P 081526Z MAY 09
FM AMEMBASSY ABIDJAN
TO SECSTATE WASHDC PRIORITY 5130
INFO ECOWAS COLLECTIVE PRIORITY
DEPT OF TREASURY WASHDC PRIORITY

UNCLAS ABIDJAN 000299 
 
 
E.O. 12958: N/A 
TAGS: ENRG ECON EFIN PGOV IV
SUBJECT: HIKE IN ELECTRICITY RATES UNLIKELY TO PRODUCE 
STRONG REACTION 
 
¶1.  Summary.  In an effort to decrease government subsidies 
to the electricity sector, and in line with recommendations 
from international financial institutions, the GOCI raised 
most household electricity rates by 10 percent effective 
April 30.  Previous increases in electricity rates have not 
generated the public reaction that increases in food or fuel 
prices have.  Post does not anticipate a strong public 
reaction.  End summary. 
 
¶2. The GOCI announced that, as of April 30, electricity rates 
for households would increase by 10 percent.  Households that 
use low amounts of electricity are exempted, and the rate 
increase does not apply to businesses or industrial users. 
The GOCI expects the price hike to result in approximately 
USD 40 million in additional revenue for the sector.  Total 
electricity sales are approximately USD 450 million per year. 
 
¶3. The Ivoirian electricity sector incurred significant 
financial losses in 2007-2008 due to rising fuel costs, 
greater reliance on thermal power, and unchanged power rates. 
 The cost of gas used to produce electricity increased during 
2007 and 2008 because, under the existing contract for gas, 
the price of gas is directly linked to international oil 
prices (not/not gas prices).  Difficulties in bill 
collection--in particular from government agencies and from 
clients in the northern region of the country, which until 
recently was split from the rest of the country since a 
rebellion in 2002--contributed to the sector's financial 
deficit.  GOCI subsidies for electricity resulted in a drain 
of approximately USD 120 million on the GOCI budget in 2008. 
 
¶4. In an effort to encourage a more stable fiscal environment 
and more pro-poor spending, the international financial 
institutions have encouraged the GOCI to diminish these 
subsidies.  In early 2008 the GOCI raised electricity rates 
for businesses by 10 percent on average.  The GOCI also began 
negotiations with gas operators in order to revise the 
indexation of gas prices. 
 
¶5. In the IMF Poverty Reduction and Growth Facility approved 
March 27, the GOCI agreed to revise the level and structure 
of electricity tariffs so as to improve the financial 
viability of the electricity sector.  It also agreed to limit 
subsidies to the electricity sector to CFA 25 billion 
(approximately USD 50 million), on the basis of a better 
price for gas purchases negotiated with the gas producers, a 
revision of the electricity rate structure and, as needed, an 
increase in rates. 
 
¶6. Comment.  The rate increase received little attention in 
the press.  During a May 5 meeting with econoff, the leader 
of one of Cote d'Ivoire's leading consumer unions, the Union 
Generale des Consommateurs de Cote d'Ivoire, expressed little 
concern about the increase, though he questioned the need to 
raise prices when Cote d'Ivoire is exporting electricity to 
other countries in the region.  In the past, hikes in prices 
for rice and fuel (or transportation) have resulted in 
significant protests.  However, Ivoirian consumers are not 
well organized (especially around the electricity issue), and 
many will be exempt from the increase because of their low 
level of electricity use.  It seems unlikely the increase 
will create a significant reaction from the public.  End 
comment. 
 
 
NESBITT