Ethiopia’s state-run Ethiopian Electric Utility (EEU) has rolled out a sweeping electricity tariff hike across households, businesses, and industry in what it calls a year-long adjustment plan. The move, effective from July through October 2025, aims to plug chronic funding gaps in the power sector but also risks deepening pressure on family budgets and industrial competitiveness. While the poorest households remain partially shielded under the “lifeline” band, moderate- and high-consumption users face double-digit increases. Businesses and factories are hit with higher per-kilowatt-hour charges and hefty fixed demand fees, raising both variable and unavoidable monthly costs.

The middle class, not the poorest, will absorb the steepest proportional shock.

Who Pays the Price?

• Households: The smallest users (0-50 kWh) face just a 0.08 birr increase per unit, while families using 201-300 kWh see jumps of nearly 12%. Ethiopia’s emerging middle class, already squeezed by inflation, takes the hardest hit.
• Businesses: Commercial users face a 0.48 birr/kWh hike, with small industries adding 0.26 birr/kWh and medium industries 0.22 birr/kWh plus new monthly demand fees that inflate bills regardless of usage.
• Fixed Costs: Domestic postpaid users above the lifeline threshold now pay an extra 46.75 birr, while commercial accounts shoulder 59.94 birr more.

Why It Matters

1. Inflation Outlook: Higher power costs for retailers, processors, and transport services could ripple into consumer prices, threatening to prolong double-digit inflation.
2. Industrial Strain: Export-focused sectors like textiles and agro-processing face thinner margins, raising questions about Ethiopia’s competitiveness against regional rivals.
3. Equity Trade-Offs: Protecting the poorest households shields social stability but puts middle-income families critical drivers of domestic consumption under pressure.

Reliable energy pricing is a prerequisite for private-sector investment, but it comes at a social cost.

The Bigger Picture

For Ethiopia, this is not just a tariff revision. It marks a policy shift: away from blanket subsidies and toward targeted protection for the poorest, while nudging others closer to market reality. The adjustment could improve the financial health of the utility, unlock new investment in renewables and grid expansion, and lay groundwork for long-term energy security. But for everyday Ethiopians, it means steeper monthly bills, thinner wallets, and higher prices at checkout.

For households, the burden is immediate. For businesses, the challenge is survival in a higher-cost environment.