December 31, 2021
The government has decided to quintuple the price of electricity supplied to major industries, opening the question of the ripple effect on the rest of the economy as those industries boost their prices.
The regime provides dirt-cheap power to the country; the result is that the national power company, Tavanir, lacks the capital to build as many power plants as are needed and to maintain the ones already built. It has been forced to borrow heavily and is now saddled with a massive debt of $2 billion.
This is the obvious rationale for the huge price increase from 0.5 cents per kilowatt-hour to 2.5 cents—which is still far below the average price in the US, which is 10.4 cents per kilowatt-hour.
The new price will take effect at Now Ruz.
It will apply to oil refineries and to cement, steel and petrochemical plants. Altogether, industry consumes about 40 percent of the country’s power supplies, according to the Financial Tribune.
Mohsen Tarztalab, the head of the Thermal Power Plants Holding Company, told the Mehr news agency the price hike would generate $400 million a year to help the firm to pay off debts and also to restart $13 billion in projects that are now on hold because contractors are demanding better guarantees that they will be paid on time.
While the majority of the output of the impacted firms is exported, the Financial Tribune said 40 percent of their output is consumed domestically, so there is likely to be an impact on inflation.
