Electricity tariff cross-subsidization within Regional Electricity Distributors in Namibia

Abstract

This research report investigated the dynamics of electricity tariff cross- subsidization within Namibia's Regional Electricity Distributors (REDs), focusing on CENORED, Erongo RED, and NORED. The study aims to analyze the extent and determinants of cross-subsidization among different customer categories, including residential, social, general, general-demand, institutional, and institutional-demand consumers. By utilizing a mixed-methods approach, the research combined quantitative analysis of tariff application sheets and qualitative insights from stakeholder interviews to provide a comprehensive understanding of cross-subsidization practices. The findings reveal that residential and social consumers are the primary beneficiaries of cross-subsidization, receiving significant financial support to promote equitable access to electricity. Conversely, general-demand and institutional-demand consumers bear the financial burden, contributing disproportionately to the cross-subsidy. The study highlights substantial variations in cross-subsidization levels across the different REDs, reflecting regional economic conditions and consumer demographics. Key policies, such as the White Paper on Energy Policy (1998) and the National Electrification Policy (2021), play a crucial role in shaping cross-subsidization practices. These policies emphasize equitable access to electricity, particularly for low-income and rural consumers. However, the implementation of these policies presents challenges, including balancing cost reflectivity with affordability and addressing regional disparities. This research underscores the need for refined cost allocation models, targeted cross-subsidies for low-income consumers, and enhanced transparency in the tariff-setting process. These measures are intended to ensure that cross- subsidization practices promote social equity without overburdening contributing consumer categories. The study's insights contribute to the academic discourse on equitable electricity distribution and provide valuable recommendations for policymakers, regulators, and electricity distributors in Namibia.