Ghanaians To Pay More For Electricity

The Electricity Company of Ghana (ECG) has proposed a 310% upward adjustment in electricity tariffs, to reflect the current value of the cedi, provide for recovery of cost of project investments as well as a system for losses in the distribution service charge. The increase is also to meet the cost of debt service of the company's loans estimated at ?195 billion.

The Director of Finance of ECG, Mr. Christian Sowah Tetteh announced this at a public hearing to discuss the proposals for new tariffs being demanded by ECG and the Volta River Authority (VRA), convened by the Public Utility Regulatory Commission (PURC). The forum was attended by executives of the various utility companies, representatives of trade unions and consumer organisations.

Making a case for the increase, the ECG says it is taking after the VRA's proposal for an increment in the existing Bulk Supply Tariff rate of ?95/KWh approved by the PURC in 1998 to ?432/KWh. And in line with the above, the ECG wants its distribution service charge to go up from ?192/KWh to ?356/KWh. According to Mr. Tetteh, even if the new tariff is approved with effect from 1st March to December 2001, the company is still heading for a loss of about ?16 billion, just as it is expecting a loss of about ?480 billion for last year.

Thus continuing with its poor performance of ?780 million loss in 1998 and ?59.099 billion in 1999, due to inadequate tariff. Under the proposed tariff, consumers within the lifeline block of 0-50, will pay ?25,000 instead of the present charge of ?4,000. However, the representative of the Trades Union Congress (TUC), Mr. Joseph Yaw Atopley pointed out that the ECG was not justified in demanding for tariff increases since it has not done much about cost control, revenue collection and overall efficiency.

Besides, he said, the company has to assess its increase against the low pay pocket of the ordinary Ghanaian, recent increase in petrol prices, depreciation of the cedi and expected increases in other utilities. Mr. Tetteh, also asked that to sustain the supply of power, there should be a consistent upwards adjustment of tariff periodically to reflect the distribution service charge. Accordingly, the company will need to invest about $30 million each year over a period of five years.

"If we want the system to work, then we need to pay more," Tetteh underscored. Justifying the expenditure of the company, he catalogued how ECG spent the revenue which accrued from the 300% 1998 tariff increment to improve the quality of its service; such as replacement of underground cables, transformers, connecting 335 towns to the national electricity grid as well as setting up customer service points. The introduction of the pre-paid metering was identified as the most effective way of solving the hydra problem of tariff collection, but the cost has been a disincentive to its use in all parts of the country, which ECG hopes to surmount.

To one consumer, Mohammed Salia, the ECG should declare its agenda in asking for tariff increase, because the usual argument of improving its services is untenable, since no improvement is ever recorded in their service, considering the perennial issues of consistent unannounced power outages, over billing, poor client-customer relations among others.

Soliciting the public sympathy for the increment, the Chief Executive of VRA, Mr. Gilbert Dokyi, said the Authority has the capacity to meet the demand for electricity in full, but what is required is sufficient income to meet the operating requirement generation of power from the Akosombo and Kpong hydro plants, supplemented by the Takoradi thermal power station. He lamented that the existing tariff of ?95/KWh approved in 1998, is inadequate for the recovery of the cost of generating hydro power, which is the cheapest, in full. "Consequently, the Authority has been incurring heavy and increasing losses since 1998. The losses were ?105.2 billion and ?283.2 billion in 1998 and 1999 respectively.

The loss in 2000 is expected to exceed ?850 billion. The Authority is, therefore, currently facing severe cash-flow deficit, as our revenues are not able to cover our costs in full," the Chief Executive pointed out. The Authority is currently indebted to various local banks, Cote d'Ivoire that supply power to Ghana and its joint venture partners. Mr. Dokyi stressed that new tariff is needed to expand the generating system to meet the increasing annual 10% domestic demand.

It is also committed to its contractual obligations to Valco, Togo and Benin in full. Within the next six years, the VRA will construct a 330 Mgw Thermal plant to be cited at Tema and the Bui hydro plant, according to its Finance Director, Mr. Joshua Ofedie. The Ghana Chamber of Mines, mindful of the upsets it is currently suffering due to the fallen price of its product, especially the gold sector, opposed the increase.

"The proposed increase will aggravate the gloomy situation facing the mining industry," it argued. The Chamber was not also pleased with the calculations of VRA that arrived at the proposed new tariff, where its social responsibility costs, in areas of services provided to communities and towns within its catchment areas are passed unto the consumers.

The Chairman of the PURC, Nana Dr S. K. B. Asante, who presided over the function, agreed to the request of the Private Enterprise Foundation and the Chamber of Mines to have another session with them to discuss the calculations and figures provided by VRA. Providing a balance between protecting the interest of both consumers and investors and ensuring the financial integrity of the utilities, the Commission proposes economic tariffs in the future.

Before then, a workshop is expected to be held soon for stakeholders for the adoption and implementation of the plan. Under it, consumers would be given ample time to adjust to the economic tariffs while at the same time enabling the utilities to recover their cost.

"The plan aims at moving tariffs to economic rates in the near future without imposing undue financial burden on all classes of customers; giving customers ample time to adjust to the economic tariffs and simultaneously enabling the utilities to recover their cost, earn reasonable return while ensuring that charges that pass through to customers do not contain inefficiencies." Nana acknowledged that during the transitional period, the utilities would face some financial difficulties.