Electric power has cascading, everlasting and vicious effect on the economy, social andrnpolitical performance of any country, and has great role wherever people live and work be it inrnmanufacturing, services etc. Source of funds, power system efficiency and electric tariff werernconsidered as the basic causes for success or failure of GTP_II plan to develop and operaternelectric power which is expected to energize the planned economy.rnThe objective of this paper was to assess source of finance, power system efficiency, electricrntariff and financial performance and to identify the related challenges to each source ofrnEthiopian Electric Power and Ethiopian Electric Utility. So as to meet this objective bothrnqualitative and quantitative approaches were used. For the qualitative study, profound data wasrncollected from key informants and focus group discussant and analyzed using content analysisrnapproaches. Descriptive analysis was used to analyze quantitative data collected from differentrndocuments.rnThe findings of the research show that In GTP_I 32% of total investment covered from foreignrnloans, 57% expended from bond sales to CBE and 11% is spent from own sources and none ofrnGTP_I major plans achieved fully fundamentally because of financial limitations. In GTP_IIrn38% of the total estimated investment in the sector expected from foreign loans, 44% isrnplanned to be covered from bond sales to CBE and the remaining 18% is left for own sourcernfinancing scheme. Each source has exposed the enterprises for different challenges such as thernforeign loan exposed the enterprises for high foreign currency requirements to purchase goodsrnand services, to repay matured principal loans and interests. Although bond sales to CBE is lessrncostly relative to foreign loans and it is one of the biggest instrument or channel for therngovernment to subsidize the sector, CBE couldnâ€™t provide the required fund on time and as thernamount of this loan is very huge the enterprises are not able to repay the interest from itsrnrevenue. In addition to these, more than 20% of the produced energy is sacrificed for electricrnsystem loss and the existing tariff system doesnâ€™t represent the fact on the ground.rnIn order to provide sufficient, reliable and sustainable energy for the whole public, therngovernment and the enterprises are expected to optimize the power system efficiency, updaternthe electric system tariff and find alternatives of smooth financing such as opening the sectorâ€™srndoor for private investors.rnKey Words: - Source of funds, foreign loans, bond sales to Commercial Bank of Ethiopia,rnpower system loss, electric tariff.