Water, Electricity Tariffs Increased Again
Despite a fairly stable cedi, the Public Utilities Regulatory Commission (PURC) has announced increments in utility tariffs beginning February 1, 2023, in spite of rising economic hardships faced by the citizenry.
The state-owned regulator, in a statement, said the end-user tariff for electricity has been increased by 29.96 percent, while that of water has also seen an upward adjustment by 8.3 percent.
The latest increments come months after a similar announcement was made in last August, when electricity and water tariffs were increased by 27.15% and 21.55% respectively. The implementation of those tariff increments took effect in September, same year.
The announcement yesterday, Monday January 16, 2023, also acknowledged the present economic challenges.
It follows the conclusion of its regulatory process for the quarterly adjustment of utility tariffs covering the first quarter of 2023. The commission said the process is in conformity with the Quarterly Tariff Review Mechanism and Guidelines as communicated in the Commission’s August, 2022 major tariff review decision.
According to the statement, signed by the Executive Secretary, Dr. Ishmael Ackah, the PURC approved the new tariffs very mindful of the current economic circumstances.
“The PURC is equally mindful of the current difficult economic circumstances but notes that the potential for outages would be catastrophic for Ghana and has to be avoided. The PURC, therefore, sought to balance prevention of extended power outages and its deleterious implications on jobs and livelihoods with minimizing the impact of rate increases on consumers.”
“The Commission, therefore, decided to increase the average end-user tariff for electricity by 29.96% across the board for all consumer groups (Table i). The average end-user tariff for water has also been increased by 8.3% (Table 2). The Commission, however, approved varying rate adjustments including some reductions for selected industrial and commercial consumers as part of the ongoing restructuring of the existing water rate structure,” the statement added.
For the end-user electricity tariffs payable by consumers, the PURC said it considered four key factors to arrive at its latest decision.
These were the Ghana Cedi/US Dollar exchange rate, inflation, generation mix and the weighted average cost of natural gas.
“Since the announcement of the major tariff in August 2022, these key variables underlying the rate setting have changed significantly. For example, the weighted average Ghana Cedi/Dollar exchange rate used for the major tariff review was GHS 7.5165 to the US Dollar. Since then, we have witnessed the depreciation of life Cedi against the US Dollar and other major currencies. The projected weighted average Ghana Cedi US Dollar exchange rate used in First Quarter 2023 Tariff Analysis is GHS10.5421/USD,” PURC stressed.
Additionally, the weighted average inflation figure used for the major tariff has seen a four-fold increase.
Together with exchange rate movements, this has negatively affected the ability of the utilities to purchase critical inputs required for their operations.
The Commission used a projected inflation rate of 42.63% in its tariff analysis for the First Quarter of 2023.
“The combined effect of the Cedi/US Dollar exchange rate, inflation and WACOG is that the utility companies are significantly under-recovering and require an upward adjustment of their tariffs in order to keep the lights on and water flowing,” the statement added.
It noted, however, that the potential for a return to the days of erratic power supply was also given due consideration as it would be “catastrophic for Ghana.”
“The Commission therefore decided to increase the average end-user tariff for electricity by 29.96% across the board for all consumer groups. The average end-user tariff for water has also been increased by 8.3%. The Commission however approved varying rates of adjustments including some reductions for selected industrial and commercial consumers as part of the ongoing restructuring of the existing water rate structure,” the release explained.
The PURC further stated that, “The Quarterly Tariff Review Mechanism seeks to track and incorporate changes in key factors used in determining natural gas, electricity, and water tariffs. The objective is to maintain the real value of cost of supply of these utility services and ensure that utility companies do not under- or over-recover.
“Under-recovery has negative implications for the ability of the companies to supply service to consumers, and has the potential of causing outages of electricity (DUMSOR) and water supply. Over-recovery unnecessarily overburdens consumers of electricity and water. The Quarterly Tariff Review Mechanism is meant to ensure that none of these happens.”
“The PURC is grateful to all stakeholders for their support as it continues to implement quarterly tariff reviews in accordance with its Rate Setting Guidelines for Quarterly Review of Natural Gas, Electricity and Water tariffs. In doing so, the Commission will continue to equitably balance the interests of the utility service and consumers and hold service providers to strict adherence to regulatory standards and benchmarks,” the PURC assured.