Tariff reduction could take us back to ‘dumsor’ – Bawa
National Democratic Congress Member of Parliament for Bongo, Edward Bawa, has expressed fears that the reduction in electricity tariffs could plunge the country into another power crisis.
Mr. Bawa, who once worked at the Energy Ministry at the peak of the power crisis in the previous NDC administration, believes the reduction compromises the revenue projections for utility providers and power generators thereby exposing them to debt.
“If you look at the challenges that brought us into dumsor, apart from the capacity and fuel security, it also had to do with the financial health of the utilities,” he said on Eyewitness News. “The current move, the reduction is on the energy charges, it is an encroachment on their revenues because energy charges are one of the accruals that the utilities will make.”
In line with longstanding promises from the government, residential customers per the new tariff cuts are to enjoy a 17.5% reduction, while non-residential customers will see tariffs cut by 30%.
Those in the mining sector have also been given a 10% tariff cut, and 25% cut for Special Load Tariff Customers (LV, MV & HV).
The Public Utilities and Regulations Commission (PURC) said the decision was arrived at after extensive consultations with stakeholders in the sector, as well as detailed analysis of proposals tendered in by companies in the power distribution chain.
But Mr. Bawa, who was an energy consultant to the government during Ghana’s energy crisis, said the government was risking energy security in the name of promises.
“I know the factors that took us to dumsor. Those factors are still lingering. My fear is that, if we don’t consolidate a make this system robust, and just because of the fact we want to satisfy electoral promises, we go into situations like this we may expose ourselves to yet another dumsor.”
Reduce taxes instead
Mr. Bawa further argued that the government should be “focusing on the burden it puts on the tariffs in terms of taxes and levies.”
“For example, you have a VAT of 17.5 percent on it. In all these arrangements, the take that goes to the state and the take to the government has not been touched.”
He suggested that the government simply reduce the taxes on the tariff, which will still benefit industry by allowing them to expand because of the reduced energy costs
“Industry will expand, they will make profits; you tax those profits. They expand, they employ people and you still tax incomes. This is how you will get it [revenue]. It is an indirect road but you will eventually get the money. That is the proposal I am making,” Mr. Bawa said.
Bullying from government
Mr. Bawa, had earlier advised PURC not to yield to any pressure from the government to reduce tariffs beyond realistic margins.
Mr. Bawa also encouraged the PURC to withstand what he termed as “bullying” from government and put the interest of the country ahead of political interest with regards to the adjustment of utility tariffs.
The PURC has however insisted that it was not pressured into effecting these reductions, and that such major reviews are done every two years.