Electric Tariff Increase Sends Shockwave Through Consumers

The past two weeks did not bode well for the relationship between landlord Getaneh GebreHana and his eight tenants.

After Ethiopian Electric Utility adjusted prices upward he was forced to be strict with his tenants about their electricity consumption.

Seven of his tenants have cooking stoves, two have refrigerators, another two baking stoves and one has a washing machine – normal household electric appliances. His monthly electric bill has doubled to 800 Br, which Getaneh feels does not add up even after factoring in the adjustment.

“I looked into all the tenants’ homes to verify how they are consuming power,” said Getaneh, who uses a prepaid electric service.

“Even at midnight, I try to investigate who may be using electricity more but have found nothing out of the ordinary,” he added.

Getaneh is just one of 2.9 million household customers of the utility, of which over 80pc use postpaid services.

There are seven different types of tariffs for each usage. The lowest is 0.2 Br for each kilowatt-hour (kWh) for those that use below 50kWh a month, and the highest is 2.4 Br for each kilowatt-hour for those that use more than 500kWh a month.

The national electric utility recently adjusted the rates after 13 years of hiatus. This followed a perennial shortfall in revenues as a result of electric subsidies.

In the past fiscal year, the government earned seven billion Birr from the sale of electricity against a target of four times that amount, according to Seleshi Bekele (PhD), minister of Water, Irrigation & Electricity.

“Our expenses and revenue are not equivalent, especially as 60pc to 70pc of our costs have to be paid in foreign currency,” Melaku Taye, corporate communications director of the utility, told Fortune.

The nation’s electricity tariff is one of the lowest in Africa, with Sudan, Nigeria, Kenya, Rwanda and Uganda having rates between three and 14 times as expensive.

The tariff adjustments came after a 2013 World Bank study recommended increasing domestic tariffs to as much as 400pc if the nation was to meet its target of reaching a power capacity of 37,000MW by 2037.

The new electricity tariffs became effective on December 1, 2018, five years after that study. The rates will rise progressively toward a four-fold increase in 2022.

Consumers who use less than 50kWh a month are the only ones that will not see a rise, while the rest will be charged at a higher price based on higher rates.

The largest consumers of electricity, which the utility classifies as those that use more than 500KWh a month, will see their tariffs grow by more than fourfold to 2.48 Br per KW in four years.

“We have considered what would be a fair price for low-income households before we set the tariff,” Melaku says.

Nonetheless, the rate hikes were followed by complaints from customers who alleged that they were being charged higher than what the rate should be.

Users of pre-paid services as well say they have been inconvenienced by the electric utility’s inability to handle the new requests for recharging cards.

Simegn Afrash, a 40-year-old mother, who was waiting in a long queue to recharge a card for the second time in just a week, was one of them.

The Qality branch of the utility is closer to her home, but she had to go to Kazanchis where the main office for the prepaid service is located to prepay her electricity bill.

“I had to come to the main office, because I was told there was a network interruption there,” Simegn told Fortune, adding that she had to buy a power bank to cope with the blackout at her house.

She usually recharges her card for 50 Br, which lasts her a month but the same amount did not extend beyond a week after the tariff adjustment at was made the beginning of this month.

The six-year-old utility, established after its split from the Ethiopian Electric Power Corporation, is aware of the problem and says that the problem is being caused by network jams as the number of customers that recharge has increased.

“We are working with Ethio telecom to improve the network capacity and address the problem,” Melaku said.

The matter of unfair rates that both Simegn and Getaneh mentioned though does not hold water in the eyes of the utility, which he attributes to confusion.

Getachew Bekele (PhD), who has worked in the energy sector for two decades and is a lecturer on electrical technology at Addis Abeba University, agrees with the view of the utility and its decision to adjust the tariff rates.

“Customers had it easy for over a decade in their electric consumption, which is why they are confused about the new arrangement,” he says. “This new adjustment and its strategy are better, especially in incentivising the lower-income class of citizens.”

However, the government ought to work harder to enhance the electricity generating and distribution capacity of the nation, according to Getachew.

Economists as well do not believe that the tariff increase would have negative impacts on businesses and investment across the country.

“The tariff will indeed affect industries that consume a great deal of electricity,” says Atlaw Alemu (PhD), a university professor at Addis Abeba University’s School of Business & Economics. “But more than that, their main challenge will continue to be the quality of service, which the government has to work hard to enhance.”

Ethiopia currently has the capacity to generate 4,500MW of energy, while it has the potential to produce 10 times as much from hydropower, 10,000MW from geothermal and 1.3 million MW from wind.

Despite that, the national peak consumption of electricity is 2,500MW and the minimum consumption is 700MW at any given time, with Addis Abeba using almost half the nation’s capacity at peak hours and 350MW during low consumption periods.

Currently, less than a third of the population has access to electricity, although the Second Edition of the Growth & Transformation Plan projected to reach 90pc by 2020.

It makes Ethiopia a country with one of the largest populations without access to electricity in Sub-Saharan Africa, next only to Nigeria.

To increase access to electricity the government has been subsidizing electric power tariffs until the recent adjustment, which shocked users as it came into force.

Hence, Getaneh is thinking of increasing a rental fee by 50 Br on each tenant to compensate for his increased expenses.







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