PURC: New utility tariff due in days, Industry to no longer subsidize residential consumers

BY: Maclean Kwofi
New utility tariff due in days, Industry to no longer subsidize residential consumers - PURC
Executive Secretary of PURC, Dr Ishmael Ackah

The Public Utilities Regulatory Commission (PURC) says all is set for the announcement of new utility tariffs for consumers of electricity and water in the coming days of this month (August).

The 2022 to 2027 multi-year major tariff announcement was expected to be announced in June 2022.

But the PURC deferred it for further and broader consultation process to solicit for more independent views, independent verification of submitted projects and deeper consultations with key stakeholders across the country.

That nationwide consultations by the commission on the proposals from the utility companies are now over, and the PURC is set to announce the new tariffs.

When announced, it will be the first tariff adjustment since 2017.

SMEs to be supported with new tariffs

The Executive Secretary of PURC, Dr Ishmael Ackah, at a press soiree in Accra on Friday (August 12, 2022) observed that the new tariff would be used to support businesses especially those in the small and medium enterprises (SMEs) space.

“All stakeholders have been consulted, the commission is finalising and in the next few days the new tariff will be announced.

“This year’s tariff will be business friendly especially for hairdressers and barbers and other firms in the SMEs space,” he said.

Industry to no longer subsidise residential consumers

He noted that the 2022 tariff also seeks to gradually reverse the structure of the country’s utility tariff where industry subsidizes residential consumers.

“We currently have a situation where industry pays higher tariffs than domestic users. This is because we have a cross subsidy inbuilt in the tariff structure,” he said.

As a result, the Executive Secretary stated that PURC had reduced the cross subsidy and was gradually reserving the system where industries subsidise domestic users.

He said this would make the industrial sector more competitive, enhance operations and create jobs for the unemployed.

Presented 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).

Punitive tariff bands

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.

Graphic Online gathers the new tariffs adjustment may be around 20 to 25 per cent.

Read also: Trends in electricity tariffs in Ghana between 2010 and 2020