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Bring back automatic adjustment formula for utility tariffs — Coalition

BY: Mary Anane-Amponsah & Faith Ayorkor Mensah
Bring back automatic adjustment formula for utility tariffs — Coalition

The Public Utilities Regulatory Commission (PURC) has been urged to re-introduce the automatic adjustment formula, a pricing mechanism, to reflect the actual cost of electricity and water supply to prevent outrageous tariff increments.

The Chairman of the Coalition of Stakeholders on Electricity Contracts and Arrangement (COSECA), Dr Steve Manteaw, who made the call at a press conference in Accra yesterday, said there were too many estimations in the determination of tariffs, which did not present fair and equitable tariffs, resulting in consumers paying higher sums.

The press conference was to express concern over recent proposals by the utility companies for upward adjustments of their tariffs, with Electricity Company of Ghana (ECG) seeking a 148 per cent increment, while the Ghana Water Company Limited (GWCL) sought 334 per cent.

Dr Manteaw, flanked by other members of the coalition, including the Vice-President of Imani Africa, Kofi Bentil, said: “It will be difficult for budgeting and planning for individual households when they are asked to pay huge increases, so the essence of the automatic tariff adjustment is to adjust in small incremental basis so that the effect is not painful.”

The quarterly adjustment, he noted, did not necessarily mean that there would be an increase at all cost because the tariffs were based on economic indicators, such as inflation, the generation mix, the price of crude oil and the exchange rate.

“During certain quarters, these parameters are stable and in those quarters, you will find that there may not be any increase.

But not to do it at all will disturb the stabilisation of the tariff, and that is why we are saying that it is essential that the PURC continues with the automatic adjustment formula.” he said.

Pay arrears

Aside from the adjustment formula, Dr Manteaw said, the PURC should immediately pay all the distribution service charges (DSC) to the ECG and ensure that the Volta River Authority (VRA) was metered and also start the effective monitoring and evaluation of the performance of the utility companies.

Other people present at the press conference were the Chief Executive Officer (CEO) of African Energy Consortium Limited, Kwame Jantuah; the General Secretary of the Convention People’s Party (CPP), Nana Yaa Jantuah, who is also a former Head of Public Affairs of the PURC; the CEO of the Consumer Protection Agency, Kofi Kapito, and the Executive Director of the Institute for Energy Research and Policies, Kwadwo N. Poku.

PURC to blame for high tariffs Laying the blame for high utility tariffs at the doorstep of the PURC, Dr Manteaw said thecommission was the main reason tariffs had piled up, resulting in the percentages being demanded by the utility companies.

He said the PURC had, over the past five years, failed to implement the pricing formula to review tariffs within a short period.

Lack of monitoring

Dr Manteaw said the lack of monitoring and evaluation on the part of the PURC had also led to increases in technical and commercial losses of the utility companies.

A key reason the ECG and the GWCL would need such huge increases was the long-standing inefficiencies in the utility companies, political interference, poor outcomes of government’s macroeconomic management and its inability to curb illegal mining, which had increased the GWCL’s treatment costs.

In principle, COSECA was in support of upward tariff adjustments to ensure that the utility companies did not grind to a halt, he said.

However, from its analysis, if the PURC did its work properly, "we should not see more than 20 per cent in electricity tariff adjustment, and it will automatically also lead to a reduction of water tariffs, as electricity constitutes about 30 per cent of the cost of water

While calling for the immediate payment of all distribution service charges (DSC) to the ECG, Dr Manteawexplained that until March 2018, there was only one DSC, which went to the ECG and subsequently to the Power Distribution Service (PDS).

However, in March 2018, the PURC split the DSC into two.

"Our checks have since confirmed that the PURC has failed, refused or neglected to pay the DSC2 to the ECG since 2018. If the PURC gave DSC one and two to the ECG, which was the case until March 2018, the ECG would have the 31.42p/kwh of the 40p/ kwh it is requesting," he said.

Audit energy funds

COSECA, he said, also wanted energy funds and schemes, such as the COVID-19 levy, the Energy Sector Levy Act (ESLA), government stabilisation payments to the ECG and auxiliary services charges to power generation companies to be audited to improve accountability.

He said Ghanaians must know, "for example, how much was made from the COVID-19 Levy and how much are we left to pay. Where is that money going to and who is making that decision?"

Dr Manteaw said the coalition would take serious legal action against the PURC if it continued to be derelict in its responsibilities to the consumer.

Recommendations

As part of recommendations for an effective sector, Dr Manteaw said the PURC should establish a programme with a clear timeline, on which all institutions in the energy chain would be properly metered to determine each unit's cost of production and service delivery.

He also appealed to the government to stop interfering in the work of the utility companies, especially in areas of procurement, and rather demonstrate a genuine commitment to the fight against illegal mining, which depleted the water resource base of the country.

Dr Manteaw added that as a matter of urgency, the management of utility companies should take steps to reduce technical and commercial losses and pay close attention to theft and illegal connections.