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How much do electricity tariff increases in Ukraine hurt the poor?


Increasing the electricity tariffs for private consumers to cost-covering levels has been a very sensitive issue for all transition countries. The likely negative social consequences are the central argument why the necessary tariff corrections have not yet been implemented in Ukraine by the political decision makers. Since official data is not available, there is insufficient knowledge regarding the electricity consumption behaviour of private households. This makes it difficult to counter the official arguments with hard evidence. A survey was carried out by the authors giving a more detailed picture. Basic data of the survey was used in evaluating the impact of possible tariff increases on the household expenditures of different income groups, using both the compensating (CV) and the equivalent variation (EV) methods. The findings confirm that an electricity tariff increase up to the level which would cover “officially” measured costs, as defined by the Ukrainian electricity regulatory authority, would not cause severe social problems. However, further increases up to a level, which would cover the “true” costs, i.e. up to a level comparable to the average OECD level, should only be realised in steps.