Iran - Electricity Pricing & Power Sector Reform

The ESMAP-funded Islamic Republic of Iran Power Sector Note concludes that one of the main sector challenges are tariffs and subsidies policies. The Note suggests phasing out subsidized prices of natural gas and moving toward electricity generation tariffs reflective of the real costs, with subsidy support shifting over time toward end-user tariffs. This would allow better targeting of social support and lead to better pricing signals inducing more efficient energy use. Such a shift in the tariff and subsidy policies should lead to a more sustainable financial foundation for the energy sector. The Power Sector Note describes power sector structural reform under way in Iran, which includes unbundling the vertically integrated utility and creating a structure with more transparency and competition in the wholesale market. The Note suggests revising and updating the existing sector law, adopted in 1967 law, to enable and facilitate the reform.