IES says the cost of power production in Ghana is higher than what consumers pay
The Public Utility Regulatory Commisison (PURC) has been asked to announced the new tariffs approved as soon as possible to help businesses in particular plan ahead.
Energy Think Tank, Institute of Energy Security (IES) that made the recommendation says consumers are well aware PURC has no alternative than to increase tariffs, but are not sure how high that may be hence the need for the announcement to be made ahead of the tariff hikes.
Utility companies like the ECG and the VRA are complaining bitterly about losses being incurred after the forced reduction of tarrifs last year under the directives of President Akufo Addo.
Minority MPs are already hinting, the new PURC tariff adjustment could go as high as 60%. According to Adam Mutawakilu, Minority Spokesman on Energy, the tariff increment is bound to happen because ECG in 2018 accrued a loss of ¢1.1 billion for the first part of the year and is expected to hit ¢2 billion in this year.
Trade union Congress (TUC) had also served notice any adjustment may worsen the plight of workers whose recent 10% salary increase has been swallowed by the high cost of commodities and fuel prices.
But last month, the PURC fought off claims new managers taking over ECG would see to an astronomical increase in electricity tariffs.
PURC Commissioner, Ishmael Agyekumhene, noted that they would regulate the new managers to ensure that no high tariffs were imposed, stressing that “ECG’s losses are around 24 per cent, we only allow 21 per cent so that they will pay the remaining 3 per cent. Where they will find the money to do that, we (PURC) don’t care,” he added.
He told Joy News in an interview that there were regulatory benchmarks to deal with the pricing of power.
However, Mikdad Mohammed, a Research fellow at IES on Monday said on Ete Sen on Radio XYZ 93.1 that the increment was beckoning.
“It’s 80% likely electricity tariffs wil be increased…and this is because we are not paying realistic prices for the power we consume. It will be in order if they announce the tariff increment early so the businesses can make the necessary projections,” he told Piesie Okrah.
He said the cost of power production in Ghana is higher than what consumers pay and explained that “the cost of power production (by ECG) is quoted in dollars (31 Cents per kilowatt) and sold in cedis so when the cedi depreciates, the power producers absorb the shocks which is not the best.”
“The tariff increment will have to happen, and it is not that the system managers are wicked. It’s just that we are not paying realistic prices.”
Factors
Meanwhile the cedi, has started a freefall against the dollar. It is currently trading between 5.25 cedis to 5.4 cedis to the dollar.
It’s a key determinant factor in fixing utility tariffs because of the huge fuel import to power the Thermal Plants.
In December last year, the cedi closed the year at about 4.9 cedis to the dollar after government injected millions of dollars to shore up the local currency.
There are fears, the cedis may comtinue to fall and may soon cross the 5.5 cedi to the dollar mark before mid year and further fall to six cedis by December 2019.
If all these projections happen, power prices will have to go a notch higher, thereby affecting businesses in the country.
