Monday, 4 March 2019

Power companies may bear GH¢700m extra cost as PURC fails to review electricity tariff

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Adnan Adams Mohammed

The skyrocketing cedi depreciation amidst decision by the Public Utilities Regulatory Commission (PURC) to maintain tariffs for the first half of this year is likely to cost power companies of not less than GH¢700 million due to expected high cost of production and maintenance.
 
“We need to save our utility services by giving them a cost reflective tariff. PURC’s tariffs review from March to June will cost the utility services not less than GH¢700 million which will collapse them and we will be going back to power rationing, a member of Mines and Energy Committee of Parliament, Edward Bawa has disclosed.

He is therefore calling on government to be sincere with Ghanaians and admit that the cedi depreciation and other production costs make maintaining the tariff detrimental to the sustainability of the energy companies.

The PURC was expected to announce new tariffs on February 1, this year, but delayed the announcement till last week when it decided not to maintain the prevailing tariffs till end of the second quarter of the year.

This looks a more detrimental to the operation of the power companies which in the past have cried of not meeting or making profit due to low tariffs paid by consumers for electricity. Ghana Grid Company Limited (GRIDCO) has been running at a lost for the past two years, recording a loss of GH¢118 .28 million and GH¢31.10 million in 2018 and 2017 respectively.

The Ghana Grid Company Limited (GRIDCO) reduced its tariff in 2018 from ¢5.0400 to ¢4.283 kilowatts per hour which affected the company. “Because of this particular reduction of about 17 percent, as we speak today, if you compare their losses in 2016 and 2017, you have a situation where in 2016, they were making a profit of about ¢59.13 million. However, “In 2017, they made a loss of ¢31.10 million and in 2018, they also made a loss of ¢118 .28 million”, the former consultant with the Energy ministry, Edward Bawa has said.

According to him, GRIDCO made a loss of ¢148 million as a result of exchange rate depreciation.

Considering the country’s economy with the depreciating cedi and other factors which affect tariffs, the decision is not a prudent one, the Bongo MP added.

However, according to the Commission, it took the decision due to critical emerging issues in the sector which are expected to affect the final tariff setting.

It said the emerging issues are related to the planned relocation of the Karpowership Plant, resulting in savings from switch from Heavy field oil (HF) to natural gas.

Additionally, it explained that reduction in the price of natural gas was anticipated due to ongoing negotiations by government.

It said: “These matters are outside the purview of PURC, but their outcomes are likely to have measurable impact on the commission’s decision. In the interim, the commission will also closely monitor the operations of Power Distribution Services (PDS) Ghana Limited, which has taken over the assets of Electricity Company of Ghana (ECG).

“This is to establish PDS’ actual operational cost and any other efficiency gains in the running of the distribution network by PDS.”

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