The Public Utilities and Regulatory Commission has announced that utility tariffs will go up on 1st February, 2023.
Despite admitting the current economic challenges, the PURC said electricity will go up by 29.96 percent while water will see an upward adjustment by 8.3 percent.
“The PURC is equally mindful of the current difficult economic circumstances but notes that the potential for outages would be catastrophic for Ghana and has to be avoided. The PURC, therefore, sought to balance prevention of extended power outages and its deleterious implications on jobs and livelihoods with minimizing the impact of rate increases on consumers” the PURC explained in a statement issued on Monday, January 16.
“The Commission, therefore, decided to increase the average end-user tariff for electricity by 29.96% across the board for all consumer groups (Table i). The average end-user tariff for water has also been increased by 8.3% (Table 2). The Commission, however, approved varying rate adjustments including some reductions for selected industrial and commercial consumers as part of the ongoing restructuring of the existing water rate structure”, the statement added.
Justifying the decision to okay the impending utility adjustment, the commission said it considered four key factors for the end-user electricity tariffs payable by consumers.
These were the Ghana Cedi/US Dollar exchange rate, inflation, generation mix and the weighted average cost of natural gas.
“Since the announcement of the major tariff in August 2022, these key variables underlying the rate setting have changed significantly. For example, the weighted average Ghana Cedi/Dollar exchange rate used for the major tariff review was GHS 7.5165 to the US Dollar. Since then, we have witnessed the depreciation of life Cedi against the US Dollar and other major currencies. The projected weighted average Ghana Cedi US Dollar exchange rate used in First Quarter 2023 Tariff Analysis is GHS10.5421/USD”, it further explained.
Additionally, the weighted average inflation figure used for the major tariff has seen a four-fold increase.
Together with exchange rate movements, this has negatively affected the ability of the utilities to purchase critical inputs required for their operations.
The Commission used a projected inflation rate of 42.63% in its tariff analysis for the First Quarter of 2023.
“The combined effect of the Cedi/US Dollar exchange rate, inflation and WACOG is that the utility companies are significantly under-recovering and require an upward adjustment of their tariffs in order to keep the lights on and water flowing”, the statement added.