As per a proposal ratified by the Majlis and Cabinet, electricity tariffs increased by 7% for all consumers and 23% for heavy consumers in 2019 and the policy will continue in 2020.
According to ISNA, the rule went into effect in May 2019, and the current rate of 2,100 rials (1.3 cents) per kilowatt hour will be raised to 1.4 cents in 2020.
The news agency added that power generation cost, including production and transmission, is close to five cents per kilowatt-hour.
Electricity, gas, gasoline and water are subsidized in Iran and successive governments have said that the heavy subsidies cannot be sustained due to chronic economic problems and declining government revenues due largely to US sanctions and other ills.
As per law, subscribers in Tehran, and other cities with relatively moderate climate should use less than 300 kWh a month to be eligible for a discount in billing.
Consumers in the hot southern provinces like Khuzestan and Bushehr (where the mercury in summer exceeds 52 degrees Celsius) will be entitled to a discount if their consumption does not cross 1,200 kWh per month.
“Tariffs for heavy consumers (who do not comply with the basic consumption model) will increase by 23%, (7% as regular annual rise plus 16% penalty for higher use).”
The Energy Ministry says close to 80% of consumers are in the average 300-kilowatt hour bracket per month (in temperate regions).
According to Mohammad Hassan Motavalizadeh, head of state-run Iran Power Generation, Distribution and Transmission Company (Tavanir), the number of electricity subscribers who adhere to the consumption patterns increased by 10% in 2019 compared to the previous year.
Revenues generated from the hike in tariffs are being used to replace old traditional electric meters with smart meters to ensure accurate billing as they digitally relay readings to utilities without human involvement.
Smart meters also have monitors so users can also better understand their energy use and adjust if necessary.
Part of the new revenue is also spent on reducing waste by improving electrify production and distribution.
Although with the new rule the government intends to control consumption during the hot summers, the 23% rise does not look like a long shot to consumers who have no problem with higher bills to be able to live in the comfort of air conditioners 24/7.
For example, if a heavy consumer had to pay 7 million rials ($50) in 2019, with the same amount of consumption, they will be charged 8.6 million rials ($61.4) in 2020 -- no big deal. The same is true for those who care the least little about their high consumption and paying an extra $11.
“Tariffs should be adjusted in a manner that prices gradually get closer to real costs,” the Tavanir official was quoted as saying. Therefore, if heavy consumers are charged four times the price they now pay (5 cents instead of the current 1.4 cents), that would to some extent compensate power generation costs and probably curb high consumption.
