VRA calls for tariff formula

An automatic tariff adjustment formula, which would allow gradual tariff increment, is one of the surest ways in which electricity consumers can get a breather, according to the Volta River Authority (VRA).

Deputy Chief Executive, Engineering and Operation, Kirk Koffi called on the Public Utilities Regulatory Commission (PURC) to apply the formula which is sustainable and economically manageable.

“It must be noted that since the last quarter of 2011, PURC had imposed a freeze on quarterly tariffs adjustments in spite of rapid depreciation of the cedi against the dollar, explosion in fuel costs and large volumes of crude oil purchases, as well as problems associated with natural gas supply from Nigeria.”

Addressing the media at a press conference in Accra to shed light on the recent approved electricity tariff, Mr. Koffi announced that VRA’s total revenue, even with the current increment at 36 percent, stood at $900 million while the authority’s fuel bills alone stood at $1.3 billion creating a deficit of $400 million.

According to him, the approved 36 percent increase barely covers operational and maintenance costs.

“The reality of the situation on the ground is that the current electricity tariff applicable to the VRA covers only part of our cost of operation. Our request to PURC was for a tariff increase of 128 percent, but PURC approved just 36 percent tariff increase for bulk generation.

“This means that we would have to depend on Government support for the difference to enable us operate satisfactorily without any destabilization of the electricity system.”

He disclosed that VRA’s bulk electricity tariff proposal submitted to the PURC was for a bulk tariff increase from 8.4495 pesewas to 19.29 pesewas. However, the new bulk tariff, approved by the PURC, was from 8.4495 pesewas to 11.4900 pesewas, representing an increase of 35.98 percent against the proposed increase of 128 percent.

Mr. Koffi observed that the position of PURC to impose a freeze on quarterly tariff adjustments had contributed to the dramatic electricity increment which has attracted the public outcry, adding that if the formula is put to use, it would prevent such problems in future.

Although the authority sympathized with consumers over the increment, Mr. Koffi stated that the public must be careful not to take any action that would deter private and government investments in the energy sector.

He further stated that the current structure continues to favour the less-privileged, explaining that the first 50 and 150 units are still subsidized and most people use less than 300 units a month. He called on consumers to conserve energy.

That, he said, would not only help consumers reduce their bills but assist the generation system by reducing waste on the demand side. The energy sector is faced with the problem of insufficiency in capacity resulting occasionally in periodic country-wide load-shedding, he noted.

The Deputy Chief Executive however outlined several renewable projects including the development of a 12 megawatt solar power plant, a 150 megawatts wind farm, a 500-600MW thermal plant in Domunli under the WAPP integration projects to augment the existing capacity.

VRA has started exploring alternative gas supply and is holding talks with gas producers in Nigeria and Ghana, including ENI, holders of the Sankofa non-associated gas field. The supplies will complement current sources in Ghana and Nigeria and also stabilize the authority’s operations and electricity supply.