INOGATE & Energy tariffs

The tariff paid by every consumer of energy includes its delivery, extraction or import (for gas) and generation or import (for electricity). To guarantee the quality and security of energy supply, tariffs must be paid for at a rate sufficient to recover the operating costs and to provide a reasonable return on the capital invested in the assets.

Payment is generally achieved by a system of tariffs - although some large users may enter into commercial contracts for supply. End consumer tariffs may be applied by commercial suppliers in de-regulated sectors, or through a regulatory process where monopoly suppliers are in place. The network businesses (for transmission and distribution) are viewed as natural monopolies in de-regulated sectors and are always subject to tariffs.

Where there are monopolies, the regulator acts as a proxy for completion by attempting to limit the profits a company makes to that which would be found in a similar organisation in a competitive environment. Through incentives or price controls it encourages efficiency in those companies. End user tariffs are matched to the cost of providing the services to ensure that no cross-subsidisation takes place.

In the INOGATE Partner Countries (PCs), there is a large variation in the tariff methodologies currently in place. In many PCs, particularly those that are considering membership in the EU Energy Community, the tariffs are well designed, and most of the assistance is targeted at specific issues. In those countries that maintain a traditional, vertically integrated structure, assistance is much more geared towards capacity building and advice on the underlying disciplines.

INOGATE has undertaken a tariff review of the Partner Countries to establish their current status and to advise on the steps that they may take if they wish to reform their tariffs according to the central tenets: fairness, transparency, coverage of reasonable costs, efficient allocatation of the costs between customer classes, provision for investment and provision of a reasonable return for the owners.