The cabinet will extend the subsidy period of electricity consumption prices during a meeting this week.
The Ministry of Electricity sent a proposal to the cabinet detailing three different suggested plans for the future of the subsidies system in an integrated file that explains the current status of the energy sector in Egypt.
According to a governmental source, the government plans to extend the electricity prices subsidy period until 2026, which is seven years after the deadline of the programme. The programme is scheduled to end in 2019.
The cabinet will approve and apply new prices on electricity consumption by the middle of July, the source said.
The source noted that there is a possibility that either the first three levels of consumption will be exempted from the increase; if not, the electricity prices restructuring programme will continue without exceptions.
The source explained that the decision to extend electricity subsidy years is meant to ease the pressure on consumers with a full commitment to increase the prices starting from July of each year.
There are ongoing consultations between the prime minister and President Abdel Fattah Al-Sisi in regards to exempting the first three levels of consumption from the price increase and to apply the increase only to high use levels in order to maintain the price restructuring programme.
The energy saving campaigns that were launched in collaboration with the Central Bank of Egypt (CBE) at the beginning of Ramadan, besides adding codification and smart counters, will contribute towards saving energy and reducing electricity thefts and illegal connections.
The decision was based on the changes that occurred to the exchange prices. The US dollar price was EGP 7.15 when the government implemented its strategy to increase the support, while the official price currently stands at EGP 8.88 and the state bears the difference rather than the citizen.
Previously, the Ministry of Electricity’s subsidy strategy was based on a fuel mixture consisting of 86% gas and 14% petroleum materials. However, the situation changed in the past two years, and the mixture has become 70% gas and 30% petroleum materials. As a result the million BTUs of fuel oil cost increased to be roughly $8.
Therefore, the government has resorted to restructuring the electricity prices after the clear deficit between the cost of electricity production and the selling prices to consumers reached 50%. The solution is to sell electricity at its real price to keep the balance.
The Minister of Electricity’s First Undersecretary Mohamed Al-Yamani said that the restructure of electricity consumption aims to achieve social justice, taking into account low-income citizens who the government provides with a subsidy worth EGP 9bn annually.
He explained that restructuring the electricity prices is due to the sector’s debt. This substantial debt has impacted the sector’s commitments and obligations causing delays in maintenance or adding new capacities.