Friday, 17 November 2017

Energy experts take on gov’t over tariff cut proposal

Adnan Adams Mohammed

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Reading the 2018 budget, the finance minister, Mr. Ken Ofori-Atta announced that government will be reducing electricity tariff between 13 to 21 percent beginning next year.

‘’Mr. Speaker, during the 2016 election campaign, H.E. the President, Nana Addo Dankwa Akufo-Addo, promised Ghanaians that with prudent management of the economy, the NPP government would ensure that electricity tariffs are reduced. In fulfillment of this promise, government has reviewed the tariff setting methodology and cost structure of power production. This review has resulted in recommendations that will be made to the PURC for consideration.’’ He noted.

The reductions in electricity tariff as contained in the 2018 budget are; Residential – Up to 13%, Nonresidential – 13%, Special Load Tariff-Low Voltage – 13% ,Special Load Tariff -Medium Voltage – 11%, Special Load Tariff -High Voltage – 14%, High Voltage Mines – 21%.

The new tariff cuts are however subject to approval by the Public Utility Regulatory Commission (PURC)

However, the Executive Director of Policy Think Tank, the African Centre for Energy (ACEP), Benjamin Boakye has asked government to clarify the details that informed the proposed reduction in the electricity tariffs.

“Tariffs in Ghana are extremely high and ought to come down, but the fundamentals will have to be checked to ensure that we are not going to put the institutions in distress. We know that the losses are high so you have to put some mechanisms in place to reduce the losses so we can pass on the relief to consumers.

“We haven’t seen that happen immediately and so we don’t know how that reduction is going to come about. It will be good to see what is informing reduction at this point.

“If it’s out of some negotiations they have had with the generators to cut down some cost and therefore, they are able to pass on that relief to consumers, that will be good news.

“But we now know the numbers of the quantum of reduction that is going to come but we don’t know how that reduction is coming about. And that is what is important for Analysts like us so that we can interrogate the numbers and project where the implications are on the sector.”

Similarly, former Chief Executive Officer (CEO) of the Volta River Authority (VRA), Dr. Charles Wereko-Brobby, has accused the government of trying to usurp the mandate of the Public Utilities Regulatory Commission (PURC), by announcing an average reduction of between 13 and 21 percent in electricity tariffs for residential and industrial consumers.
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In an interview, Dr. Wereko-Brobby, described this move by government as “extremely inappropriate,” adding that the government cannot make a recommendation to the PURC on possible cuts in utility costs as the Commission had the sole mandate of setting the tariffs.

“The idea that government should recommend specific numbers for tariffs is extremely inappropriate. Since 1997, we’ve had the PURC whose job it is to determine the methodology and the applicable rates, and also undertake three-monthly reviews of the tariffs in line with the changing circumstances such as price of fuel and the types of fuel mix that are being used by various generators, and the tariffs that are paid to the various generators.

“That is the sole purview of the PURC, and absolutely no government has got any right to recommend, let alone be specific about what reductions it should apply,” he said.

According to him, government could make proposals to the regulatory body about a possible reduction in the tariffs, citing possible changes in the cost of production.
He added however, that the final say on any adjustment of the tariffs should come from the PURC devoid of any pressure from the government.

“If circumstances have changed, and for example, government has been able to negotiate contracts with IPPs which have made the cost of producing power cheaper, it is incumbent on the government to draw the attention of the PURC to these changes in prices, and it must do so through the utilities who have got the actual contracts with the IPPs for the production of power. PURC will take a look at all this new information and make the necessary adjustments. But it is not up the government to say that they have changed the tariff setting mechanism and have collapsed the three bands into two. That is strictly not government’s business,” he argued.
“[Governments] are not supposed to make recommendations, if you make recommendations to the PURC, you don’t announce them in the budget. Proposals can be made to the PURC.”

‘In providing relief to the poor, who consume within the lifeline subsidies, but are likely to be living in compound houses, thus robbing of them such benefits, the current 4-tier tariff classification for residential consumers “will be collapsed into lifeline and non-lifeline consumers in phases,” Mr. Ofori Atta said.

Lifeline users currently pay 33.56 pesewas per kilowatt hour in addition to the 633.17 pesewas service charge monthly.

Moreover, Minority Leader in Parliament, Haruna Iddrisu, has asked Ghanaians not to be excited yet following government’s proposed average reduction of 13 percent in electricity tariffs for residential consumers, saying it will be insignificant when approved.