Electricity and water tariffs to go up from September 1

Electricity and water tariffs are expected to go up from Thursday, September 1, 2022.

The Public Utilities Regulatory Commission (PURC) carried out nationwide consultations on proposals it received from the utility companies.

Reports by Daily Graphic stated that the new tariffs will not be across the board, which means the rates will depend on the reasons and proofs adduced by the utilities and the verification the commission has done.

It said the tariffs will be the first review of utility tariffs since 2017 adding that micro, small and medium enterprises (MSMEs), such as food joints and salons, would be protected from paying “punitive” tariffs.

The power distribution company, the Electricity Company of Ghana (ECG), earlier proposed to the PURC seeking approval for the upward review of electricity tariff by 148% for 2022.

For the subsequent years – from 2023 to 2026 – the ECG is seeking further approval for a 7.6% tariff increase on its Distribution Service Charge (DSC) which is the charge for distributing electricity to Ghanaian households.

ECG in its multi-year tariff review proposal for the period from 2022-to 2026, asserts the high tariff increase is attributable to the cost of investment projects, the existing gap between actual cost recovery tariff and PURC approved tariffs and the effect of macroeconomic factors such as inflation and exchange rate.

According to ECG, the current DSC of GHS 16.10/kWh is inadequate and has eroded the financial viability of the ECG which has had an adverse impact on the entire distribution sector.

It believes that with a DSC charge of GHS 39.95/kWh – that is the 148% increment – it will be able to recover the actual cost of electricity distribution and remain financially viable.

It said: “The result of ECG’s tariff proposal for the next five years shows an approximately 148% increase on the current DSC1 in 2022 and an average increase of 7.6% year on year from 2023 to 2026. The high increase in the DSC1 for the year 2022 could be attributed to the gap that has developed over the years between the actual cost recovery tariff and the PURC approved tariffs as well as the cost of completed projects.”

“Similarly, ECG’s proposed DSC2 shows a higher increase of 28.4% in the first year (2022) while that of the subsequent years increases by an average of 2% from 2022 to 2026.”

The power distributor again pointed out that its financial sustainability is important as it impacts the entire energy sector.

The management of the Ghana Water Company (GWCL) has proposed to the Public Utilities Regulatory Commission (PURC) to increase water tariffs.

The GWCL in its proposal said over the years, the approved tariffs have not been fully cost-reflective.

This has led to the inability of GWCL to raise enough revenue to finance the much-needed capital investment projects, with a consequent unsatisfactory level of service, the company said.

“Among the urban poor, water can be a critical resource in short supply. GWCL has therefore set up a Low-Income Customer Support Department (LICSD) to deliver improved services to targeted low-income urban poor areas.

“The Government of Ghana is committed to expanding access to safe water supply services in urban areas with particular focus on improving water production and expansion of distribution systems and ensuring sustainable financing of the sector. It is estimated that about $ 2 billion will have to be invested in water production to help increase current urban coverage to 100% country-wide by 2025.

“Notwithstanding the challenges mentioned above, it is important to consider the broad sectoral focal areas that impact water operations. These include sustainable water sources, access to potable water, sustainable financing, improved public-private partnerships, capacity building, good governance, good research and development, monitoring and evaluation, water safety, and customer interest/education.”

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