Govt decision to cut electricity tariff for households may endanger financial recovery of power sector – World Bank

KYIV. Sept 13 (Interfax-Ukraine) – The decision of the Cabinet of Ministers to reduce the electricity tariff for households consuming less than 250 kWh per month could threaten the financial recovery of the energy sector, World Bank Vice President for Europe and Central Asia Anna Bjerde has said.

The World Bank welcomed the government’s previous decision to abolish preferential consumption prices of up to 100 kWh per month. The recent decision to revoke the reform and cut the electricity tariffs for households could jeopardize sector financial recovery further weakened by COVID-19 pandemic, she said in an exclusive interview with Interfax-Ukraine.

Bjerde highlighted the importance of pursuing a greater cost recovery track in the power sector, given the industry’s current fiscal deficit, driven in part by high feed-in tariff rates for RES.

Based on the analysis of the World Bank, the electricity tariff for the population should be gradually increased to a level that reflects its cost, the vice president of the World Bank said.

She also said that the price of electricity for the residential sector has traditionally been subsidized from prices for commercial and industrial consumers.

And the latest decision on tariffs may lead to an increase in cross-subsidies, which will potentially negatively affect the international competitiveness of energy-intensive industries in Ukraine, she said.