Moody’s says Qatar could hike electricity tariff

Doha :  Qatar could increase the electricity tariff by 81% and 40% for residential and commercial connections respectively to reflect the actual cost per kilowatt hour (kWh), according to global credit rating agency Moody's.

In Qatar, the average tariff for the residential and commercial connections are 2.3 cents per kWh and 3 cents per kWh respectively while cost is 4.2 cents per kWh, Moody's said in a report.

As part of subsidy reforms in Qatar, a slab tariff system was introduced in October 2015 with the highest electricity and water usage tariff almost 120% and 130% higher than prior period respectively, it said, adding that Doha had also hiked fuel price by 30% to QR1.3 per litre in January this year.

"Qatar and Oman have the highest tariff subsidies for residential electricity consumers," Moody's said, suggesting broader subsidy reforms in the Gulf Cooperation Council (GCC).

The credit implications are "neutral" in the short term for power and water generators that operate under unbundled systems, such as Qatar Electricity and Water Company as it will not directly benefit from tariff increases.

This is because they have stable operating cash flow streams that are derived from secure, long-term purchase agreements with a sole off-taker. In the case of QEWC with Qatar General Electricity and Water Corporation (Kahramaa) for power and water, it added.

In Oman, the electricity tariff has to be more than doubled with average tariff amounting to 4.1 cents per kWh, while cost is 8.4 cents per kWh.

In Saudi Arabia, the estimated tariff increase required for cost reflective level is 11% as average tariff is 3.7 cents per kWh and cost at 4.1 cents per kWh.

In Abu Dhabi, electricity tariffs have to be increased 10% and 102% for residential and commercial connections respectively as the tariffs are 8.1 cents and 4.4 cents per kWh against the cost of 8.9 cents per kWh.

Dubai has the lowest subsidies in the electricity sector as s average tariffs and costs are 8.6 cents per kWh.