The Impact of Electricity Ta'rifa on Profitability Indicators: The Case of Jordanian Electricity Companies

Yahya Mohammad Al-Qudah, Radwan Mohammad Elanati

Abstract


This study examines the electricity ta'rifa methodologies that are applied in Jordan to determine buying and selling prices of the electric energy among the main activities in electricity sector (Generation, Transmission, and Distribution) up to the end user. In order to demonstrate the extent of its impacts on profitability indicators of these companies, we have used (5) indicators. Descriptive analytical method has been used to achieve the objectives of this study, where six electricity companies in Jordan that issued annual reports during the study’s period (2008-2013) have been included in this study.
The study showed that the electricity ta'rifa has a clear and significant impact on the financial performance of the electricity sector, as (5) out of (5) indicators (that have been tested) were affected by ta'rifa. That is directly attributed to the differences in prices (resulting from the shift to use high cost fuel), where the Electricity Regulatory Commission (ERC) was unable – at that time - to reflect the increase in electricity production cost on the ta'rifas due to social and economic reasons.

Keywords


Electricity Ta'rifa, Profitability Indicators, The Jordanian Electricity Companies.

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