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Yaoundé - 26 February 2024 -
Energy

Cameroon implements new electricity price hike to achieve financial balance

Cameroon implements new electricity price hike to achieve financial balance
  • Comments   -   Wednesday, 07 February 2024 14:41

(Business in Cameroon) - As of January 1, 2024, Cameroon has witnessed a new surge in electricity prices, primarily impacting medium-voltage customers, labeled as "industrial clients." This adjustment applies to about 2,000 clients out of Eneo's 2 million customers, constituting around 0.1% of the overall portfolio.

In a note dated January 23, the utility explained that the price increases are 5% for consumption between 0 and 3 MW, and 10% for consumption between 3 and 10 MW.

Although not welcomed by businesses in the country, this revision aligns with the directive issued by the Electricity Sector Regulatory Agency (Arsel) on December 12, 2022. Arsel outlined the untaxed rates for electricity sales to medium-voltage clients and established minimum negotiation thresholds for "major accounts," applicable from 2023 to 2026. As per this decision, electricity rates for medium-voltage clients, implemented since January 1, 2023, will progressively rise until 2026, increasing by 5% annually for consumption between 0 and 3 MW and 10% for consumption between 3 and 10 MW. Similar adjustments were set for high-voltage clients in early 2023, with a 6% increase for the first category and 10% for the second. These changes do not affect low-voltage clients, which include households. However, adjustments for professional low-voltage clients are currently underway.

Cameroon's electricity rates have remained unchanged since 2012. Arsel, responsible for regulation and oversight in the electricity sector, explained that this freeze became unbearable, especially considering the escalating costs associated with electricity production and distribution, such as transformers, meters, electrical cables, and fuel.

Reducing Subsidies

Jean Pascal Nkou, MD-Arsel, explained in an interview with Cameroon Business Today in January 2023 that the adjustment was a partial measure over five years, intending to gradually reach the service cost equilibrium by 2026. Adjusting rates is crucial to address the financial imbalance between sector-generated resources and the expenses incurred, according to Nkou.

This price increase, officially mandated by the government, aims to prevent the sector from accumulating further deficits and achieving financial equilibrium. It aligns with Cameroon's commitments to the International Monetary Fund (IMF), which conditioned certain loans on ending energy subsidies. Subsidies paid by the state to sector operators between 2012 and 2022 to prevent this tariff increase reportedly amount to about CFA300 billion, according to Gaston Eloundou Essomba, the Minister of Water and Energy.

"For example, the cost of producing one kWh from a diesel thermal power plant is CFA200, similar to Bertoua, Maroua, Banyo, Yoko, and others. However, households with a monthly consumption below 110 kWh only pay CFA50 per kWh, resulting in a government subsidy of CFA150 per kWh. The same applies to industrial customers connected to the medium-voltage network, whose consumption was subsidized by CFA20 billion for the 2021 fiscal year as part of the tariff compensation. These measures have allowed businesses to control the production costs of their goods and services, contributing to inflation containment," the energy minister said during a press conference on March 31, 2022. He was discussing the government's actions to enhance the electricity supply.

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