- but will be adjusted every quarter
Households and businesses are facing a steep increase in their electricity and water tariffs of 27.15 percent and 21.55 percent respectively, the Public Utilities Regulatory Commission (PURC) has said, adding that tariffs will now see adjustments every quarter.
The increment, the Commission said, was necessitated by an unfavourable exchange rate, rising cost of gas for electricity generation and chemicals for water treatment, among others, and will take effect on September 1, 2022.
It also said an average inflation rate of 16.2 percent and an exchange rate depreciation to the dollar of 7.5 percent were used in setting the new tariffs. The last tariff review was in 2018.
The new tariffs will span between now and 2027, and will be reviewed on a quarterly basis to reflect ever-changing microeconomic conditions, PURC Executive Secretary Ishmael Ackah said at a press conference in Accra.
He also revealed that, for the first time, the tariff structure will benefit industrial consumers more than residential users – in line with the country’s industrial ambitions.
The Electricity Company of Ghana, which distributes electricity to the southern parts of the country, and the Northern Electricity Distribution Company Limited (NEDCo), which is in charge of the northern belt, had proposed an increase in end-user electricity tariff of 148 percent and 113 percent respectively.
Ghana Water Company Limited (GWCL) demanded an over 300 percent increase in end-user tariffs, while Volta River Authority (VRA) and Ghana Grid Company Limited (GRIDCo) proposed 37 percent and 48 percent increments respectively. The VRA is a state-owned power generator and largest producer in the country while GRIDCo is in charge of power transmission.
The Commission, after reviewing and benchmarking the proposals to regulatory standards as well as regulatory loss allowable margins, however arrived at a rate of 27.15 percent and 21.5 percent for electricity and water respectively.
“In balancing the interests of service providers and consumers, the PURC acknowledged that the very economic variables which have occasioned the steep increases proposed by the service providers also affect consumers.
“The Commission admitted, however, that some level of increases in utility tariffs are inevitable if the nation is to avoid another dumsor and its attendant effects, including job losses,” he said.
Mixed reactions meet announcement
The new tariffs announcement by the utilities regulator has however been met with mixed reactions from industry experts and consumers.
“I think the PURC yielded to the mood of consumers rather than what the sector needs to be sustainable,” says Benjamin Boakye, Executive Director of the Africa Centre for Energy Policy.
He said the tariff should be forward-looking; therefore, it’s strange for PURC to use an inflation rate of 16.2 percent when in the next three months there’s no projection of a steep decline from the current 31 percent.
He added that the exchange rate is currently above GH¢9 to the dollar, hence using 7.5 to the dollar is not realistic for the next three months.
“The implication is that the power sector will continue to under-recover its revenue requirements. Government should be planning for these under-recoveries and not pretend they won’t happen.
“The state will absorb the gas payment at a minimum, because of the guarantees that tie the payment responsibility to government directly. PURC may have avoided public reaction, but citizens will pay through other means. In the past government paid with loans. In the current economic situation and lack of access to the capital market, it is difficult to predict how government will deal with these payment obligations,” Mr. Boakye further explained.
Similarly, the Executive Director of Institute for Energy Security, Nana Amoasi VII, said the 27.15 percent upward adjustment falls below the inflation rate recorded in this year alone, and will do very little to bring ECG to the level of efficiency required of them.
“One can therefore conclude that the PURC is only compensating the utilities for the inflationary losses recorded in first-half of the year 2022,” he noted.
He added that until additional capital is injected into ECG’s operations, Ghanaians will continue experiencing low service-quality from the company.
“Issues like low voltage, frequent power outages and system collapses will not go away anytime soon.”
For Mary Gyan, a cold-store operator at Oyarifa – a suburb of Accra, the increment is simply too high and could affect the price of frozen meat products.
“I am already paying too much for electricity. I spend more than GH¢500 monthly on electricity alone and this upward adjustment is coming to add up. Already things are very slow; people are not buying frozen meat like in the past,” she lamented.
She added that the September 1 date, which is the date new tariffs will take effect, is too short.