The Rouhani administration’s decision to exempt households that use electricity within a certain limit from paying their bills is a politically-motivated gesture. It cannot help solve the power sector’s problems nor improve the quality of life of underprivileged, head of the Majlis Energy Commission said.
“It is no surprise that most households eligible for free electricity and who have already been identified by the Energy Ministry live in poor neighborhoods [apparently] supported by charity organizations,” Fereydoun Abbasi-Davani was quoted by Barq News website as saying.
Electricity bills of poor families usually do not exceed 30 cents a month and not charging them this amount will make no difference in their welfare, Abbasi-Davani said.
“Trumpeting a plan that 30 million subscribers will get free electricity will not address economic problems challenges as it is more a political gesture than a well-thought-out action plan.”
In the opinion of the MP there are more effective ways to convince consumers to save energy, one of which is the mechanism that differentiates between tariffs of those who exceed reasonable consumption limits and those who do not.
Exempting households whose consumption does not exceed 100 kilowatt-hours per month is not logical to persuade people to rethink their consumption patterns, he stressed.
“Those who use more than the set limits (300 kilowatt hours per month) are the core of the problem and should be identified and fined [pay higher rates].”
As per a government proposal, households that use electricity within a certain range (less than 100 kilowatt hours per month in regions with moderate climate and less than 400 kWh in hot areas) are exempt from paying bills as of November.
Electricity is heavily subsidized in Iran. Power generation cost, including production and transmission, is 2 cents per kilowatt-hour, but is sold at 0.7 cents per kWh. Average global electricity consumption rises by less than 3% per annum. In Iran demand for power jumps over 6% every year.
Ali Shams Ardakani, head of the Energy Commission of Iran Chamber of Commerce, Industries and Mines, who is a known opponent of "cheap power tariffs" has always maintained that so long as power pricing policies are not premised on energy economics, problems linked with high consumption are here to stay.
Ardakani maintains that policymakers have long stuck to a wrong approach by not using the step tariff in which all consumers are charged a fixed rate per kilowatt-hour but rates vary according to consumption.
Underperformance
What is more worrying is that Iran’s power industry has not developed as would have been expected in the past decade.
According to Mohammad Parsa, close to 4,000 megawatts were added to the national grid per annum between 2006 and 2013. Between 2014 and 2020 this volume fell by a massive 50%.
“New investment by private power producers is almost zero now and the country will face the consequences in the future.”
The number of electricity meters nationwide in the household, agro and industrial sectors, which exceeds 37 million, jumps by 1 million a year and lack of investment will not only hamper economic development but impede normal life in rural and urban areas, he said.
The Energy Ministry's debt has risen to $1 billion, of which $400 million should be paid to the industrial giant Mapna Group.
In a letter to the Energy Ministry, Mapna CEO Abbas Aliabadi has said that not settling the debt will disrupt projects that are underway. Moreover, routine maintenance and repair programs that should be completed by May will be delayed.
