Egypt’s Cabinet will decide on expected electricity price increases by the end of this month. There are ongoing negotiations on the size of electricity subsidies for the next fiscal year.
According to government sources, there are negotiations with the Ministry of Finance on the size of subsidies allocated to electricity, which amounted to EGP 30bn in the current fiscal year, though the electricity allocations jumped to EGP 63bn following the Central Bank of Egypt’s (CBE) decision to float the pound.
The sources added that the Egyptian Electric Utility and Consumer Protection Regulatory Agency will hold a meeting after the Eid el-Fitr under the chairmanship of Minister of Electricity Mohamed Shaker to calculate the increase in electricity prices. The increase is expected to range between 20% and 40%, taking into account the limited income and the most needy category.
They added that Shaker will hold a press conference the first week of July to announce the new prices for electricity consumption segments. He will disclose the cost of producing a kilowatt of electricity, and the amount of subsidies allocated to the sector, as well as the expected timetable to lift the subsidies on electricity totally.
The sources pointed out that the ministry has declined the request from the Energy and Environment Committee in the House of Representatives to postpone the increase in prices, or exempt segments lower than 200KW.
MP al-Sayyed Hegazy said that the House of Representatives submitted formal requests to the Ministry of Electricity to postpone the scheduled increase in July, and extend the timetable of lifting subsidies on electricity to 10 years with the aim to ease the burden on citizens. The officials did not respond to the requests of Parliament.
Hegazy added that the Parliament suggested to apply the increase on higher consumption segments only and maintain the prices on the lower segments. The leaders of the Egyptian Electricity Holding Company (EEHC) affirmed they would protect limited income people from the price increase, which represents a very small percentage.
Sources said that the Parliament presented a number of scenarios that could come from an increase in electricity prices, none of them suggested a delay of price increases. The Parliament suggested applying a slight increase on the low segments and increase it gradually on higher consumption segments.
The scenarios also included increasing the prices by 10 percent on segments up to 200kW, and 15 percent on segments up to 350kW. The Parliament demanded to lift the electricity subsidies gradually over a number of years, provided that the last year will have the highest percentage of the increase.
The sources pointed out that the lift of subsidies on high and medium consumption segments, including hotels, hospitals and facilities will be on a faster rate than the lower segments, adding that the electricity subsides on enterprises will be lifted within 3 years.
The sources said that the cost of the electricity unit in 2017-2018 will be higher than last year, especially that the electricity tariff in 2016-2017 which was calculated based on EGP 8.88 per dollar, according to the price announced by the CBE at the time. After the flotation, the dollar price reached about EGP 18. They noted that the changes in the foreign exchange rate led to an increase in the average value of the energy unit up to EGP 0.95 per kilowatt-hour instead of EGP 0.63 in the current fiscal year. It is to be noted that the original program to restructure electricity prices in 2014 showed that the production cost of kilowatt-hour is estimated at 47.5 pts.