Beyond Higher Utility Tariffs

Predictably, the Public Utilities Regulatory Commission (PURC) has granted the request by the Electricity Company of Ghana (ECG) and the Ghana Water Company (GWC) to raise their tariffs.

The 35.0% hike in electricity and water prices represented only an “initial tariff decision”, according to the PURC. This means that more hikes are likely any time soon. It will all depend on when the PURC completes its own “in-depth review and analyses of the cost structure of the utilities and their proposals,” as the Commission put it in a press release on October 19, 2007.

But whatever the PURC comes up with, one thing is certain: To make the utilities effective, efficient, and responsive to the needs of their customers, we need extensive institutional reforms, starting with the PURC itself and running through ECG and GWC, along with behavioural changes among consumers.

By law, the PURC is supposed to be an impartial arbiter of consumer and service- provider interests; in practice, judging by the public comments of its chairman, it seems more like a spokesperson for the utilities, always justifying why they need higher tariffs and paying scant attention to consumer welfare. We need a professional and impartial PURC.

The Commission’s stance on energy policy, as articulated by its chairman, also seems to be more punitive, even vindictive, than facilitatory and progressive. It is true, for example, that some hotels unwisely keep empty fridges in guest rooms, needlessly raising their own business costs and wasting electricity.

The solution to this problem is not to raise tariffs, ostensibly to teach them a lesson when in fact it is the larger population which suffers. The proper and sensible thing to do is to educate them on best business practice, including energy-efficiency fridges and the possibility of having ice makers for general use rather than a fridge per room.

Lastly, the Commission’s chairman should stop making public pronouncements on the propriety or otherwise of subsidies (the chairman of the National Petroleum Authority (NPA) also does that). PURC (nay NPA) is a technocracy, not a political outfit, and it should remain so. Subsidies are political issues – sensitive and contestable – between the electorate and our elected leaders, not technocrats. It should remain so.

With respect to the utilities, it is clear that the “efficiency measures” that the Government told the IMF in 2004 were “already underway” have not been under way after all. Clearly, something ought to be done. What follows is just a scattershot of suggestions: :

• To help reduce waste (through theft and technical losses), both ECG and GWC should set-up hi-tech hotlines to which anyone anywhere in Ghana can report cases of theft and loss. ECG’s hotline may be as simple as 1111 with GWC’s being 2222 – both easy to remember. It must have roll-over technology, which ensures that neither line is ever “engaged” – unless there is a major crisis when many people call in at once. The system must be professionally manned from, say, 8:00AM to 8:00PM, with provisions made for life-threatening emergency calls to be taken 24 hours around the clock under a skeletal crew of one or two people.

The heart of the system would be a computerised fool-proof “ledger” that, among other things, details time and dates of calls, the nature of complaints, and how they were dealt with (such as the number of prosecutions, fines and jail sentences for illegal connectors). To minimise the risk of abuse, the actual computerised ledger must be located at the respective sector ministries of the utilities, with a “clone” at the Ministry of Finance, which allows the Ministry as the keeper of the nation’s finance to conduct “snap checks” at the touch of a computer key. Random audits by central government may be conducted to validate and ensure the continued integrity of the system. • The preceding suggestions constitute back-end reforms; we also need front-end reforms to improve customer service and ultimately enhance cash flow for the utilities. The two utilities should adopt an Easy Does It (EDI) programme to make for ease of bills payment and the acquisition of new metres, for example. While the current arrangement with some commercial banks for bills payments is commendable, it is limited by the fact that only a fraction of the Ghanaian population deal with banks. Alternatives may include the following: Increasing opening hours (to 7:00 PM, say) to give office workers enough time to settle their bills after work; and payment of bills through their mobile phones (Busy Internet already uses this technology for its home dial-up customers to top up their accounts without going to Busy every time they run out of credit). Once the EDI is in place, the utilities should give customers a grace period for settling their bills, beyond which the bills would attract pro-rated penalties that grow bigger the longer the bills remain unpaid. This should enhance revenue mobilisation. • Both utilities must be required to publish quarterly accounts of their activities. This should comprise “financial reports,” outlining costs and expenditures for the respective quarters, including procurements participants and outcomes, as well as “management reports” that would detail monthly breakdowns of major activities such as the number of arrests and prosecutions for illegal connections; trends in and nature of arrears; waiting time for issuing new metres; as well as frequency of service interruptions and measures being taken to improve them. Broadly, the management reports must disclose progress in managerial and technical innovation and how they are contributing to overall efficiency.

Proposals for ECG: • The distribution of energy-saving bulbs by government, while well-intentioned, is misguided and ultimately unsustainable. (Would the government replace these bulbs every time they burn out?) Let government instead reduce or abolish the import taxes on the energy-saving bulbs and raise taxes on the incandescent bulbs to the point where the energy-saving bulbs are cheaper. As people would buy bulbs anyway, they will naturally buy the cheaper ones and an important policy objective would have been attained with the minimum of government interference and the risk of corruption. • Energy-saving bulbs alone will not provide a lasting solution to our energy crisis; a comprehensive educational campaign, similar to the Bank of Ghana’s re-denomination campaign, will do. In this regard, the VRA, ECG, and the Energy Commission should share the enormous amount of energy-conservation tips that they have assembled but have so far not shared with the public. Special attention may be paid to the use of automatic sensors that turn lights on and off according to time of day or motion (in the case of hotels). Businesses and other institutions, such as schools, must be required to fit their premises with these sensors. Anyone who has travelled through the University of Ghana during the day and seen outdoor lights on from the hospital staff’s residences to the hospital itself to the campus proper would appreciate the need for such devices. They will save us energy – and money.

Proposals for GWC: • Seek legislation to make rain-water harvesting mandatory for households and businesses. Common sense dictates that we do this. • Promote other forms of water conservation, such as the mandatory phasing out of water-inefficient cisterns as the construction industry expands. Taks the Water Resources Commission and KNUST to devise simple and affordable technologies for commercial and household recycling of water (“grey water”). When Germany wanted to make cars affordable for ordinary people, the government simply charged a bunch of scientists to develop such cars in the shortest possible car. The result was Volks Wagon (which in German means “People’s Car,”). The rest, as they say, is history.

Proposals for Government:

Besides illegal connections, government arrears constitute the second biggest source of financial distress to the utilities. This is not hard to fathom, as most government officials get these utilities for free, with no incentives to conserve. Perhaps, it’s time to impose some charge, from the presidency on down to the lowest ranking public official living in free housing.

For public offices, we may have to introduce Conservation Marshalls for each Ministry, Department and Agency (MDA) and well as Metropolitan, Municipal, and District Assemblies (MMDAs). With the assistance of the relevant sector ministries, these marshalls will study the importance and techniques of conservation and return to their offices not only to spread the word (through workshops, for example) but actually have the responsibility of monitoring. The Ministry for Public Sector Reform may be given the overall responsibility for these marshalls, including snap inspections of government premises to ensure compliance.

Proposals for the public:

Ultimately, behavioural change holds the key to a sustainable conservation policy for both energy and water. But such change cannot come about without extensive public education by the various public organisations with the responsibility for doing that. (I have just learned, for example, that keeping your air conditioner at about 25 degrees would save about a quarter of the energy you would have used if it was set at a lower degree).

The back of every utility bill should include energy and water conservation tips. Similarly, conservation pamphlets may be distributed occasionally in churches, schools and banks. The possibilities for effective public education are endless. Let us explore them..