Lesotho’s Power Tariff Study Puts Affordability and Grid Finance on the Same Table

Lesotho is weighing electricity tariff changes after a cost-of-service study found that current prices recover substantially less than it costs to supply power. The African Development Bank said on September 21 that existing tariffs for the 2026/27 financial year are expected to bring in about 74 maloti for every 100 maloti required to provide the service. The finding frames a difficult policy choice for the country: how to fund a reliable, expanding electricity system without pricing vulnerable households out of it.

The Lesotho Electricity and Water Authority (LEWA) and the bank gathered government officials, technical specialists, consumer representatives and others in Maseru in August to discuss the study. The recommendations include a phased average tariff increase, changes to industrial pricing and a more progressive household structure. These are proposals for consultation and regulatory consideration, not an announcement that new tariffs have already taken effect.

The size of the funding gap

A tariff that does not cover supply costs leaves a utility with limited room to maintain equipment, replace aging assets and serve new customers. The cost may be paid elsewhere through public support, deferred maintenance or weaker service. None of those routes is free to consumers or the economy. For a small electricity system, delayed repair and underinvestment can have a visible effect on households and firms that already rely on the network.

The study estimates that full cost recovery would require an average tariff increase of 35.6% under its assumptions. Instead, its recommendations propose an average rise of 12.8% a year over three years to reduce the immediate shock. These figures describe a modelled gap and a suggested path. They do not establish what LEWA will ultimately approve, how each customer category would be billed or how future changes in costs might alter the calculation.

The customer base is also expected to grow. The study projects Lesotho Electricity Company customers rising from about 320,575 in 2025 to nearly 391,544 in 2030, an increase of roughly 71,000. Growth can spread fixed costs over more accounts, but it also requires connections, transformers, distribution lines, metering and maintenance. If new revenue is not invested effectively, higher tariffs alone may not deliver better reliability.

Household protection must be designed, not promised

The proposed household structure is progressive: customers using more electricity would pay more, creating room to protect low-consumption users through a social tariff. That design could make an increase less burdensome for people who use only basic lighting and appliances. It also raises practical questions. The regulator must define the low-use threshold, establish who qualifies for support and make the rules clear enough for customers to understand their bills.

Consumption is an imperfect measure of need. A large low-income household may use more power than a small higher-income one. Some households may share a meter or operate a microbusiness from home. A social tariff based only on kilowatt-hours could therefore miss people it aims to help. LEWA and the government can examine customer data and consult affected groups before setting the final structure, including how prepaid users would be treated.

Transparency will matter as much as the rate itself. Customers should be able to see the assumptions behind the cost-of-service study, the expected effect of each option on common bill sizes and the service improvements the utility commits to deliver. A phased rise will be easier to justify if people can track whether outages, response times and connection delays improve. Without that accountability, consumers may experience only the price change.

Businesses face a different pricing question

For commercial and industrial users, the study discusses time-of-use prices. Under that approach, electricity costs can vary by the hour or period, encouraging customers to shift flexible activities away from times when the system is most strained. If designed well, it can improve use of existing capacity and give businesses a clearer incentive to manage demand. It also requires accurate metering and a rate schedule that firms can plan around.

Not every business can move its operating hours. A workshop, cold-storage facility or textile producer may have processes, labour arrangements and delivery deadlines that limit flexibility. The regulator will need to test the effect on different types of enterprise rather than assume all can respond in the same way. Reliable power may matter more to a firm than a small tariff reduction; conversely, a steep bill increase without service gains can damage competitiveness.

The wider economy has a stake in this trade-off. Investors need confidence that an electricity provider can operate and extend service, while local firms need prices they can sustain. The consultation is therefore about industrial policy as well as utility accounting. A published schedule and predictable review process could help businesses make decisions about equipment, operating hours and new sites.

How tariff reform fits the access agenda

The African Development Bank places the initiative within its energy-sector technical assistance and the Mission 300 effort to connect 300 million more Africans to electricity by 2030. That continental target is not a connection promise made by this Lesotho tariff study. The study addresses one condition for sustained access: whether the local power system has enough revenue and the right incentives to serve current and future customers.

Other investment is moving in parallel. In May, the World Bank announced a $50 million credit intended to help bring electricity and economic opportunity to nearly 147,000 people and businesses in Lesotho. That project has its own objectives and financing. It illustrates why pricing, network investment and access policy need to be considered together. New connections can be valuable only if supply remains dependable and households can afford to use it.

The next step belongs to Lesotho’s institutions and consumers. LEWA’s consultation should show how feedback changes the proposal, what support is planned for vulnerable users and how the utility will account for any additional revenue. Decision-makers should also separate the cost of efficient service from losses that customers should not be asked to finance indefinitely. Better collection and operations can complement a fair tariff, though the study’s reported gap suggests the issue cannot be solved by rhetoric alone.

Lesotho has not yet chosen a final rate path. The study has made the choices clearer: a large shortfall under existing tariffs, a suggested three-year adjustment and a need to protect people least able to absorb higher bills. The reform will be judged by what happens after consultation, in bills, service quality and the pace of new connections. That is the point at which financial sustainability becomes a practical benefit to the public rather than only a figure in a study.