Gov’t weighs delaying electricity price hikes until early next year

The Madbouly government could postpone electricity price hikes until January 2026, a government source told EnterpriseAM yesterday. This is one of three potential scenarios for electricity price increases — the other two are implementing the increases next month or postponing them until September.

This potential delay until early 2026 is largely driven by two factors. First, the energy sector has secured its natural gas needs at a price below global rates through recent short and medium-term agreements. Then, there is the decline in the EGP/USD exchange rate — providing the government the flexibility needed to absorb the cost of pushing back these anticipated hikes, the source added.

The proposed hikes? Up to 40% based on consumption: The proposed electricity price increases will range from 15% to 40%, with the exact percentage directly tied to customers’ consumption tier, our source said. A government source told us earlier this month that the Electricity Ministry proposed scenarios to the cabinet that include postponing any electricity hikes to September to shield citizens from inflationary pressures.

The final decision hinges on key factors, according to our source. First, inflation indicators, as the Madbouly government seeks to ease the burden on citizens. Also, the state’s financial capacity to absorb the subsidy cost is a significant consideration.

Electricity price hikes will be based on studies, which are expected to be finalized soon, taking into account the exchange rate forecasts and overall costs, the source said.

Electricity consumption hit a new peak at 39.4 GW on Sunday, after a few days of extreme heat pushed energy demand to a series of record highs. Power plants are fed 3.3 bn cubic feet of natural gas a day — taking up 65% of the country’s gas supplies, according to our sources.

The IMF expects electricity subsidies to hit EGP 75 bn during this fiscal year, matching the amount the government allocated in its budget. Looking ahead, these subsidies are projected to drop to EGP 45 bn in FY 2026-2027, before gradually increasing to EGP 50 bn in the subsequent fiscal year and to EGP 56 bn in FY 2028-2029 and finally to EGP 63 bn in FY 2029-2030.

REFRESHER- The Electricity Ministry has raised electricity prices by 14-40% between August and September 2024. The cost of electricity production has soared after the float of the EGP, becoming more of a burden on the state budget.