Industrial producers’ electricity costs will rise by up to 43 percent, according to new tariff increases announced by the government on Tuesday, which also raised the cost of electricity for commercial outlets by up to 22 percent as part of a five-year plan which aims to eliminate electricity subsidies by 2022.
Commercial outlets that consume the least amount of electricity will face the highest tariff increases, while those with the highest consumption will face lower tariff increases, according to Tuesday’s edition of the Official Gazette.
Conversely, within the industrial sector, more energy intensive industrial producers faced higher tariff increases than their less energy intensive counterparts.
Consuming almost a quarter of all the electricity generated in Egypt, the industrial sector accounts for one of the highest shares of electricity consumption in the country, second only to households, which consume half of Egypt’s total electricity production.
|Commercial consumption brackets (Kwh/month)||Current tariff (LE/Kwh)||New tariff starting July (LE/Kwh)||Change|
|0 – 250||LE0.84||LE1||19%|
|0 – 600||LE0.96||LE1.15||19.8%|
|601 – 1000||LE1.35||LE1.45||7.4%|
|0 – more than 1000||LE1.4||LE1.5||7.1%|
|Industry usage brackets||Average current tariff (LE/Kwh)||Average new tariff (LE/Kwh)||Change|
|Extra high voltage|
220, 132 kV
(Energy intensive industries)
66, 33 kV
22, 11 kV
|Low voltage – Irrigation||LE0.35||LE0.5||42.9%|
During a Tuesday press conference, Minister of Electricity and Renewable Energy Mohamed Shaker said that this new distribution of electricity price increases reflects a government effort to place the tariff burden on energy intensive, or extra high voltage, industries such as steel and iron production factories, rather than on households.
In the same government decree, which was approved by the Cabinet on May 30, household electricity tariffs increased by more than 69 percent for the lowest consumption brackets and fell gradually with consumption increases. The two mid-range household consumption brackets, which cover the majority of individual electricity consumers, rose by up to 36.4 percent.
The ministry calculated the cost of electricity generation at approximately LE1.4 per Kwh, according to Shaker. This indicates that all industrial producers continue to face subsidized rates, while only the two upper consumption brackets within the commercial sector pay unsubsidized rates.
The government began gradually liberalizing electricity prices in July 2014, with the purpose of completely eliminating the electricity subsidy bill within five years. However, the timeframe for this plan had to be extended until 2022, after the November 2016 devaluation of the pound raised the costs of fuel imports needed for electricity generation, which in turn increased the electricity subsidy bill beyond its initial targets.
Electricity price increases, which began in 2014, are among a number of austerity measures implemented by the state with inflationary repercussions. Egypt’s deal with the International Monetary Fund, in which it committed to further structural adjustment targets in exchange for a US$12 billion loan to be disbursed over three years, came two years later, after extensive negotiations. In the months that followed, inflation rates soared, exceeding the 30 percent benchmark in mid-2017, before beginning a process of gradual decline in September of the same year.
Economists previously told Mada Masr they predict that there will be another surge in inflation following the recent energy subsidy cuts.