The Utilities Regulatory Authority (URA) wishes to inform the public that, under Council of Ministers (CoM) Decision No. 18 of 2026, the Government has approved a subsidy of VUV 192 million for the electricity sector in response to rising global fuel prices associated with the ongoing conflict in Iran.
To help maintain affordable and accessible electricity services despite increasing electricity generation costs, URA, with support from the Ministry of Finance and Economic Management (MFEM) and the Ministry of Climate Change Adaptation, Meteorology, Geo-Hazards, Environment, Energy and Disaster Management (MoCC), will begin implementing the approved subsidy across all regulated electricity concessionaires like UNELCO Engie, VUI Ltd, and VANPAWA.
The subsidy will be introduced in phases and is intended to reduce the impact of increased fuel costs used for electricity generation. This support is particularly important for utilities such as UNELCO Engie and VANPAWA, where a large proportion of electricity generation depends on diesel fuel. As international fuel prices rise, the cost of generating electricity also increases, placing upward pressure on electricity tariffs.
This differs from utilities such as VUI Ltd, where a greater share of electricity generation is sourced from renewable energy, resulting in lower exposure to fuel price fluctuations.
Under the current tariff framework, the electricity generation mix used by each utility plays a significant role in determining monthly base tariff adjustments. By applying the subsidy to fuel volumes purchased at inflated fuel prices, the overall fuel cost used in electricity generation is reduced. This is expected to lessen the impact of fuel price increases on electricity tariffs and help maintain affordability for consumers.
The cost of fuel for electricity generation for each Utilities will be subsidized for the first month of the fuel spike at 60VT/litre and 30 VT/litre for the months thereafter. The subsidy will apply from this month onward until the allocated funding has been fully utilized. The subsidy will only apply to fuel volumes purchased at inflated fuel prices and used specifically for electricity generation.
The example below compares the monthly adjusted electricity tariff for the June billing period with and without the subsidy, showing the effect of the subsidy on the final tariff
For UNELCO, the monthly tariff adjustment for June would have increased by 24.72% (or 15.55 VT/kWh) without the subsidy, compared with only 3.99% (or 2.51 VT/kWh) with the subsidy. For VUI, the June monthly tariff adjustment would have increased by 8% (or 4.25 VT/kWh) without the subsidy, but with the subsidy applied, the increase would be limited to 1% (or 0.61 VT/kWh).
For VANPAWA, no subsidy adjustment was reflected in the June 2026 billing period because there was no recorded fuel consumption associated with fuel purchased at inflated prices during the applicable tariff calculation period. However, the subsidy will be applied in the July 2026 billing period. This reflects the tariff adjustment methodology currently used in VANPAWA’s monthly tariff review process.
Promoting affordable electricity services remains a key function of the URA. To support this objective, and with assistance from the Government through the MFEM and the MoCC, URA has facilitated the rollout of the fuel subsidy for the electricity sector.
URA will continue to closely monitor the electricity sector, assess the effects of rising global fuel prices, and provide advice to the Government on how these trends may impact electricity tariffs.