FTI Consulting supported the Ministry of
Energy of a West Africa country to redesign
its electricity tariffs for the period 2024-
2035. Balancing explicitly economic and
social efficiency, our work allowed the
development of tariff structure and financial
model that would allow the country national
utility to recover its costs of producing,
distributing and supplying electricity as
well as achieving State targets in terms of
development and social equity.

Situation

The Ministry of Energy faced a major challenge in
recovering the costs of the country electricity distribution
company. As the existing electricity retail tariffs were
outdated, the electricity sector was facing inefficiencies,
losses, and underinvestment. Furthermore, the tariffs did
not reflect the true cost of service. The country utility was
then operating at a loss, unable to recover its operational
and capital costs, and dependent on Government
subsidies. The tariffs also prevented public investment in
the electricity sector, hampering the development of power
production capacity and grid expansion.

The Government realized that it needed to reform the
electricity retail tariffs to improve the performance and
sustainability of the sector, as well as to meet the growing
demand for electricity in the country.

Our Role

FTI Consulting was requested by the Ministry of Energy to
redefine the electricity retail tariffs for the whole country,
including industrials consumers.

FTI Consulting applied its expertise in tariff design, economic
regulation, and financial modeling to develop a comprehensive
and transparent tariff methodology that is aligned with the
best international practices.

Defining Cost Recovery Principles
FTI Consulting redefined the cost recovery principles of the
electricity tariff in line with the regulator framework to ensure
the financial viability of the country utility, while also ensuring
the social efficiency of the tariffs by refining the social tariff.
The social tariff aim to provide subsidized electricity from highincome
households and industrials to low-income households,
while also encouraging energy efficiency and conservation.

Conducting Stakeholder Consultations
Our Team also conducted extensive stakeholder consultations
to understand the economic and social objectives of the
Government in the electricity sector, and to solicit feedback
and suggestions from various public parties.

Developing and Transferring a Fit-for-Purpose Financial
Model
We developed a financial model to compute the new tariffs
under different scenarios to sustain the costs of the electricity
sector and investments in the power production and electricity
grid needed. We delivered user-friendly tariff calculation
model to the client, enabling the country Government to
update and adjust the tariffs as needed in the future.

FTI Consulting’s work will result in a significant improvement
in the electricity sector’s financial performance. The new
tariffs will enable the country utility to fully cover its costs.
The new tariffs will also improve social equity in energy by
adjusting and documenting cross-subsidies between
customer segments to meet the country Government
electrification objectives.

Our Impact

• We redesigned the cost recovery principles
  (providing transparency and visibility for
  economic players and public authorities) to
  balance economic and social efficiency through
  explicit criteria.
• Our tariff calculation model serves as a powerful
  tool for quantifying the impact of future energy
  policies, tariffs evolutions, and investments in the
  electricity sector, facilitating a rational decisionmaking
  processes.
• The electricity retails tariffs designed by FTI
  Consulting will positively impact the whole
  population of the country granting larger access to
  power and providing visibility for investors
  and clients