Rwanda has introduced a “lifeline tariff” for low-income households in a review of power tariffs aimed at bringing the cost of electricity to par with its East African neighbours.

The country’s utilities regulator has introduced a tariff of $0.11 for the first 15 units consumed in a month while industrial customers will see between 28 and 34 per cent tariff reduction.

The new tariffs, which will come into force on January 1, will see large industries that have been paying Rwf126 ($0.15) per kWh now pay Rwf83 ($0.10) per kWh while medium scale industries will pay Rwf90 ($0.11), from Rwf126 ($0.15). Small industries will be charged Rwf126 ($0.15), down from Rwf182 ($0.22).

The Rwanda Utilities Regulatory Authority (Rura) said its objective was to help grow the economy to attract foreign and domestic investment by having competitive tariffs.

Eating into profits

Rwanda has the highest electricity tariffs in the region for industries, averaging Rwf138 ($0.17), with businesses complaining that power costs are eating into their profits and keeping locally produced goods uncompetitive.

When the new tariffs come into force, Rwanda will have aligned with Uganda, Kenya and Tanzania. The average tariff for large industries in the three countries is $0.11 per kWh.

Power distributor Energy Utility Corporation is expected to save huge amounts of money that it used to spend on electricity from independent power producers and on subsidies on power costs to keep tariffs affordable.

In 2014, Rwanda was generating 51.8MW from diesel generators and pushing up subsidies to make power affordable.

The government expects to supplement domestic production with imports from the East African Regional Power Pool starting next year.