The Trades Union Congress (TUC) has asked the Public Utilities Regulatory Commission (PURC) to reduce electricity and water tariffs by 15 percent and 12 percent respectively in 2019 to stimulate economic growth.
“In 2019, it is expected that the price of fuel and natural gas will reduce. Inflation is also expected to decline to a single digit, and the value of the Ghana Cedi is expected to be stable. We strongly believe that a further reduction in tariffs will stimulate economic growth that could lead to increased job creation,” the TUC said in its proposal for tariff review submitted to the PURC.
“We would like to highlight the need to attach more weight to prudent and efficient cost of operations for the utility companies. In our view, there are still inefficiencies in the utility sector which are being passed on to consumers. We expect PURC to provide consumers with its regulatory benchmarks for efficiency to convince us that the operational costs of utility companies are in line with the standards of best practice,” the largest labour body in the country said.
The TUC, as part of its proposal to PURC, advised the Commission to ignore recommendations put forward in the Fitchner Report.
The report, which is the findings of a study undertaken by Fitchner Management Consulting and funded by the Millennium Challenge Cooperation and Millennium Development Authority, recommended that four consumption blocks of the residential customers should be reduced to two consumption blocks of 0-50kWh and 51kWh+.
But the TUC believes that adoption and implementation of the report can lead to an over-400 percent increase in tariffs for small residential customers – rising from GH¢0.39 /kWh to GH¢1.97 /kWh, as a result of removing cross-subsidies.
The TUC indicated that if this is implemented it could lead to social unrest in the country.
According to the umbrella-body of 17 affiliate trade unions, its previous submission – which raised issues about passing on the cost of excess capacity of Independent Power Producers (IPPs) to consumers – is still valid.
“The consumer should not be burdened with payment for excess capacity. It is very unfair to pass on the cost of excess capacity to consumers, especially working people whose wages and salaries do not match the rate of increase for electricity tariffs.
“Government has promised to review the Power Purchase Agreements (PPAs), but we are not aware of any practical steps toward reviewing the PPAs – most of which were signed under emergency conditions which can hardly pass the transparency and ‘value for money’ tests.
“Consumers, especially working people, should not be forced to pay for the cost of electricity that results from bad policies in the power sector.”
According to the statement, the TUC urged PURC to ensure that the new arrangement changing the status of ECG as an electricity distribution company to asset owner and a bulk energy trader, from February 1, 2019, will not lead to higher tariffs.
Consumers, according to TUC, are yet to be informed of the effects of such a major policy change in the distribution of electricity on electricity tariffs.
Government, Power Distribution Services of Ghana Limited and the ECG have signed transaction agreements which have been ratified by Parliament.
Water desalination project
The Union again observed that the Befesa Desalination plant, which was commissioned in 2015 on the basis of a Build, Own, Operate, Transfer (BOOT) Water Purchase Agreement between the Ghana Water Company Limited and Befesa Desalination Development Ghana Limited, has become a big financial drain on Ghana Water Company Limited.
This, the TUC said, has become an albatross that is draining the GWCL of some US$1.42million every month in capacity charge alone, and is therefore proposing that “The cost of operating the Befesa Desalination Plant must not be passed on to consumers”.
In the past, unions have responded to high increases in utility tariffs with agitation, especially when wage increases and income growth have lagged behind the rate of tariff increases. In addition, high utility tariffs have often resulted in significant job losses.
Also, in the past tariff hikes justified on the grounds of improving service delivery have failed woefully to bring about any appreciable improvement in the services of utility providers.
Earlier this year, the PURC announced the reduction of electricity tariffs as shown in the table below:
PURC Approved Average Percentage Reduction
|Special Load Tariff Customers||25%|