BY BUSINESS REPORTER
THE Energy and Water Regulatory Authority (EWURA) has approved an electricity price hike of 40.29 percent for the country's state-run power firm, a move expected to further stoke a rising inflation rate in Tanzania.
The loss-making Tanzania Electric Supply Company (TANESCO) had sought a 155 percent tariff increase to revive profit margins and offset rental charges from independent power producers.
The tariff hike takes effect from January 15, but the Energy and Water Regulatory Authority (EWURA) said it would review power prices again after six months.
"TANESCO requested for a tariff increase averaging 155 percent across all customer categories. The board of directors of EWURA ... approved an average tariff increase of 40.29 percent," EWURA director general Haruna Masebu told a news conference in Dar es Salaam on Thursday.
The latest hike comes on the back of an 18.5 percent increase in power prices in 2011 amid chronic electricity shortages.
Hydro power accounts for 55 percent of the energy sources in Tanzania, with prolonged drought resulting in rolling power blackouts in the country.
EWURA said the price increase would affect power users from commercial, industrial and mining segments.
The lowest power consumers using less than 50 kilowatts per hour (kWh) for domestic purposes would not be affected by the price hike.
"A 40 percent power tariff increase is a good compromise compared to the 155 percent hike that TANESCO demanded. But the resulting high energy costs will continue to put pressure on the inflation rate," said Tanzanian economic researcher Haji Semboja.
"The cost of delivery of energy is every high because TANESCO depends heavily on very expensive electricity generated by independent power producers. TANESCO also suffers from inefficiencies in distribution and revenue collection."
EWURA said TANESCO was expected to raise 1.005 trillion Tanzanian shillings in 2012 in revenue collections as a result of the tariff increase.
It said the government had converted a loan of 136 billion shillings it had extended to the public power utility into a grant to minimise its operating costs.
"The government is also exempting imported fuel for running emergency power plants from taxes," said Masebu.
"The principal motive for the power tariff increase is to enable TANESCO cover increased operating costs resulting from the use of emergency power plants and extensive use of its own thermal generating plants to address acute power shortage in the country."
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