Ghana: PURC Assumptions On Energy Mix Generation For 2023 Tariff Review Is Baseless-IES

The Institute for Energy Security (IES) has received news of tariff review by the Public Utility Regulatory Authority (PURC).

The review captured in the PURC statement released on 16^th January, has stated the effects of the Cedi depreciation, Inflation rates, Generation mix and the Weighted Average Cost of Gas (WACOG) as the factors which informed the end-user tariff increment by 29.96% for electricity for all consumer groups.

The IES is concerned in particular about the assumption used in establishing the new electricity tariffs beginning 1^st February, 2023.

On the four key variables, the IES believe the rates for Cedi/Dollar exchange rate and inflation rates reflects market conditions.

The IES however considers the assumption used by the PURC on the electricity generation mix of 26.11% hydro and 73.89% thermal as baseless.

That assumption amounts to given priority to thermal power generation over hydro, given that water elevations for Bui and Akosombo generating stations (GS) have improved, and capable of producing close to 38% of power in 2023, in IES’ estimation.

Data from Akosombo and Bui indicate elevations at the beginning of 2023 compared to previous years are in a better position to produce more electricity than the thermals.

Bui’s water elevation is expected to help produce more megawatts to meet increasing electricity demand at particularly peak hours, and extended megawatts to support voltage on the grid and help reduce transmission losses, if dispatched conservatively throughout the year.

The Institute agrees with the expectation that bulk of the capacity generation for 2023 would come from thermal sources if natural gas supply is sustained, and planned plant maintenance schedules is strictly adhered to.

However, with improved water-head levels, hydropower generation is estimated to produce close to 38% of 2023 capacity, should hydro-electric have dispatch priority over thermal in the generation mix.

With a year-start Akosombo water level elevation of 83.10 metres (272.66 feet), it is estimated that total energy production from Akosombo GS could fall between 7,500 and 8,000 gigawatt hours (GWh) for 2023, with the Kpong GS producing roughly 990 GWh of electric energy over the period.

Also, Bui GS’ year-start elevation of 178.99 metres above sea level (masl) is enough to possibly produce an estimated 1,056 GWh of electricity in 2023.

Although the IES has anticipated that the average electricity end-user tariff (GH₵/kWh) covering residential, non-residential and special load tariff electricity consumers would see an increase within the year, the expected increase in tariff was anticipated to be marginal should more of hydro-electric power be produce from the generation mix.

IES therefore calls on the PURC to reconsider the energy mix assumption used in the tariff adjustment (to reflect improved water-head levels) as that has an impact on the Weighted Average Cost of Gas, which has been reviewed to $6.0952/MMBtu from $5.9060MMBtu. This, the IES believe will bring down the 29.96% tariff increase for all electricity consumer groups, thus introducing some relief to the already burdened citizens, in the face of the current economic crisis.

Should the PURC decide to maintain the 26.11% hydro-thermal and 73.89% thermal electricity generation mix for 2023 as the basis for the high tariff increment, that position would amount to promoting inefficiency and deliberately burdening the Ghanaian with high electricity cost.

Source: IES