Beginning this month, companies with higher electric power consumption will be paying their electric bills to Ethiopian Electric Power (EEP) rather than Ethiopian Electric Utilities (EEU). Though EEP asserts that the decision was made with the primary aim of service efficiency, the decision has become a source of aggravation to EEU, who claims a mandate for selling electric power domestically.
Companies that are transferred to EEP utilize over 132kV of power and pay a minimum of five million Birr a month for electricity. So far, close to 15 companies are identified as being high consumers of electricity, including cement factories, textile factories and steel mills. "We moved these key clients to our institution to render quality service," said Tesfaye Teklemariam, deputy CEO of the EEP, "and enable them to get quick maintenance and reliable supply."
Normally, companies that consume high energy get direct supply from the national grid. Power supply to low-consumption business and household users has been provided through the EEU.
To date, all subscribers to electric services have been paying their bills to the EEU, which collected five billion Birr in revenue from its 2.9 million subscribers during the last fiscal year. The Electric Utility transferred three billion Birr to EEP according to a 40:60 revenue sharing scheme established between the two entities.
"Electric Utilities was designated to sell power domestically with the main aim of financially enabling the new institution during its formation period," said Tesfaye.
The two entities were formed six years ago after the split of the former Ethiopian Electric Power Corporation (EEPCO) into EEP, the power generator, and EEU, the power distributor. The two wings were formed by a regulation that was approved by the Council of Ministers with the intention of managing the power sector more efficiently.
The regulation mandated EEP to construct and generate energy, while the EEU was tasked with distributing the generated power, selling electricity and maintaining the distribution network.
Last fiscal year EEP generated 13.9 billion kWh of energy, increasing the supply by 11pc. Approximately 95.2pc of the electric power was generated from hydropower, 3.7pc from wind and one percent from thermal sources.
Along with the 60pc revenue that EEP receives from the Electric Utility, it generates revenues from the export of power to neighbouring countries. In the first five months of the current fiscal year, EEP has generated 28.4 million dollars by exporting power to Sudan and Djibouti. In the last fiscal year, the export value was 75 million dollars.
Two weeks ago EEP, which has a massive debt of a quarter of a trillion Birr, called high power consuming companies for a meeting at Capital Hotel to inform them of the change.
But for Shiferaw Telila, CEO of the Electric Utility, the issue remains unresolved."We have a lot to do to prepare for this," he told Fortune.The national peak consumption of electricity is 2,500MW, and the minimum consumption is 700MW at any given time, with Addis Abeba using almost half the nation's capacity at peak hours and 350MW during low consumption periods.
For Tigabu Atalo, a power consultant with a decade of experience working in the industry, the decision was made as an intervention to address complaints lodged by big investment firms who have complained about lack of maintenance of the power lines and power interruptions.
"Though the companies are clients of the Electric Utility, the EPP maintains the lines as it manages the high voltage electric power lines," Tigabu said. "This was a source of disappointment for companies as there are delays in maintenance."
Tigabu also believes that the conflict of interest between the two offices surfaces as their establishment regulations do not clearly define the scope of the two entities with regard to selling power explicitly.
"The regulation entitled EEP to sell bulk electric power although it does not clearly define what bulk power means and to whom to sell to," he says. "Plus, it also lacks clarity whether the bulk power is sold to the Electric Utility or to individual consumers or both."
As of this month, the government has made tariff amendments on both power sales by EEU and EEP. Users will see their tariffs raised in increments by more than fourfold to 2.48 Br a kW in four years.
"As of now we will sell the power to the Electric Utility according to the new tariff replacing the 40:60 revenue sharing scheme,” Tesfaye told Fortune.
It is very bad for the utility if the larger consumers directly pay EEP, according to the expert."Electricity tariff are normally set by keeping in mind that the larger consumers would compensate the lower electricity consumers to make power affordable to the lower bracket of the economic group," Tigabu said.
The Electric Utility is expected to sign an agreement with the Commercial Bank of Ethiopia to launch a billing system called "debt to debt" for corporate clients.The new system to be introduced will enable corporate clients, which include companies, non-governmental and governmental institutions to settle their electric bills through the Bank by directly transferring funds from their accounts."The new system will benefit 27,000 corporate clients," Melaku Taye, corporate communications director the EEU, told Fortune