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Electricity rates go up 140 percent instead of 59.2 percent - Research

BY: Graphic.com.gh
Robert Dwamena, Managing Director of ECG

A recent survey conducted by GN Research, a multinational research company and a member of Groupe Nduom indicates that, most hotels in Accra are currently paying about 140 percent more for power instead of the approved 59.2 percent by Public Utilities Regulatory Commission (PURC) in December 2015. 

Residential consumers are also said to be having their fair share of the nightmare, a statement issued and signed by Mr Samuel Kofi Ampah, Head of GN Research said.                   

According to GN Research, their survey revealed that individuals were currently paying a little over 130percent more for the same or less electricity consumed despite putting off some gadgets to save costs. 

“Even so, a little over two-thirds of respondents have not made any formal complaint to the ECG,” it said.

“5 out of every 10 people interviewed was aware of an increase in electricity tariffs but only 10 percent of them could quote the recent rate increment in December 2015. About 29 percent of respondents buy prepaid units twice every month, followed by weekly (26 percent), and then, monthly (20percent).” 

According to GN Research, a technical analysis of the latest service charges published by ECG indicates that, electricity tariffs were again increased by some 10 percent in February 2016 without any clear justification. The announcement of these new charges has been very low to avoid any public outcry. 

It said in 2012, electricity tariff was marginally increased by 7.42percent for residents after the first quarter whilst that for non-residents was reduced by an average of 5.26percent to shore up private sector growth.  These rates were maintained for the most part of 2013, before the astronomical increase by 78.9percent (averagely) across board in October 2013. 

The rates were further deepened in 2014 by an average of 28.35percent across board with the basic reason of shielding the existing electricity tariffs against intense depreciation of the cedi. Specifically, electricity tariffs were increased by 9.73percent, 12.09percent and 6.53percent in the first, second and fourth quarter respectively.

In the midst of persistent unreliable power supply, rising inflation and interest rates as well as fast depreciating cedi, the Public Utilities Regulatory Commission (PURC) thought it wise to increase electricity tariffs by 2.63% in the second quarter of 2015 with the basic excuse of assisting service providers to raise funds for maintenance works and avoid an immediate collapse of the distribution network.  

According to the survey, most hotels spend about GhȻ120 daily on electricity, marking an increase from GHȻ 50 spent daily last year. Coupled with exploded water tariffs, high maintenance costs and the latest terrorist attack alerts which has slithered occupancy rate drastically, many hotel managers are considering reduction in work force to stay afloat. 

On the average, the new tariffs consume over 45% of total sales revenue, leaving very low fiscal space for expansion and upgrading to meet global standards. This has compelled many hotel owners to reduce the number of air conditioner rooms and shut down in-house laundering services to cut down operational costs. 

Nevertheless, only 40percent of respondents (hotel managers) have logged complaints with the Electricity Company of Ghana (ECG) whereas the remaining 60percent considers it a waste of time. 

The situation for manufacturing companies in Accra that use the Special Levy Tariff (SLT) meter is no different. The research revealed that some pharmaceutical companies that were paying electricity tariffs within the ranges of GhȻ73,000 to GhȻ80,000 are now paying between GhȻ110,000 to GhȻ125,000 (representing an increase of 52.60percent) with just one-third of last year’s production capacity. 

Some food processing companies that were paying between GhȻ140,000 to GhȻ160,000 in 2015 are now paying between GhȻ200,000 to GhȻ210,000 (equivalent to an rise of 51.43percent) at a reduced production rate. This has increased the accumulation of ECG bills and left many managers bemused about the future prospects of their businesses. 

Interestingly, some rubber product manufacturing companies in Accra have been compelled to reduce production and lay-off contract staff this year to avoid further accumulation of ECG bills. 

A cursory look at their bills reveals that most companies are paying in excess of 13percent as VAT and NHIL, 3.08percent as power factor surcharge and 2.73percent each as government levy and street light charges. 

Given a relatively stable crude oil prices, steady domestic currency and upcoming elections in November, we do not see any further increment in electricity tariffs this year. However, we anticipated in adjustment of utility rates early next year.

GN Research impresses on the PURC, to fast track its investigation into the overbilling by ECG and strictly enforces Rule 15 of the Electricity Supply and Distribution Regulations (2008) (where applicable).

Alternatively, the PURC should consider reviewing the current End User Tariff Categories for consumers and businesses to ease the pressure on household disposable incomes and business profits respectively.