VT192M Gov’t subsidy to ease electricity costs starting this month
June 8, 2026 11:06 pm | Posted in Business News | Share now TwitterFacebook
A VT192 million Government subsidy will start being rolled out this month across the electricity sector to cushion the impact of rising global fuel prices associated with the ongoing conflict in Iran, the Utilities Regulatory Authority (URA) has announced.
The subsidy has been approved under Council of Ministers (CoM) Decision No. 18 of 2026 in response to increased electricity generation costs to help maintain affordable and accessible electricity services.
The URA, with support from the Ministry of Finance and Economic Management (MoFEM) and the Ministry of Climate Change Adaptation (MoCCA), which is also responsible for the departments of Meteorology, Geo-Hazards, Environment, Energy and Disaster Management, will implement the subsidy across all regulated electricity concessionaires, including UNELCO Engie, VUI Ltd, and VANPAWA.
The subsidy will be introduced in phases and is intended to reduce the impact of increased fuel costs used in electricity generation.
This support is particularly important for utilities such as UNELCO Engie and VANPAWA, where a large proportion of electricity generation depends on diesel fuel.
As international fuel prices rise, the cost of generating electricity also increases, placing upward pressure on electricity tariffs.
This differs from utilities such as VUI Ltd, where a greater share of electricity generation is sourced from renewable energy, resulting in lower exposure to fuel price fluctuations.
Under the current tariff framework, the electricity generation mix used by each utility plays a significant role in determining monthly base tariff adjustments.
By applying the subsidy to fuel volumes purchased at inflated fuel prices, the overall fuel cost used in electricity generation is reduced.
This is expected to lessen the impact of fuel price increases on electricity tariffs and help maintain affordability for consumers.
The cost of fuel for electricity generation for each utility will be subsidised at VT60 per litre for the first month of the fuel spike and VT30 per litre for the months thereafter.
The subsidy will apply from this month onward until the allocated funding has been fully utilised.
It will only apply to fuel volumes purchased at inflated fuel prices and used specifically for electricity generation.
The example below compares the monthly-adjusted electricity tariff for the June billing period with and without the subsidy, showing the effect of the subsidy on the final tariff.
For UNELCO, the monthly tariff adjustment for June would have increased by 24.72 per cent (VT15.55/kWh) without the subsidy, compared with 3.99 per cent (VT2.51/kWh) with the subsidy.
For VUI Ltd, the June monthly tariff adjustment would have increased by 8 per cent (VT4.25/kWh) without the subsidy, but with the subsidy applied, the increase would be limited to 1 per cent (VT0.61/kWh).
For VANPAWA, no subsidy adjustment was reflected in the June 2026 billing period because there was no recorded fuel consumption associated with fuel purchased at inflated prices during the applicable tariff calculation period.
However, the subsidy will be applied in the July 2026 billing period.
This reflects the tariff adjustment methodology currently used in VANPAWA’s monthly tariff review process.
Promoting affordable electricity services remains a key function of the URA.
To support this objective, and with assistance from the Government through the MoFEM and the MoCCA, the URA has facilitated the rollout of the fuel subsidy for the electricity sector.
The URA will continue to closely monitor the electricity sector, assess the effects of rising global fuel prices linked to the conflict in Iran, and provide advice to the Government on how these trends may impact electricity tariffs.
