Recapitalize utilities - ACEP

Executive Director of Africa Centre for Energy Policy (ACEP), Mohammed Amin Adam, says the only option left for the government is to recapitalize the utilities in the apparent regulatory confusion.

He said another possible solution to the current situation would be to appoint competent people to the board and management of utilities and sack incompetent members who fail to deliver.

Recently, the Public Utilities Regulatory Commission (PURC) announced increases of 78.9 per cent and 52 per cent respectively in electricity and water tariffs effective October 1, 2013.

The increment fell short of the 166 per cent and 112 per cent increase correspondingly requested by the electricity and water providers but consumers have expressed infuriation in many ways.

The utilities, especially Electricity Company of Ghana (ECG), have argued that until Ghana obtains cheap but reliable source of fuel (natural gas) and an expanded distribution network, consumers would continue to experience upward tariff adjustments.

In ACEP’s analysis titled, “Higher tariffs for poor quality service or poor quality service for higher tariffs – the dilemma of Ghanaian utility consumers,” Mr. Amin Adam said it beats his imagination how government would ensure that the service providers offer quality service in view of the role of the Public Utilities Regulatory Commission (PURC).”

“What government has not done is to recapitalize the utilities. The funds that have been allocated to the utilities have mainly been used to settle government indebtedness through the clearing house system, but not recapitalization,” he said, adding “therefore equipment breakdown and other short-term financial obligations have been met with short-term financing which have proven to be very expensive for the utilities, hence reducing their rate of return.”

“Government has the onerous responsibility of managing the utilities as owner and the appointing authority. As owner of the utilities, Government must also be concerned about the investment requirements for improving their operations.”

He said it was refreshing to hear that with the exception of ECG, the government does not owe the utilities in unpaid tariffs for the consumption of electricity by public sector agencies, adding that the agencies’ decision to switch to pre-paid meters to eliminate tariff based debts was good.