The Public Utilities Regulatory Commission (PURC) has approved a 27.15 per cent increase in electricity and 21.55 per cent increase in water.
The new tariffs take effect September 1, 2022.
The PURC announced this Monday morning.
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PUBLIC UTILITIES REGULATORY COMMISSION
2022-2025 MULTI-YEAR MAJOR TARIFF REVIEW
FOR NATURAL GAS, ELECTRICITY AND WATER SERVICES
The Public Utilities Regulatory Commission (PURC), has concluded its regulatory process for the examination and approval of utility tariffs covering the period 2022 to 2025.
The tariff review process commenced with the receipt of proposals from the following Utility Service Providers: Volta River Authority (VRA), Ghana National Gas Company (GNGC), Ghana Grid Company Limited (GRIDCo), Electricity Company of Ghana (ECG), Northern Electricity Distribution Company (NEDCo), Enclave Power Company (EPC) and Ghana Water Company Limited (GWCL). The Commission also received proposals from Ghana National Petroleum Corporation (GNPC) in respect of projected natural gas volumes and tariffs by gas supply sources.
As has been the practice, the PURC undertook extensive stakeholder consultations, which afforded the utility service providers the opportunity to explain their proposals to the general public and key interest groups such as the Association of Ghana Industries (AGI) and the Trades Union Congress (TUC).
The tariff decisions for the period 2022-2025 have been informed by rigorous analyses, intense debates, and extensive consultations. The last major review of tariffs was done in 2018 which resulted in an 17.5% reduction for residential and 30% for non-residential in electricity tariff. Since then, key macroeconomic variables have deteriorated, particularly since 2020. These have adverse implications on the ability of utilities to keep the lights on and water flowing.
The companies requested for very astronomical increases with GWCL demanding over 300% increase in end-user tariffs. ECG and NEDCo proposed 148% and 113% increases respectively. VRA and GRIDCo proposed 37% and 48% increment respectively. After receiving these proposals, the Commission carried out rigorous regulatory audit of processes and assets of Utility Service Providers, enabling it to adjust the Weighted Average Cost of Gas (WACOG) for power generation and end-user tariffs for electricity and water. The details are summarized in Table-1 (for Natural Gas), Table-2 (for electricity and Table-3 for water).
In approving the Weighted Average Cost of Gas (WACOG) for the regulated period (2022-2025), the Commission considered, GNPC’s projected gas volumes by gas source and tariffs as well as projected gas supply volumes and tariffs by N-Gas. For Gas Gathering, Processing and Transmission Service Charges, the Commission took into consideration financing, investment and operational costs as well as condensates and liquids revenue receipts by GNGC.
For the end-user electricity tariffs/rates payable by consumers (Table-2), the Commission considered a number of factors. These include the cost of power which is influenced by growth in demand, Weighted Average Cost of Gas (WACOG), inflation and the Ghana Cedi/US Dollar Exchange Rate. Other factors include network upgrade/expansion and investments, operation and maintenance of service delivery infrastructure as well as financial viability of the Utility Service Providers. Most importantly, the Commission was guided in its decision by the supreme interests of consumers and the general economic conditions prevailing in the country.
The Commission gave considerable thought to the role of small and medium scale enterprises in the country’s economic development, in particular, the creation and/or preservation of jobs and livelihoods. The existing tariff is structured in a manner that slaps industry with punitive tariffs in order to subsidize residential consumers of electricity. This structure has contributed to loss of competitiveness of Ghanaian industry including small and medium size household enterprises. The implications for jobs and the general welfare of residential consumers is adverse and obvious.
To address the challenge, for the first time, industry including, small and medium scale business owners of Hairdressing and Beauty Parlours/Salons, Barbering Shops, Tailoring and Dress Making Shops, Welding, Mechanics, Cold stores, Chop bars, Vulcanising and Carpentry Workshops among others will now pay lower tariffs than the residential consumer class. This is to address the high electricity cost for industrial customers which has been repeatedly identified in the AGI Business Barometer as the key challenge affecting the competitiveness of Ghanaian industry in the global market place. The objective here is to support industry to expand and enhance its ability to generate decent employment. This tariff decision is a first step in a gradual process to invert the tariff structure over the next few years in support of the industrialisation programme of government.
For water (Table-3), the Commission took cognisance of the cost of electricity, increased volume/cost of chemicals for raw water treatment, the Ghana Cedi/US Dollar exchange rate, inflation, infrastructure upgrade/expansion and, operation and maintenance of service delivery as well as financial viability of GWCL.
In balancing the interests of service providers and consumers, the PURC acknowledged that the very economic variables that have occasioned the steep increases proposed by the service providers also affect consumers. The Commission admitted, however, that some level of increases in utility tariffs were inevitable if the nation was to avoid another dumsor and its attendant effects including job losses. The Commission therefore decided to increase the average end-user tariff for electricity by 27.15% and water by 21.55% effective 1st September, 2022. These rates, in view of the Commission, are sensitive and responsive to the positions of all stakeholders in the utility space in line with sections 3(c) of PURC Act 1997 (Act 538).
The PURC is grateful to all stakeholders for their participation and inputs into the tariff approval process. The Commission will continue to monitor the operations of the Utility Service Providers to ensure value for money and quality of service delivery. After this major Tariff Review, the Commission will implement its Quarterly Tariff Review in line with its Rate Setting Guidelines for Quarterly Review of Natural Gas, Electricity and Water Tariffs.
The details of the Commission's tariff decision will be published in the gazette in due course and will be available on the Commission's website: www.purc.com.gh
Dr. Ishmael Ackah
Public Utilities Regulatory Commission