Utility tariffs to go up next week; New rates to take effect September 1

Utility tariffs are expected to go up next week, the first since 2017.

Once announced, the tariffs are expected to come into effect on September 1, this year.

This comes after the Public Utilities Regulatory Commission (PURC) had carried out nationwide consultations on proposals it received from the utility companies.

A source familiar with the stakeholder consultations said aside from the public fora across the 16 regions, the PURC also engaged identifiable groups and relevant sections of the public and had considered all sides of the arguments in arriving at appropriate tariffs.

The Daily Graphic has gathered that the new tariffs will not be across the board, which means the rates will depend on the reasons and proofs adduced by the utilities and the verification the commission has done.

Another source said the tariffs to be announced would exclude taxes and levies already imposed by the state.

It said micro, small and medium enterprises (MSMEs), such as food joints and salons, would be protected from paying “punitive” tariffs.

 Proposals

The utility companies presented proposals to the PURC in May this year, based on the regulator’s guidelines.

While the Ghana Water Company Limited (GWCL) proposed a 300 per cent increment over its existing tariffs, the Electricity Company of Ghana (ECG) proposed 148 per cent, the Volta River Authority (VRA) proposed 37 per cent, with the Ghana Grid Company Ltd (GRIDCo) proposing 48 per cent.

Other proposals were 38 per cent from the only private power distributor, Enclave Power, and 113 per cent increase over the existing tariffs of the Northern Electricity Distribution Company (NEDCo).

Framework

The tariff proposals were in line with policy directions to progressively eliminate what has been described as “punitive tariff bands” that discouraged consumption.

This included industry being made to pay higher to cushion residential consumers, a situation which was adding to the cost of doing business and making operations in the industrial sector costly.

The multi-year tariff adjustment, which will come with different rates of increment over a five-year period, is also expected to enable the PURC and the utilities to commit to the quarterly “automatic” adjustment system, support industrial development and improve utility efficiency.

Another source familiar with the consultations and computations told the Daily Graphic that in arriving at the various tariffs, the regulator took into consideration external and internal economic conditions, as well as the need to keep the utilities in operation, enabling them to do routine maintenance, finance developments, among others.

The PURC also subjected all the costs proposed by the utilities to strict assessment and validation, including visiting some of the investments on the ground.

It accepted servicing costs on loans for approved investments, while the state-owned utilities were asked to suspend all discretionary investment this year.

The regulator also requested for and critically assessed proposed investments by utilities, among other things.

Customer expectation survey

The PURC also conducted a survey in which 851 respondents across all 16 regions completed the questionnaire.

The survey indicated that 44 per cent of respondents thought the current electricity tariffs were not commensurate with quality of service received from the electricity utilities due to frequent voltage fluctuations, poor customer service delivery, among other reasons.

On electricity tariffs, 42 per cent of the respondents rated prevailing tariffs as fair, while 55 per cent rated them as high. 

Again, half of the respondents indicated that current water tariffs were not justified, given the poor service delivery in the form of frequent water supply interruptions.

Consequently, 41 per cent of respondents rated prevailing water tariffs as fair, while 57 per cent rated them as high.

 Inefficiency

The PURC, the source said, would also set efficiency benchmarks by which the utilities would abide, so that their inefficiencies would not be passed on to consumers.

“The PURC sets loss benchmarks which mostly cover technical losses to ensure that the inefficiencies are not passed on. For instance, if the benchmark is 4.2 per cent and you incur 10 per cent, the PURC will deduct the benchmark and the utility will pay for the rest,” it explained.

 Fact sheet

a) The utility companies are proposing new tariff adjustments mainly due to their inability to finance capital investments, inadequacy of the last PURC-approved tariffs, the depreciation of their assets, exchange rate fluctuations, payment of government-guaranteed loans, among others.