ethiopia there are 16,652 villages and towns and of that 7,962 have been covered by EEU, while 11 areas have access to power under the off grid scheme.