TUC, ECG clash over tariffs for 2019

The Trades Union Congress (TUC) and the Electricity Company of Ghana (ECG) have put the Public Utility Regulatory Commission (PURC) in a tight corner.

While ECG is asking for 37.6 per cent increase in tariffs for 2019, TUC is demanding a reduction of 15 per cent for the same period.

The TUC asserted that the previous reduction in electricity resulted in significant growth of the economy hence their demand for further reduction in 2019.

“We believe that the reduction in tariffs played a significant role in the growth of the economy. It is against this backdrop that we make the following proposals for the consideration of PURC in the review of tariffs for 2019,” a statement by TUC demanded.

The Union is also demanding 12 per cent reduction in water tariff for next year.

ECG argues that the proposed increase is necessary to cover the losses it is making on electricity sales under the current tariff structure which has been in effect since April this year.

But, TUC in its statement christened ‘Proposal for Tariff Review’ and submitted to the PURC, outlined five key reasons to support their request for reduction in tariffs.

Efficiency

According to the TUC, there were still inefficiencies in the utility sector that are being passed on to consumers.

It therefore demanded the PURC to attach more weight to ensuring prudent and efficient costs of the operations of the utility companies.

“We expect PURC to provide consumers with its regulatory benchmarks for efficiency to convince us that the operational costs of utility companies are in line with the standards of best practice,” the TUC demanded.

Consumers should not pay for excess Capacity of IPPs

The TUC statement also touched on the issue of excess capacity of Independent Power Producers (IPPs) which the Union lamented was unfair for consumers to be forced to pay for the cost of electricity that is as a result of bad policies in the power sector.

“It is very unfair to pass on the cost of excess capacity to consumers, especially working people, whose wages and salaries do not match the rate of increase of electricity tariffs.

“Government has promised to review the Power Purchase Agreements (PPAs). But we are not aware of any practical steps toward the review of the PPAs most of which were signed under emergency conditions that can hardly pass the transparency and ‘value for money’ tests,” the Union added.

Lifeline and cross subsidies

A Tariff Study conducted by Fitchner Management Consulting which was funded by the Millennium Challenge Cooperation (MCC) and Millennium Development Authority (MDA) recommended that the four consumption blocks of the residential customers should be reduced to two consumption blocks of 0-50kWh and 51kWh.

TUC fears 400% increase in tariffs for small residential customers

The TUC however argues that a review of the tariff structure to levels that can be considered “cost reflective”, as recommended by the Fitchner Report, can lead to over 400% increase in tariffs for small residential customers from GH¢0.39/kWh to GH¢1.97/kWh, as a result of the removal of cross-subsidies.

“We would like to advise PURC to ignore this recommendation because if tariffs are increased to such levels it could lead to social unrest,” the statement indicated.

ECG Concession

The TUC further cautioned against the tariff hikes as a result of the ECG concession to take effect from February 2019.

The Government of Ghana, Power Distribution Services of Ghana Limited and Electricity Company of Ghana (ECG) have signed transaction agreements which have been ratified by Parliament. Under the agreement, the status of ECG as an electricity distribution company would change to asset owner and a bulk energy trader from February 1, 2019.

“Consumers are yet to be informed of the effects of such major policy change in the electricity distribution on electricity tariff. We urge PURC to ensure that this arrangement will not lead to higher tariffs,” it stated.

Befesa Desalination Plant

On water tariff, the TUC warned against the passing onto consumers the cost of operating the Befesa Desalination Plant.

The Befesa Desalination Plant is a Water Purchase Agreement which was commissioned in 2015 on the basis of a Build, Own, Operate, Transfer (BOOT) between the Ghana Water Company Limited (GWCL) and Befesa Desalination Development Ghana Limited.

According to the TUC, it has since become a big financial drain on the Ghana Water Company Limited, describing it as “an albatross which is draining the GWCL of $1.42 million every month in capacity charge alone.”

Previous tariff reduction

It would be recalled that the PURC had earlier this year reduced electricity tariffs by 17.5 per cent for residential customers, 30 per cent for non-residential customers, 25 per cent for special load tariff customers, and 10 per cent for the mining companies.

According to the PURC, the main factors that had informed the reduction then were: as a response to consumer interest, investor interest, economic development, and revenue requirement.

The other reasons given by the Commission were falling natural gas prices, re-negotiation of Power Purchase Agreements (PPAs), among others.