30 August 2011

Ghana: Water, Electricity Prices Go Up By 7 Percent

Ghana's Public Utilities Regulatory Commission (PURC) yesterday announced new tariffs for utility services, which shows 6.7 percent increase in water supply and seven percent in electricity.

The new tariff rates fall short of what the service providers, namely Ghana Water Company Limited (GWCL), the Volta River Authority (VRA), the Electricity Company of Ghana (ECG), and Ghana Grid Company Limited (GRICO) were expecting.

Announcing the new rates in Accra, the Chairman of the Commission, Dr. Emmanuel Annan noted that all the critical expenditures by the utilities, particularly the fuel requirements have been covered in the tariffs.

He added that "the approved tariffs is intended to support thermal power producers to procure the needed cargoes of light crude oil that would enable them generate the required electricity through thermal sources".

The commission was mindful of the need to maximize or optimize the use of hydro resources. Hence, although the tariff has been computed based on a 62.6% hydro component, this is only a base figure and the generator can adjudge the level of hydro generation internally, in the event of favourable hydrology.

The new tariffs, which become effective from 1st September to November 2011, do not include Value Added Tax (VAT) and National Health Insurance Levy (NHIL), as these taxes lie outside the PURC's mandate.

In arriving at the decision for the third quarter of this year, the commission has taken account of key factors, including rising world market price of crude oil, availability of natural gas for generating electricity, movements in the hydro component in the generation mix and improvement in quality of service.

The commission stated categorically that "ECG, NEDCO and GWCL are to take note that electricity and water consumed in August 2011, but which falls within the September 2011 billing cycle should not be charged at the new rates. Any consumer affected by wrongful billing should report to the PURC for immediate redress".

Dr. Annan disclosed that one third of the cost of production of the GWCL was based on electricity, as such any increase in electricity tariffs automatically impacts on the operations of the company.

The commission, which maintained the tariffs in the second quarter, was quick to stress that it would continue to educate stakeholders on the Automatic Adjustment Formula (AAF) which enables the PURC to make periodic adjustments in response to movements in the underlying varies, such as the world market crude oil price, consumer price index and the natural gas generation mix.

The PURC, therefore, expects that incrementally, there will be improvement in quality of service in all areas over the next two quarters, saying "the commission is committed to the provision of quality utility services to consumers and would continue to put in place measures aimed at ensuring that consumers of water and electricity get fair value for money."

However, some consumers who spoke to the Business Chronicle did not see the reason for the increment, inciting the general economic hardship in the country.

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