Cost of service and electricity tariff studies in Cameroon

Cameroon has the 3rd largest hydroelectric potential in Sub-Saharan Africa. However, the country is struggling to meet the demand for electricity: only 63% of the total population has access to electricity, 23% of which is in rural areas. The sector also faces other challenges, as network performance is poor: high losses, numerous supply interruptions and voltage drops.

However, the sector does have some strengths: it has been thoroughly reformed since 2011 and the enactment of a new electricity law has allowed the creation of new specialized operators. In parallel, investment programs for the development of hydroelectricity and rural electrification have been launched.

But the main challenge facing the sector today is the weakness of its own financial resources. Tariffs – although relatively high – remain insufficient to cover service costs, requiring recourse to compensation from the State. The poor financial health of ENEO, the sector’s incumbent operator, has led it to accumulate debts to other companies in the sector, putting the whole sector in difficulty and preventing it from making the investments necessary to improve its performance.

The Electricity Sector Regulatory Agency (ARSEL) has the authority to set tariffs for users that cover the cost of service. Although the tariff level is subject to annual review, the last tariff revision was in 2012.

The Consortium formed by MRC Group and Phœnix has been retained by the World Bank to carry out a study of the cost of electricity service and tariffs. The objective of this mission is to develop the capacity of the Government of Cameroon and ARSEL to assess the full costs of service and to establish tariffs that ensure the financial sustainability of the sector. Phoenix is responsible for conducting institutional mapping of the sector and making recommendations for improving the existing tariff structure.