Ghana: Increment In Utility Tariffs Needed To Avert Power Crisis—PURC Justifies

The Executive Secretary of the Public Utilities Regulatory Commission (PURC,) Dr. Ishmael Ackah has responded to those criticising the Commission’s decision to increase utility tariffs.

Some individuals and civil society groups have raised concerns about the Commission’s decision to increase electricity and water tariffs by 29.96 per cent and 8.3 per cent respectively.

The increment is effective 1st February 2023.

In a statement issued last Monday, the Commission said it took into consideration four key factors before arriving at the approved tariff for electricity.

It said it considered the Ghana Cedi/US Dollar exchange rate, inflation, generation mix and weighted cost of average cost of natural gas.

The statement explained that since the major tariff in August 2022, these key variables underlying the rate setting have changed significantly.

However, responding to the concerns being raised despite the Commission explaining the basis for the hikes in the utility tariffs, Dr Ishmael Ackah, in a post on Linkedln defended the Commission’s decision to hike electricity and water tariffs.

He said: “PURC does not take delight in increasing tariffs for no reason. We need to balance the need to keep the lights on whilst not burdening the consumer. For instance, we used a conservative exchange rate of 10 cedis to a dollar and inflation of 42 per cent. These are to help reduce the rate of increase whilst helping the utilities to stay afloat.

“Please let us guide against misinformation,” Dr. Ackah advised.

 Below is the response Dr Ackah shared on LinkedIn:

The Quarterly Adjustment

Personal Note

PURC does not take delight in increasing tariffs for no reason. We need to balance the need to keep the lights on whilst not burdening the consumer. For instance, we used a conservative exchange rate of 10 cedis to a Dollar and inflation of 42 per cent. These are to help reduce the rate of increase whilst helping the utilities to stay afloat.

1. 1. Four main factors were used in the tariff adjustment.

The exchange rate contributed about 65%.

The remaining 3 factors- inflation, energy mix (hydro-thermal mix) and cost of natural gas contributed about 35%.

We looked at the differences between the values of these variables at the last adjustment and projected for the next quarter. That is actual values for the current quarter plus a forecast of the next quarter.

2. Hydro

There are four dynamics.

(i) We have the legacy hydro versus other hydro sources

1. On the legacy hydro, 18(l)(h) of Electricity Regulations, 2008, LL 1937 mandates the Electricity Market Oversight Panel (EMOP) Regulation to determine/approve the allocation based on a formula.

(iii). The legacy hydro is shared among:

(a) Ghana Water Company Limited

(b) Valco

(c) Regulated market (which PURC uses)

(d) Other Deregulated market (mines, export etc)

The projected electricity supply from the legacy hydro is 6,800 GWh. Out of this, what goes to the regulated market is 4,617.01 GWh (67.9%) (What was used for the tariff). So not all the hydro generation come into the regulated market.

The figures show a potential decline of both Bui and Akosombo since November 2022.

Please let us guide against misinformation.

The guidelines have been published (https://lnkd.in/dVcJad77). We have engaged the media and CSOs on this. The Gazette will be published by next week. We will continue to engage as we build sustainable energy and water sectors.