How will the increase in electricity bills affect inflation?


Lerato Khumalo

While the Energy Market Regulatory Authority (EPDK) announced an increase of 20% to 38% in final electricity retail sales prices, economists calculated that the increase would have a limited impact of 67 basis points on the CPI at the end of 2024.

According to the calculations of three economists consulted by Reuters, the total impact of the hike on the CPI will be 67 basis points. 53 basis points of the impact will be reflected in the CPI in July.

While the electricity price tariff has been significantly increased for the first time since September 2022, economists stated that in addition to the direct effects, the increase will have indirect effects on the CPI, and the indirect effect could be 40-50 basis points by the end of the year.

The weight of electricity in the CPI is at 1.76 percent in 2024. According to EPDK statements, there was no increase in the commercial and industrial tariffs. The majority of industry and some commercial enterprises purchase electricity not at tariff prices but through agreements indexed to free market prices.

The government keeps electricity prices for households in Turkey well below free market and international prices through subsidies, and this practice continues despite the price hike.

In a written statement from EPDK, it was stated that “A 38 percent increase was made for the residential subscriber group, a 30 percent increase was made for the agricultural activities subscriber group, a 38 percent increase was made for the low level of the public and private services sector subscriber group, and a 20 percent increase was made for the high level.”