Cost Reflective Tariffs Discussion Paper

A customer tariff structure is a mechanism for users to pay either a public utility or a private sector provider for the costs of generating and delivering electricity to them. Although this sounds simple, setting customer tariffs for the power sector is a complex issue with broad social, economic, and environmental implications. It is also a highly technical issue that can require significant and potentially costly data collection and analysis for establishing tariffs, and administrative costs for implementation. This discussion paper provides a concise summary of the key considerations and decisions facing any country establishing a customer electricity tariff structure. It describes the trade-offs among the different financial, social, economic, and environmental objectives that are inherent in all tariff structures. It can help Mozambique to determine how to create a tariff structure that will balance objectives of universal access, enable Electricidade de Mocambique (EdM) to restore financial health, facilitate economic growth, and protect the environment.