The Africa Centre for Energy Policy (ACEP), in its analysis of recent tariff increases, has cited the failure of the Public Utilities Regulatory Commission (PURC) to hold the utilities to ‘standard costs of capital and operational investments’ as one of the problems that is making the commission somewhat ineffective.

According to the energy think-tank, the commission does not have “authorized costs levels” for certain equipment or activities.

“Even though the law that established the commission empowers it to assess the cost of production of any service by a public utility’ and may ‘investigate and determine whether any expenditure incurred by the public utility is justified or reasonable, there is no evidence that PURC conducts its own due diligence on the integrity of the costs presented to it by the utilities for the purpose of justifying tariff increases.”

In ACEP’s analysis titled, “Higher tariffs for poor quality service or poor quality service for higher tariffs – the dilemma of Ghanaian utility consumers,” Mohammed Amin Adam, Chief Executive of the energy policy think tank, called on the government to reposition PURC to play an effective role.

“Should Government impose a fine on the utilities only for the fine to be passed into operational costs, which consumers are compelled to eventually absorb through another tariff adjustment, sack the Chief Executive Officer (CEO) when the Commission does not have that power; go to the High Court to force the utilities to comply with its decisions when the courts cannot provide the utilities with funds to finance improvements or recommend to the Energy Commission to withdraw the licenses of the utilities, a sanction that is impossible to carry out in an energy deficit country. So what sanctions?”

Real Issues

The demand for electricity at 10% annually is further widened by lack of a reserve margin, he said.

Even at current levels of investment as well as planned investments in generation, we are unlikely to add an annual capacity of more than 600MW to meet demand growth and a reserve margin of 20%.

Mr. Amin Adam said the security of gas supply is seriously under threat as restored gas supply from the West Africa Gas Pipeline does not seem to be moving near the promised relief with average gas supply still astonishingly estimated at 70mmscfd.

“Expected Jubilee gas at a peak of 120mmscfd will only take supply levels to around 200mmscfd. This by far falls short of our demand for gas for electricity generation put at 380mmscfd and is expected to increase further when planned thermal projects are completed and brought on stream.”

He said that the annual investment of US$200 million required by ECG to maintain or improve on its distribution network cannot be guaranteed by the current levels of inefficiency in tariff collection by ECG including government and private debts.

“In spite of the broad use of prepaid meters by government agencies, there are still leakages arising from power theft and illegal connection exacerbating the distribution loss profile. More than US$100 million in revenues is lost to the high distribution losses of ECG.”

Role of consumers

He said that “as major contributors to ECG’s non-technical losses through illegal connection, power theft, meter tampering, etc, private consumers have been giving ECG the justification to request tariff adjustments to cover its inefficiency.”

The PURC, the referee, is blamed by both the utilities and consumers for delaying tariff adjustments and always increasing tariffs without commensurate quality of service respectively.”

Way Forward

Mr. Amin Adam said there should be transparency in the tariff setting process.

He said sanctions regime should be coordinated by PURC and the government so that the government could use the PURC’s performance benchmarks as basis for signing performance contracts with the Board and management members of the utilities.