The Public Utilities Regulatory Commission (PURC), the economic regulator for electricity and water in the Republic of Ghana has announced an increase in electricity tariffs by 18.36 percent across board for all consumer groups.
A statement issued by the PURC on Wednesday, May 17, 2023, and signed by Dr Ishmael Ackah, Executive Secretary of the Commission said the decision follows a review of gas and electricity tariffs.
According to the Commission, the review has become necessary to maintain the real value of cost of supply of the utility services and to ensure that the utility companies do not under- or over-recover costs. While 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 over-recovery unnecessarily overburdens consumers of electricity.
It said the Quarterly Tariff Review mechanism is meant to address the above.
The Commission noted that key variables underlying the rate setting have changed since the announcement of first quarter tariff decision in January this year.
“The weighted average Ghana Cedi/US Dollar exchange rate used for the first quarter tariff review was GHC10.5421 to the US Dollar. Since then, the Ghana Cedi has depreciated against the US Dollar.
“The first quarter tariff decision resulted in a 25% under-recovery of the exchange rate. This has to be recovered in order to ensure that the country does not add to the already mounting debt in the energy sector.
“The projected exchange rate for the second quarter plus the first quarter under-recovery is GHC12.7118 to the US Dollar.
“The Weighted Average Cost of Gas (WACOG) used for the first quarter of 2023 was USD6.0952/MMBtu. For the second quarter, as a result of an increase in price of Nigeria-Gas (N-Gas) and other factors, the applicable WACOG is USD6.5165/MMBtu.
With respect to electricity generation mix, the hydro-thermal mix used for the second quarter is 29.01% for hydro and 70.99% for thermal, as against 26.11% for hydro and 73.89% for thermal used for first quarter of 2023. Hydro allocation of 29.01% helped to reduce the impact of changes in the macroeconomic variables and the WACOG on the tariff.
“The net effect of the Ghana Cedi/US Dollar exchange rate, inflation, WACOG and electricity generation mix is that the utility companies are under-recovering and require an upward adjustment of their rates in order to keep the lights on,’’ the Commission said.
The Commission said it mindful of the current economic circumstances, but notes that the potential for outages (dumsor) is high and this could have strong adverse impact on citizens and businesses.
“This has to be avoided,” it said.
“The Commission therefore decided, after extensive deliberations and analysis, to increase the average end-user tarrif for electricity by 18.36 percent across board for all consumer groups,” the PURC statement said.