An exploratory review of electricity subsidy reform in Lesotho: Implications for the utility and households

Abstract

Although electricity subsidies play an important role in protecting poor and vulnerable households, they have to be funded. Thus, this paper uses descriptive analysis to examine the implications of the electricity lifeline tariff in Lesotho on both the utility and households over the period 2014-2022. The analysis is carried out by comparing variables at least 5 years before the implementation with those recorded in the years that have passed since. With the current implementation strategy, the utility sustained significant negative financial effects due to reduced revenue collections. Nevertheless, households experienced positive effects due to the lifeline tariff, such as increased electricity consumption, improved affordability, reduced consumption of polluting sources and increased use of electricity for cooking. Despite these, many households perceived electricity to be expensive and claimed they would reduce their consumption should electricity prices increase. This is corroborated by the declining consumption trend before the introduction of the lifeline tariff, and the fact that households still face electricity and energy poverty. This study concludes that the lifeline tariff is beneficial to the targeted households. However, it should be implemented by charging low-consumption households below cost and high-consumption households above cost to cross-subsidise the electricity consumption of the targeted households.