A new Identity Center report has questioned the effectiveness of the National Electric Power Company’s (NEPCO) cost recovery strategy, after it found a recent round of electricity tariff hikes failed to drag the publicly-owned company out of debt, but led to bumper profits at private electricity distribution firms.
The report from the development think tank said NEPCO’s losses surged from around JD160 million in 2010 to more than JD1.2 billion in 2014 due to the spiraling cost of energy imports.
The report stated that during this period, electricity generation and distribution companies that were privatized in the period of 2007-2009 saw their profits expand significantly. The Electricity Distribution Company (EDCO) and the Irbid District Electricity Company (IDECO) saw their profits surge in 2014 by 626 percent and 94.1 percent, respectively, compared to 2013.
It also said analysts associated NEPCO’s losses and the gains of private companies with the hike in electricity tariffs implemented by the government starting in 2014, which was part of NEPCO’s cost recovery strategy, prepared under the reform program with the support of the International Monetary Fund.
According to the report, the increase in tariffs actually led to a surge in the profits of distribution companies but did not affect the profitability of NEPCO, which posted a 23 percent rise in losses in 2014.
“This calls into question the effectiveness of NEPCO’s cost-recovery strategy and the associated increase in electricity tariff rates. While citizens and business are suffering from higher electricity prices, NEPCO’s losses continue to expand leading to a higher level of public debt, while generation and distribution companies post higher profits,” said the report, which examined developments in Jordan’s energy sector.
Another vital factor contributing to NEPCO’s poor financial performance is the considerable amount of electricity lost during transmission and distribution. This accounted for JD343.8 million or around 32.6 percent of NEPCO’s losses for 2013.
According to a statement provided to Venture by the Identity Centre, the report reveals the urgent need for a comprehensive assessment of the energy situation in Jordan and strategic planning, followed by concrete actions.