Impact of higher electricity tariffs on the profitability of electricity supply and distribution companies in Namibia.

Abstract

This paper presents the effect of increased electricity tariffs on the profitability of electricity supply and distribution companies in Namibia. The Namibian electricity tariffs regarding time-of-use, setting and pricing have been compared with others countries, regionally, continentally and internationally. The time-of-use methodology and concepts benefit the consumers in terms of low tariffs at off-peak times, and discourage high consumption at peak time. This study investigated the way in which high electricity tariffs impacted the profitability of electricity utilities in Namibia. It analysed and interpreted questionnaires administered to thirteen employees of the three electricity supply and distribution companies in Namibia. The results show that the high electricity tariffs had negative effects on the companies’ profitability in the electricity supply and distribution sector in Namibia. The results, furthermore, reveal that the electricity supply and distribution companies in Namibia passed the increases on to their customers. Moreover, the study concludes that there were factors that contributed to the high electricity tariffs, such as political factors, sources of energy, the poor management of utilities and a shortage of resources. There was no relationship between the electricity tariffs and profitability and equity ratios.