Increasing utility tariffs will collapse private businesses—GEA warns

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Alex Frimpong, GEA CEO

The Ghana Employers’ Association has urged the Public Utilities Regulatory Commission (PURC) to reject any proposal from utility companies demanding an increase in tariffs —since such a move could lead to businesses folding up.

According to the GEA, a research conducted last year – sampling over 140 enterprises across all sectors – revealed that 62 percent of employers had their business operations completely disrupted.

More than 75 percent of employers postponed their investment decisions, whilst 64 percent of employers responded that demand for their products had fallen below normal levels due to the effect of the COVID-19 pandemic on their customers.

For them, the situation for employers have not changed and in some instances, aggravated, hence any move to up utility prices would spell doom for their operations.

In a statement signed by the Chief Executive Officer, Alex Frimpong, the GEA emphatically said: ”In order to support businesses to recover rapidly from the vagaries of the COVID-19 pandemic and to facilitate an effective implementation of the Government’s comprehensive economic recovery strategy, dubbed the Ghana CARES Programme, the Ghana Employers’ Association (GEA) wishes to urge the Public Utilities Regulatory Commission (PURC) to maintain the current utility tariffs regime for electricity and water.”

The statement continued saying: “GEA has observed that proposals have been made to the PURC to review upwards, the current levels of electricity and water tariffs to enable the energy sector players, particularly those in the distribution value chain, to become more effective in their operations”.

The GEA argued that while it acknowledges that tariffs adjustment may support the utility companies to rake in more revenue to facilitate their operations, the timing is inappropriate for such a policy direction.

“An upward review of tariffs will only translate into prolonging the recovery period of businesses and render them uncompetitive with a general outcome of long unemployment spells.  It is worth recounting that the outbreak of the pandemic really took a heavy toll on businesses, which requires a lot of work and sacrifices to support them to rebuild.”

The association was of the view that the general benefits of maintaining utility tariffs at their current levels in the country, will far outweigh the revenues that will accrue to the utility companies from an upward tariff adjustment.

In relation to revenue generation, the GEA said it is confident that if new and effective strategies are implemented by the utility companies, enough revenue can be recouped from the financial loopholes as well as generation, transmission and distribution losses that challenge the energy sector.

It mentioned that, although utility tariffs have not been reviewed since October 2019, the country still remains comparatively high, for instance, on the price index for electricity tariffs in West Africa.

The GEA maintained that reviewing utility tariffs in the current economic atmosphere will not only render the Government’s economic recovery strategy ineffective, but it will also place Ghanaian employers in an uncompetitive position in the international market in general and West Africa subregion in particular.

“Additionally, the need for Ghanaian businesses to have a competitive urge within the African Continental Free Trade Area (AfCFTA) also requires that critical, delicate and sensitive input prices such as utility tariffs, be handled well to enable Ghana to fully harness the benefits of this historic free trade agreement” the statement said.

The GEA commended the utility companies for the ongoing upgrades to better serve customers even though it has resulted in intermittent power outages.

“The GEA is aware that the ongoing incessant power outages in the country are driven by some inevitable maintenance and repair works on a number of critical Plant and Equipment. This is a welcome development.

We, however, urge the Commission to engage all stakeholders in the production, transmission, and distribution value chain as well as consumers at all times to keep Ghanaians and businesses informed in a systematic manner in all matters relating to power outages to engender smooth business planning” the statement concluded.

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