Uzbekistan edges towards energy tariff liberalisation

Uzbekistan’s energy ministry has announced some gradual increases are on the way for electricity and gas tariffs.

Energy Minister Jurabek Mirzamakhmudov on September 11 confirmed that the government was intending to raise tariffs for businesses, and individuals who outstrip the average consumption level in their use of electricity and gas.

The tariff liberalisation move has long been recommended and anticipated by international institutions such as the European Bank for Reconstruction and Development (EBRD) and the World Bank (WB).

"If we manage to ensure a stable electricity supply, we plan to submit to the government a draft of differentiated electricity tariffs for the population from May 1, 2024," Mirzamakhmudov said. "But this does not mean that prices will rise from the same day."

With the differentiated tariffs, a social consumption norm will be introduced. This means that for households using large amounts of energy — such as those with a sauna, a heated swimming pool and large quantities of household appliances — the energy bills will be higher.

According to the energy ministry, as things stand only 15% of the population uses more than 300 kWh of electricity per month. Average consumption, meanwhile, does not exceed 200 kWh per month.

A previous attempt to raise tariffs for electricity and natural and liquefied gas was made in May last year. A draft resolution provided for the introduction of social norms for household consumers with fee increases linked to exceeded norms.

After various negative feedback, the draft was sent for additional study.

In a December address to the Oliy Majlis legislature, President Shavkat Mirziyoyev pointed out the need to liberalise the energy sector. At the same time, he noted the importance of providing support to citizens in need and an approach to payments based on the volume of consumption.

According to experts, low energy prices have proved a fundamental obstacle for potential investors in Uzbekistan’s power sector. In a bid to help its own citizens, the government, at the expense of subsidies, has been selling energy resources to the population at prices much less than cost. Funds received from higher tariffs are expected to be channelled towards the modernisation of outdated power industry equipment.

At the same time, Uzbekistan also working on the development of green energy. The government is targeting the launch of green energy capacities amounting to 2 GW by the end of this year, according to plans outlined by Mirziyoyev on May 23.

As bne IntelliNews has previously reported, Uzbekistan has overtaken Kazakhstan to become Central Asia’s leader in renewable energy. Heavy investment into a few mega projects means that power-hungry Uzbekistan now has about 2.6 GW of green energy capacity in all.