Revising the tariff is necessary to bring about a fundamental change in the energy sector.

Revising the tariff is necessary to bring about a fundamental change in the energy sector.

The tariff revision study group highlights that implementing the proposed changes is crucial for a significant transformation of the energy development sector.

Mr. Alemayehu Mengistu, a member of the study group and Director of Financial Management at Ethiopian Electric Power, presented a paper discussing the rationale behind the necessity for tariff revision.

Mr. Alemayehu Mengistu

He emphasized that tariff reform is crucial for improving energy coverage and ensuring the financial stability of both Ethiopian Electric Power and Ethiopian Electric Utility.

The reform aims to reduce losses in transmission and distribution lines, meet energy demand, enhance service quality, and strengthen the sector through increased energy exports.

Reforming tariffs is essential to raise electricity coverage to 74 percent, given that the current access to electricity services in the country is at 55 percent, he added.

Despite the current tariff contributing to increased revenue for the institution, Ethiopian Electric Power has experienced an average annual loss of 26 billion Birr over the past six years.

Mr. Alemayehu stated that since 2006, Ethiopian Electric Power (EEP) has incurred cumulative losses totaling 177 billion Birr.

He stressed the importance of substantial investments to increase the energy demand of high-voltage industries in the country from the current 3,271 gigawatt hours per annum to 5,205 gigawatt hours, and to raise the energy demand of medium and low-voltage industries from 739 gigawatt hours per annum to 3,260 gigawatt hours.

He mentioned that the tariff revision would significantly reduce power outages, meet the country’s energy demand reliably, and greatly enhance industrial production capacity.

He also highlighted that tariff reform will result in reducing transmission losses from 7% to 5% and distribution losses from 18% to 12%.

He pointed out that by increasing energy investment, the company aims to increase the current supply of 1,665 gigawatt hours of energy annually to neighboring countries by an average increment of 22 percent.

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