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Experts mull reasons for gas, electricity price hike

19 October 2021 16:33 (UTC+04:00)
Experts mull reasons for gas, electricity price hike

By Ayya Lmahamad

Azerbaijan has raised prices for electricity and gas, based on the amendments to the country’s Tariff Council’s decree “on the regulation of domestic electricity tariffs”.

According to the amendments, the existing differentiation of tariffs for the population (up to 300 and more and 300 kWh) has been changed.

Tariffs for the population are set at 8 qapiks / kWh for consumption up to 200 kWh, 9 qapiks / kWh for consumption from 200 kWh to 300 kWh, and 13 qapiks / kWh for consumption over 300 kWh.

At the same time, tariffs for consumption of up to 1,200 cubic meters of gas per year have been increased from 10 to 12 qapiks.

Various experts briefed on the reasons for gas prices increase in the country.

Global gas price hike

Azerigaz Director-General Ruslan Aliyev told local media that the reasons for gas prices increase in the country lie in the rise in prices for gas and gas equipment in the international market.

“The reasons lie in the rise in prices in the international market. If earlier we bought gas in bulk at AZN 110 ($64), now the price is AZN 118 ($69),” he said.

Aliyev also noted that the prices will remain unchanged till late October, and starting from November 1, subscribers will pay 12 qapiks per cubic meter of gas volume up to 1,200 cubic meters. He noted also that for those who use more than 1,200 cubic meters, the prices will not change.

Former tariffs failed to cover costs

In an interview with local media, energy expert Ilham Shaban stated that since the previous energy tariffs in the country did not cover the costs, it became necessary to change the prices.

He stated that starting from 2016, the State Oil Company annually reported that the cost of gas in the domestic market is lower than the production costs, thus the profitability of gas sales in the domestic market could not be achieved.

"The power sector is the biggest gas consumer in the Azerbaijani market. Consequently, if Azerkontrakt raises the price, the increase in the price of electricity is understandable. Measures are being taken to eliminate the damage incurred by the state in the process of production and sales of natural gas. As part of these measures, the dependence of the energy supply sector on the state budget is reduced and subsidies are reduced," Shaban noted.

Need to re-regulate retail electricity tariffs

Azerishig Sales Department's First Deputy Director Vugar Nabibayli told local media that due to the increase in gas tariffs, it became necessary to re-regulate the wholesale and retail electricity tariffs.

He stressed that based on the need to expand infrastructure works, as well as to provide the population with uninterrupted electricity, the regulation of electricity tariffs to cover the additional costs, incurred as a result of changes in the prices of natural gas used for energy production, was inevitable.

“Natural gas accounts for more than 50 percent of the raw materials used to generate electricity at thermal power plants in Azerbaijan. Therefore, changes in natural gas tariffs cause an increase in electricity prices. The wholesale electricity sale tariff was raised by 0.9 qapiks and set at 6.6 qapiks,” he said.

The Baku-based news website noted that the new change preserves the preferential tariff policy for low-income families. Thus, if the monthly consumption of one person is 50 kWh, and in an average family of four people, it is 200 kWh per month.

If a family of four people used to pay AZN 14 for 200 kWh, then the new tariff will be AZN 16.

According to statistics, 63 percent of the population consumes up to 200 kWh of electricity per month. This, in turn, says that the price change will not affect low-income families.


Ayya Lmahamad is AzerNews’ staff journalist, follow her on Twitter: @AyyaLmahamad

Follow us on Twitter @AzerNewsAz

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