Electricity facts 2017–18: exorbitant increases continue
On top of record inflation that has hit Egyptian households, especially the poor, the government raised electricity prices last July across all usage brackets for the sixth year in a row. The Egyptian Initiative for Personal Rights and the Built Envrionment Observatory ,publish their annual report, Electricity Facts 2017–18, questioning justifications for the hikes and examining their impact on low- and middle-income Egyptians.
Substantial increases across all brackets and most items
The report shows that Ministe of Electricity Decree 312/2017 increased bills by 27 percent on average for the current fiscal year of 2017–18, following last year’s 33-percent increase. The hikes ranged from 15.4 percent for the first bracket (the lowest electricity usage bracket) to 43.3 percent for the seventh bracket (the highest). This shows some improvement on last year, when the biggest hikes fell on the brackets using the least electricity, but the third and fourth brackets, where most low- and middle-income users fall, did absorb major increases this year of 22.4 percent and 27.9 percent respectively.
The increase covered two items in the electricity bill: the consumption fee, which increased by 28.7 percent, and the service fee, an item created in 2015, which increased by 4.8 percent.
Bill increases were not “minor” for low- and middle-income Egyptians
The report shows that in contrast with statements from Electricity Minister Mohammed Shaker that low-income households would sustain only “minor” increases, electricity bills for low- and middle-income Egyptians increased by 22.1 percent and 25.2 percent respectively on last year. This brings the cumulative increase in these groups’ bills since 2011 to 218 percent and 271 percent respectively.
Egypt shows disproportionately high household spending on electricity
Electricity Facts found that energy costs are increasingly burdensome for Egyptian families. Spending on electricity bills accounted for more than 4.5 percent of all household spending among poor and middle-income families, an approximately 25-percent increase on last year. Egypt is now a country with a marked unfair imbalance in electricity spending. As a percentage of household spending, Egyptians spend twice what families in Australia, the US, South Africa, and Canada do, although households in these countries use on average between two and three and a half times more electricity than Egyptian households.
Subsidies for the rich are four times higher thanfor the poor
After calculating the per subscriber share of subsidies directed to usage brackets, the report found that subsidies are regressive rather than progressive across the brackets, rewarding greater electricity consumption. Users in the sixth bracket are receiving subsidies worth LE5,436 per subscriber, which is four times the the poor’s (third bracket) LE1,391 per subscriber subsidy.
Billions in electricity subsidies cover unwarranted costs
The report showed that billions of pounds spent on what the government calls electricity subsidies are simply support for unjustifiable investment in the electricity sector. The costs of operating the utility account for just 17 percent of total costs of the Egyptian Holding Company for Electricity, according to its latest annual report (2015–16). That is, less than one-fifth of subscribers’ electricity bills pays for the service, while investments in the construction of new plants and networks accounts for two-thirds of the bill and debt service for the holding company for the remaining fifth.
These investments were used to boost reserve capacity to 89 percent. This is unnecessary, since the holding company’s annual reports show that the network operated efficiently with a reserve capacity of 14 percent. The problems with electricity production, which has resulted in frequent blackouts in recent years, were not related to generating capacity, but rather to problems with fuel provision and the low efficiency of the transmission network.
Electricity Facts 2017–18 concludes with several recommendations for the Electricity Ministry and the Electricity Regulatory And Consumer Protection Agency (EgyptERA). The first is to improve transparency in the electricity sector by giving subscribers an accurate picture of electricity sale prices. EgyptERA should enjoy full independence from the Electricity Ministry and support for its role in protecting subscribers and regulating the ministry and electric companies, especially by confronting unjustified hikes in electricity prices. In addition, the programs and tools for making electricity data public, especially in relation to costs and pricing, should be expanded.
Secondly, the report recommends reducing the burden on low and middle-income households by providing a minimum of 200 kwh per month throughout the year to the poorest households, ensuring that poor and middle-income families spend no more than 2.5 percent of monthly income on electricity (LE30–40). In addition, 300 kwh should be provided to middle and upper-middle income families per month throughout the year, also ensuring they spend no more than 2.5 percent of their monthly income on electricity (LE40–50).
Finally, the report recommended instituting a program to improve energy efficiency in buildings and electrical appliances, particularly by reducing space heating and cooling loads and cutting consumption of appliances by incentivizing the production or import of more energy efficient appliances.