HAVANA – So-called “voluntary blackouts” are set to become a new reality in Cuba starting Jan. 1, when once heavily subsidized electricity rates will skyrocket by as much as 500 percent.
The sharp cutback in these subsidies, part of a series of economic reforms that will include a long-postponed move to a single unified exchange rate (to be pegged at 24 pesos per $1) and a big salary hike for government workers, will make Cubans think twice about switching on the air conditioning or using more lights at home than are strictly necessary.
Citizens of the Communist-ruled island have always feared government-imposed blackouts during times of crisis, a phenomenon that was particularly commonplace during the “Special Period” following the collapse of the Soviet Union, its main benefactor prior to the early 1990s.
But now the “blackouts” will be self-inflicted and motivated by customers’ fear of what they’ll find in their utility bills.
“I’m going to pray I have enough to pay the electricity bill at the end of the month because it’s not just salaries that went up (under the new reforms). Everything went higher,” Isi, a young tour guide, told EFE.
Asked what she can do to keep the cost at a manageable level, she threw up her hands in desperation: “Magic. We’ll have to work magic.”
Until the latest reforms, the cost of living on the island had been kept relatively low thanks to massive government subsidies that compensated for people’s low salaries and pensions.
Water prices also will rise at the start of 2021, while telecommunication rates that were already among the world’s most prohibitive are expected to remain virtually unchanged.
Under the new multi-tiered system, the cost of electricity for Cubans will climb depending on how much they consume.
Prices for those who consume the least will be slightly subsidized, while the rest will see a roughly five-fold increase.
Prices will range from as low as 0.4 pesos ($0.02) per kWh for households that consume between zero and 100 kilowatt-hours per month to as high as 25 pesos (just over $1) per kWh for those that consume more than 5,000 kWh per month.
Although the minimum wage will rise fivefold in 2021, the percentage of income that households will need to spend on electricity will increase at an even faster pace.
Cubans such as retiree Maria Elena are already bracing for the impact.
She told EFE that she has the typical devices and appliances in her home: three fans, a refrigerator and a television set. “I don’t know what the bill will be like,” she said with a shrug.
People on social media, meanwhile, have been tallying up the numbers and not liking what they’re seeing.
One Internet user who says he has a refrigerator, two air conditioning units and an electric heater estimates that his power consumption of 700 kWh will cause his bill to skyrocket from $38 to $178, an amount that will be equivalent to 60 percent of his new salary.
The government, for its part, says the new prices aim to discourage consumption.
On Sunday night, Economy and Planning Minister Alejandro Gil said on state television that the new pricing system is fair and that “socialist formulas” were applied to ensure that lower-income people are still protected.
But due to the stifling Caribbean heat, even the poorest households have at least one air conditioning unit, an item often purchased thanks to remittances from family members abroad.
Most also have large freezers that they use to store food and help them endure the island’s chronic shortages.
Yaimara Garcia, who works in the education sector, told EFE that Cubans will have no choice but to cut back on their electricity consumption.
“When I leave work, I’ll have to leave everything turned off ... when I get home, I’ll start cooking before peak hours. If I’m in the living room, I’ll turn off (the light) in the kitchen, and if I’m in the kitchen, I’ll turn off (the light) in the living room,” Garcia said.
Another aspect of the problem is the cramped living conditions in Cuba. Several generations often live together under the same roof due to a chronic housing deficit on the island, and that means multiple devices – such as cellphones and computers – plugged into electric sockets.
The island’s growing private sector, including hairdressers, property renters and restaurants, also is expected to be hard-hit by the higher electricity rates and be forced to pass those costs on to their customers.
The government, meanwhile, has said that these entrepreneurs at most will be allowed to triple the price of their services.
“I’ll have no choice but to raise (prices),” said Fran, a young barber who expressed his frustration over the situation.
But Jose Carlos, a pre-university student, was more optimistic.
“It’s not as outrageous as they say. I think it’s fair. You have to conserve, not have the lights on all day if it’s not necessary, not have the air conditioning on all day,” he said.
The coronavirus pandemic has worsened an already challenging financial situation on the island, which was struggling with systemic economic inefficiencies, a decline in aid from its oil-rich ally Venezuela and recent sanctions by President Donald Trump’s administration that stiffened the United States’ decades-old embargo on the Caribbean island.
Furthermore, shipments of subsidized oil from leftist-led Venezuela – also a target of severe sanctions by the Trump administration – have plunged over the past five years due to that country’s economic woes.
This has forced Cuba to buy crude at market prices from alternate suppliers, given that its own oil output only covers 40 percent of domestic demand.
The Cuban government wants to dramatically alter its energy matrix and has set a goal of obtaining 24 percent of its electricity (an installed capacity of around 2.3 gigawatts) by 2030 from renewable sources, mainly bioelectric plants and solar parks.