Iran may hike power price by 500% - reports

Iran is considering proposals to increase electricity prices by nearly five times to encourage savings in a country facing daily power cuts at the height of summer, Iranian media reported on Tuesday.

The world's fourth-largest oil producer has had to implement daily electricity cuts in Tehran and elsewhere as temperatures climb above 40 degrees Celsius.

President Mahmoud Ahmadinejad last month outlined plans to overhaul the country's subsidy system, a move aimed at introducing more direct subsidy payments to the needy.

Economists have said the step will help to rein in state spending and curtail waste. But the short-term inflationary impact makes it a sensitive issue ahead of next year's presidential election. Inflation has already hit 26 percent.

Deputy Energy Minister Mohammad Ahmadian was quoted as saying the cuts of electricity, the price of which is subsidised, may be extended, without giving details.

"In view of the rising temperature the country is confronting 1,000 megawatt of electricity shortages... and there is no way except increasing the period of power cuts," the Etemad-e Melli daily quoted him as saying.

Saying the cuts inflicted a heavy burden on the economy, he added: "The power wastage in the country is as much as 18 percent... Economising in power consumption is almost zero in view of the entry of new consumers in the power network."

Sarmaye daily said electricity prices might increase to 770 rials ($0.08) per kilowatt hour (kWh) from 160 currently starting from Sept. 22, which marks the beginning of the second half of the Iranian year running to March.

Other newspapers quoted the same figures and said the price for consumers could be changed as part of plans to review the subsidy system.

"The final price would depend on the amount power stations have to pay for the gas they use," Ahmadian was quoted as saying by the Jam-e Jam newspaper.

Ahmadinejad urged Iranians to economise on power for the rest of the summer to ease pressure on power plants struggling to keep pace, the state broadcaster's website reported.

"Even though we have built many new power stations, the consumption is very high and rising, and we are moving on the borderline [of capacity]," he said.

"We are aware of the power cuts and the trouble caused to the public," the president said.

The government has already sought to restrain gasoline consumption by rationing the amount of heavily subsidised fuel drivers can buy. Any extra fuel bought outside the quota costs 4,000 rials a litre, four times the rationed fuel price. (Reuters)