Electricity tariff for enterprises to hike by 38%

On Monday, Minister of Energy B.Chojilsuren reported that the electricity tariff for enterprises will be raised by up to 38 percent from November 1 and the heat tariff will be increased from 2023 as the amount of debts and payments accumulated by the energy sector has surpassed 1.6 trillion MNT.

In specific, the government plans to increase the electricity tariff for enterprises by 14 percent for monthly electricity consumption of up to 5,000 kWh and by 28 percent for higher consumption. The tariff for companies such as mining companies, banks, telecommunication operators and crypto miners will be elevated by 28 percent for consumption of up to 200,000 kWh and by 38 percent if higher. This price increase is estimated to generate 280 billion MNT more revenue for the sector.

The energy minister said that electricity and heat tariffs for citizens or households will not be raised this year.

Out of 27 energy producers in the country, 10 of them operate continuously and stably. The installed capacity of these 10 plants is 1,260 MW, but the peak energy load is expected to exceed 1,500 MW this winter. In other words, consumption will likely exceed the amount of energy produced by 50 percent.

Minister B.Choijilsuren explained, “Around 400 billion MNT is needed to prepare for this winter and ensure reliable operations of equipment of power plants. Therefore, we have no choice but to either get 350 billion to 400 billion MNT from next year’s budget in the form of subsidies or raise tariffs. Because the economy is not growing, we have decided to increase the tariff. In the future, we will follow the policy of liberalizing the energy sector and developing it according to the market principle.” In addition to these issues, people working in the energy sector have repeatedly complained and submitted proposals to the Ministry of Energy and the Energy Regulatory Commission to raise their wages. There is a lack of human resources in the sector due to low wages. As of September 30, a total of 80 employees have quit their jobs.

“Losses in the energy sector have reached the level of dysfunction due to aged equipment and machinery, a lack of investment and resources, as well as the fact that electricity and heat have always been supplied below the cost of production,” the minister said.

In Mongolia, most of the equipment used by thermal power plants are old and deteriorated. In particular, it has been 57 years since DarkhanUul Province’s thermal power plant was put into operation. It is estimated to face a loss of at least 10 billion MNT this year.

Executive Director of this state-owned company M.Jargalsaikhan said, “We have 18,000 tons of coal reserves, enough to cover nine days. We should build at least 14 days of reserves but due to the financial situation, we’re low on reserves. All state-owned companies that produce and supply heat and electricity operate at a loss. This is due to the fact that the organization cannot work according to the market principle and tariff restrictions are applied. We are still facing a shortage of human resources and financial difficulties. In order to reduce the deficit, it is necessary to increase electricity and heat tariffs by at least 25 percent.”

Moreover, Executive Director of Erdenet Power Plant B.Bat-Erdene expressed that the company is projected to have a loss of about 11 billion MNT this year. This is blamed on the low electricity and heat tariffs, which are cheaper than the actual cost of production. On top of that, the increase in diesel fuel, spare parts and transportation costs is amassing losses, he said.