The government raised household electricity prices by between 17% and 30% (19.1% average) as it introduced the latest round of electricity subsidy cuts, Minister of Electricity and Renewable Energy Mohamed Shaker announced Tuesday. The remaining electricity subsidy will be phased over a further three years until the fiscal year (FY) 2024/25, according to Shaker.
The extension on the electricity subsidies period will mean that the state will bear a total cost of EGP 26.7bn.
During a press conference on Tuesday, Shaker said the plan to rationalise electricity subsidies began in 2015, with a fully liberalised price to have occurred by the end of July 2019.
However, in 2017, President Abdel Fattah Al-Sisi directed for the extension of phasing out period to eight years instead of five years in the subsidy cut plan, to avoid further burdens on citizens. As a result, the ministry already has a plan in place that extends the process of cutting subsidies until July 2021.
The minister added that the price of high, medium and high voltage electricity consumption was reduced by 10 piasters to support Egypt’s industrial sector. This would occur provided that the state budget will bear the value of this subsidy for the next five years of EGP 22bn.
Shaker noted that natural gas prices have increased from $3 to $25.3 per million thermal units. Despite this, the price of gas will remain fixed $3 per million thermal units for electricity production stations. The move will ensure the final energy consumer does not bear any additional financial burdens, ensuring the Ministry of Finance bears a financial burden amounting to EGP 29.9bn.
Accordingly, the total amount borne by the state budget over the next five years as a result of electricity subsidy measures will stand at EGP 78.6bn.
Shaker noted that a 9 June cut of electricity subsidies has seen the average increase rate in household electricity prices during FY 2019/2020 reaching 19.1%.
According to the Ministry of Electricity data for FY 2019/2020, household electricity consumption reached 41.7% of Egypt’s total electricity use. This was followed by services such as offices, clinics and gas stations at 8.5%, then commercial stores by 5%. Government agencies reported electricity consumption of 4.8%, with agriculture also consuming 4.8%.
“In price plans, we take into consideration the citizens’ monthly financial capabilities,” Shaker said, adding that the prices were set according to the exchange rate against the dollar, which is currently EGP 16.
“We acknowledge that we have billing errors, though, the standard reading programme for electricity meters helps reduce errors,” Shaker said. “The ministry has installed 9.3 million prepaid meters, and 5,000 consumers use their phones to charge smart meters, with 182,000 smart meters out of 250,000 meters installed.”