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The 2023 Recurrent Budget saw the Government allocate NLe 336.0 million as subsidies to the Electricity Distribution and Supply Agency (EDSA) and the Electricity Generation and Transmission Company (EGTC) to cover the cost of electricity generated by Karpower and evacuated from the CLSG line.
However, due to the current economic situation, the Minister of Finance, in the Supplementary Budget 2023, revealed that total subsidies disbursed to EDSA for the first half of 2023 amounted to NLe274.6 million (US$13 million), which represents over 80% of the approved budgeted subsidies.
The disbursement includes NLE263.2 million paid to Karpowership and NLE11.4 million to Transco/CLSG. Additionally, NLe29 million was also disbursed to EGTC for the supply of fuel to run Government-owned generators in Freetown and the provinces.
Minister Bangura emphasized that despite the challenging economic conditions, the Government continues to allocate significant resources to the energy sector to ensure a reliable supply. He acknowledged that the current electricity tariff, while considered high, does not reflect the actual cost of generating and transmitting electricity and affordable electricity to households.
The substantial subsidies provided by the Government to EDSA and EGTC make it possible for consumers to pay 11 US cents per kilowatt-hour compared to the uplift price of 21.5 US cents. Minister Bangura highlighted the fiscal risk posed by EDSA’s weak financial performance and stated that the Government, with support from the World Bank, is working on financial and
to improve the operational sustainability of EDSA. This support aims to reduce technical and commercial losses incurred by EDSA and develop a tariff formula that reflects the local currency cost of imported fuel to facilitate regular adjustments of electricity tariffs. According to the World Bank, network improvements are expected to reduce average technical and commercial. losses from 40 percent in 2022 to 27 percent in 2025 and 18 percent in 2030. EDSA plans to adopt a trait formula that incorporates the local currency cost of imported fuels and tends to adjust tariffs accordingly.
The International Monetary Fund (IMF) Country Report indicates projected energy subsidies to EDSA for power purchases from Karpower at an estimated US$25.5 million for 2023. Additionally, energy subsidies to cater to power purchases from the CLSG power pool are estimated at US$9 million in 2023. The Government plans to adopt a tariff formula that reflects
the local currency cost of imported fuels and regularly adjust tariffs to support EDSA’s revenue and align power sales to costs. This measure is in line with the payment agreement signed between the Ministry of Finance, EDSA, and Karpower on March 16, 2023.
