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Utility companies want increased tariffs

BY: Della Russel Ocloo
 Ismael Ejekumhene (right), Chairman of the Technical Committee of PURC, moderating the session with the industry players and stakeholders. Picture: DELLA RUSSEL OCLOO
Ismael Ejekumhene (right), Chairman of the Technical Committee of PURC, moderating the session with the industry players and stakeholders. Picture: DELLA RUSSEL OCLOO

Four power utility companies are demanding huge increases in power tariffs due to what they say are debt constraints occasioned by micro economic indicators such as rising inflation and declining foreign exchange rates over a three-year period which has significantly affected their operations.

The operators, namely the Volta River Authority (VRA), Ghana Grid Company (GRIDCo), Electricity Company of Ghana (ECG) and the Northern Electricity Company (NEDCo) believe the demand increases being made followed the three years of accumulation of failed increases which has seen tariffs approved over the period eroding considerably.

While the ECG is proposing a 148 per cent increase, GRIDCo wishes to have a 48 per cent increase, with VRA also proposing 37 per cent.

NEDCo on the other hand, which claimed government owed it in excess of GH¢1billion, is also making a demand of 113 per cent, with Ghana Water Company also making justifications for some 334 per cent increase as a result of what the Managing Director said was some $4.7 billion needed for rehabilitation and capacity enhancement of transmission pumps across several communities in the country as well as recurring expenditure.

The Ghana National Petroleum Corporation (GNPC) and the Ghana Gas Company also made strong arguments on the need for an adjustment in tariffs for the transportation of gas to the power producers.

Forum

The players at a stakeholder consultative meeting, organised by the Public Utilities Regulatory Commission (PURC) in Accra yesterday, maintained that the percentages being demanded would allow for investments to be made into the improvement and expansion of projects.

It would also help them be more efficient and deliver enhanced service delivery.

Members of Civil Society Organisations (CSOs), academia and the media who attended the forum, however, expressed reservations about the demands, stressing that the utilities were not meeting the efficiency benchmark to warrant the percentages being demanded.

Power

Taking turns to justify why they needed the increments to be granted, officials of the various companies stressed that the increases were necessary to expand their operational capacity while offering quality service for water and electricity to household, industrial and commercial consumers.

The ECG, for example, pointed out that the prevailing rate which has been in effect since July 1, 2019 has had a critical operational effect on the procurement of materials, payment to suppliers, execution of projects, among others.

The General Manager in charge of Regulatory Management, Sylvia Noshie, was of the view that the last tariff approved by the PURC for the company saw a reduction of 14 per cent, “thereby affecting the execution of projects and also delaying payments on debts”.

She also pointed out that prices for copper and aluminium which were critical tools in their operations had seen a steep increase on the world market, and the depreciation of the local currency (the Cedi) against major trading currencies ought to influence the decision of the commission to consider the proposals.

Ms Noshie also stressed that if the percentage increase being demanded was granted, ECG would not need to demand huge percentage increases in the next five years, but rather, stick to a 10 per cent demand for the next five years.

Officials of GRIDCo also pointed out that they needed the marginal increases to enable them to invest in the power grid lines.

The Manager in charge of Strategy and Risk Compliance, Mr Samuel Kow Acquah, said that the company had not been able to get funding for their projects due to the low tariffs granted it by PURC at the last major review. “Our expectations are that the ministry will help us with policy directions on financing,” Mr Acquah suggested.

Ghana Water

The Managing Director of Ghana Water, Dr Clifford Braimah, also making a case for his company, pointed out that apart from what was needed to rehabilitate capacity facilities and expand supply, the company owed the government in excess of GH¢6.22 billion as a result of investments made on behalf of the company over the years.

“And we will have wished the PURC will factor this debt component into the tariff increase, considering that the percentage terms translate to GH¢28 from the present GH¢5,” Dr Braimah said.

Citing pollution of water bodies as a result of illegal mining activities which he said had also caused silt into the company’s intake sumps in several communities, Dr Braimah pointed out that a failure by PURC to honour the increase may cause the company to begin to undertake water rationing exercise across the country.

Stakeholders

The CSOs such as the Institute of Economic Affairs (IEA), the African Centre for Energy Policy (ACEP), the Consumer Protection Agency (CPA), among others, were of the view that the posture of the providers made it appear that government and consumers were just throwing money to the problems considering that the efficiency needed was not forthcoming.

The Executive Director of ACEP, Mr Ben Boakye, for example, who engaged some of the players in a heated exchange of views, pointed out that the last tariff approval granted the companies went to worsen the efficiency in delivery particularly on the part of ECG.

“Looking at the charts they have presented, it indicates that they have invested almost $700 million so far, and the former private operator, Power Distribution Services (PDS), was supposed to have invested $5 million in five years, and if ECG has done the $700 million investment within the time frame, where is the efficiency? Mr Boakye questioned.

He said whereas some adjustments were necessary as a result of the high exchange rates which had significantly depreciated the Ghanaian cedi by 32 per cent, it would be important to tweak the investment to make them more functional by addressing the systemic issues.

PURC

The Head of Research at the PURC, Dr Kofi Obutey, said the regulator was collating all the proposals from the service providers and would analyse the figures to be able to advise accordingly.

He said the consultative engagements would continue with all stakeholders for a frank discussion before a final decision was made.

“Whatever it is, when the proposals are thoroughly assessed, the government will have a say in the final decision on the review of the tariffs,” Dr Obutey indicated.