New electricity tariffs for heavy consumers will start at the end of this Iranian month (June 21).
After parliament rejected a government proposal to raise tariffs for subscribers across the board, the government made changes to the bill and it was finally ratified by the Majlis, and came into effect from May 22, the Persian-language economic newspaper Donya-e-Eqtesad reported.
As per the new rules, electricity tariff will increase by 23% for consumers who do not comply with the announced patterns from June to September, when both the temperature and power consumption rise phenomenally.
The Energy Ministry says close to 80% of consumers are in the average 300-kilowatt hour bracket per month, which is set as a basic consumption model. Consumers in this category will be eligible for a discount in their billing if they consume less electricity in the four months compared to the same period a year ago.
The new regulations target the remaining 20% heavy consumers who apparently could be compelled to rethink their consumption patterns or get hit in the pocket.
Revenues generated by the hike in tariffs will be used to replace traditional electric meters with smart meters that ensure accurate billing as they digitally send meter readings to utilities without any human involvement. Smart meters also have monitors so users can better understand their energy use and adjust if necessary.
Part of the new revenue will also be spent on reducing waste by improving and optimizing power distribution networks.
Subsidy Dilemma
One key reason, experts say, why big consumers are often indifferent to repeated government appeals for judicious use is that electricity prices are too low compared to many countries.
Power generation costs, including production and transmission, is 2 cents per kilowatt-hour while electricity is sold at 0.7 cents per kWh now.
Data released by the Energy Ministry show among 200 countries, Iran sells the cheapest power after Egypt, Kuwait and Myanmar.
Water, electricity, gas and gasoline are subsidized in Iran and successive governments have said that the prohibitive subsidies are not sustainable. The entire concept of subsidies has come under a very big question mark for years with proponents and opponents floating ideas and views that are poles apart.
The country's current installed power capacity is 81,000 megawatts but a lot less is produced, especially in the hot season, due to water shortage in hydroelectric dams, wastage and technical problems.
Last year was one of the driest in half a century, and the country faced problems with supplying electricity in all sectors. Therefore, the government set out to find a workable solution.
One plan called for revising tariffs for heavy consumers. Other programs included changing working hours of state organizations and replacing 10 million fluorescent lamps in state bodies with the energy-efficient LED light bulbs.
Official data has it that while development of technology has led to a 4.5% growth in power consumption across the world, Iran's rate is 3.5 times over and above the global average. Average global electricity consumption rises by up to 3% per annum, but demand in Iran jumps to almost 10% every year – a development that economists say could turn into a crisis if not checked sooner rather than later.
Not Too High
Although with the new rule the government intends to control consumption during the hot summers, the mere 23%-rise does not seem to be too high for consumers who have no problem paying something extra and living in the comfort of coolers 24/7.
For example, if a heavy consumer had to pay 7 million rials ($50) last month, with the same amount of consumption, they will be charged 8.6 million rials ($61.4) in the next bill.
Apparently, it would not be any burden for those who have been visibly neglectful of their high consumption to pay an additional $11.4!
Energy expert Alireza Daemi believes that as far as heavy consumers do not pay the real price of the electricity they use, there will be no change in their consumption levels – seen as unacceptably high even as per the standards of rich and developed countries.
“Tariffs should be adjusted so that prices gradually approach real costs,” the former deputy for planning and economic affairs at the Energy Ministry said recently.
Therefore, if heavy consumers are charged three times the price they pay now (2 cents instead of the current 0.7 cent), that would to some extent compensate power generation costs and may help curb high consumption.
