Ethiopia is set to introduce a revised electric tariff system within the next two months. The new tariffs will be up to three times higher than current rates for households and could substantially increase costs for commercial and industrial users. The Ethiopian Energy & Petroleum Authority (EPA) secured approval from the Council of Ministers for proposed amendments designed to align electricity costs with current economic realities.

The revised electricity tariffs are part of a broader energy reform plan to attract private investment in the sector. The current low tariffs have deterred private companies from investing in new power generation capacity. The government hopes that higher tariffs will make the sector more attractive to investors and help meet the country's growing energy demand.

According to Bahiru Oljira, head of electric competency certification identification at the Authority, the rationale behind the revision follows extensive studies conducted to analyse the cost structure of power generation, transmission, and distribution, particularly in light of rising inflation. He said these calculations factored in pricing efficiency, revenue requirements, operational costs, and the expenses of Ethiopian Electric Power (EEP) and Electric Power Utility (EEU).

"Electricity prices have not been reflective of costs incurred," Bahiru said.

He noted that the financial burden hindered the ability of suppliers to improve infrastructure and deliver quality services. Scheduled revisions will occur every four years, with potential mid-term adjustments based on significant economic or social changes.

"This ensures the tariffs remain relevant and adaptable," he said.

For bulk supply, the power generation retail tariff has an increase of one Birr at 1.98 Br/Hr while the transmission tariff is set at 800 Br/kWh. Distribution unit prices are subdivided into households, commercial, industrial, and streetlights, with quarterly adjustments for the private sectors.

Ethiopia ranks among the bottom three countries in electricity access on the continent, with 56 million people, half of its population, lacking electricity. Currently, services reach only 4.4 million households who will see rates up to six Birr/KwH. Industrial tariffs vary from four Birr for low voltage, 2.9 Br for middle voltage, and two Birr for high voltage, representing up to a fourfold increase from previous rates.

Commercial and streetlight tariffs will also increase significantly.

The Authority approved the tariffs after reviewing proposals from the Ethiopian Electric Utility and Ethiopian Electric Power, who identified cost-based increments to encourage suppliers to align energy production with demand. The next phase involves formulating an implementation plan detailing how the tariffs will be applied over the next four years.

"We are now preparing the plan," Bahiru said.

The country revised tariffs at the end of 2018, following the first revision in 2006. According to Bahiru, previous revisions were not well-considered, burdening services for years.

The National Electrification Program (NEP), launched in 2017, aims for universal electricity access by 2025, targeting 100pc electrification with 65pc of new connections through grid extension and 35pc through investment in decentralised off-grid technologies.

Gemechu Yimer, planning director at EEU, stated that revised tariffs would help improve cost recovery, maintenance, service automation, and infrastructure. However, Gemechu acknowledged that tariffs alone might not fully address the challenges posed by grid maintenance costs and ongoing energy deficits.