UNELCO is 68% AND VUI is 12% ABOVE THE PACIFIC AVERAGE
A report by URA in July 2019 has proved the UNELCO and VUI do charge more in electricity bills than all other energy companies in the small Islands in the Pacific.
A Comparative Report released by the URA has shown that an increase in the VAT charged by the Vanuatu Government has also contributed a lot to the dramatic increase to electricity bills in Vanuatu.
The URA Comparative Report was done purposely to provide a comparison of electricity prices paid by customers in Vanuatu with customers in different small Pacific island countries across the region.
The URA collected information from 25 electricity utilities in different islands, countries and territories in the Pacific region for review.
Tariff information published publicly by regulatory agencies or the utilities was used to calculate customer bills based on typical consumption levels for three different customer categories.
All applicable taxes and fees were included, representing the total price of electricity to customers in each country and territories were also collected.
The comparison between Vanuatu and the Pacific area average shows that a relatively higher proportion of the electricity bill in Vanuatu is made up of Government taxes.
The URA findings also state “Vanuatu effective as of January 2018, the previous level of the applicable Value Added Tax (VAT) of 12.5% was increased by 2.5% to 15%, affecting all prices of goods and services.”
The Comparative Report also shows “electricity costs for the larger “Domestic consumer” category in Vanuatu are among the most expensive in the Pacific region with UNELCO ranking 23rd and VUI – 19th, out of the 25 utilities in the sample.”
VUI has moved from 17th to the 19th while UNELCO has maintained its position from 2017 to 2018 in the ranking.
Both utilities’ tariffs were affected by the above mentioned 2.5% increase in the local VAT as well as the inclusion of the Regulatory Levy in customer invoices.
The comparison between Vanuatu and the Pacific area shows that taxes generally form a higher proportion of Vanuatu’s domestic consumer’s electricity bills than generally for others.
Vanuatu customers pay 15% VAT charged on all electricity bills. This constitutes 13% of the overall customer bills when compared to a Pacific
average of 4% tax.
In Vanuatu, a cross-subsidy mechanism designed to support access to electricity services for modest households impacts the various consumer
Consumers under the “Small domestic” category are paying low
subsidised rates in the first tranche of 0-60kWh.
“Domestic consumers” are paying a higher price per kWh as a result. The cross-subsidy mechanism is implemented by both utilities.
It should also be noted that UNELCO tariffs are adjusted monthly to
reflect current diesel prices.
In January 2018, diesel cost/litre integrated into deriving tariff was higher compared to January 2017 prices resulting in an increase of tariffs for all end users.
According to percentage figures given, for UNELCO’s domestic customers, the price paid by these customers apart from the VAT of 15% and fixed charge of 3%, fuel excise tax of approximately 8%, subsidy to Small Domestic Customers of approximately 3%, subsidy for Tanna and Malekula concessions of approximately 3% and funding for rural electrification approximately 3% which are incorporated into the overall electricity bill.
The Comparative Report suggests that Small domestic customers in Vanuatu are charged significantly less than the regional average due to
cross-subsidy from large and business customers and is more pronounced in Vanuatu than in any other parts of the Pacific region; however, the sudden increase in ‘SMART METER’ rates in Vanuatu does put the findings into question.
Report Other low voltage domestic customers, which means relatively high domestic users in Vanuatu are charged significantly more than the regional average and are subsidizing the low users as stated by the Comparative Report.
The report states “Business customers in Vanuatu are differentiated between two utilities; VUI is charging HV customers below average Pacific rate while its LV customers pay above Pacific rate.”
UNELCO charging its LV and HV customers slightly higher prices than Pacific average based on the type of connection and the customer type the customer subscribed to.
It should be noted that UNELCO electricity prices are adjusted monthly reflecting current invoiced fuel prices while VUI’s prices are adjusted annually.