Group calls for return to automatic adjustment formula

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Economics Utility Tariff
Economics Utility Tariff

The Coalition of Stakeholders on Electricity Contracts and Arrangements (COSECA), an advocacy group, has called for a return to the automatic adjustment formula to determine utility tariffs to prevent the accumulation of tariffs.

The Group said failure by the Public Utilities Regulatory Commission (PURC) to implement the automatic adjustment formula on quarterly basis over the years had led to the accumulation of “high tariffs” at the expense of consumers.
Addressing a news conference in Accra on Thursday, June 2, 2022, Dr Steve Manteaw, Chairman of COSECA, accused the PURC of failing to effectively discharge its regulatory mandate.

“There is enough blame sharing to go round from government to management of utility companies, however the PURC is the number one reason why we have the tariffs currently piled up,” he said.

The Ghana Water Company Limited (GWCL) and Electricity Company of Ghana (ECG) have proposed tariffs of 334 per cent and 148 per cent respectively, to the PURC for approval for the year 2022.

They cited an increase in their operational cost, exchange rate, high inflation and depreciation of the local currency (Cedi) against its major trading currencies (Dollar and Pounds sterling) as the reasons for their tariff proposal.

Dr Manteaw said the “huge increases in tariffs” by the ECG and GWCL was partly due to the long-standing inefficiencies in the companies, usually attributed to low level of investment in new technology, political interferences in the affairs of the company, among other factors.

He said there was lack of firm and accurate accountability between the players in the energy sector, which, he added, had created a situation where estimates “are bandied about in a way that facilitates poor management, hiding of losses and potential corruption.”

“This Black Box approach where some players do not meter their output but estimate them, and where players like ECG are not allowed to determine their total actual cost of production, due to inputs in the form of government’s subsidies and denial of revenue through taking out portions of tariffs (such as DSC 2), and the effect of ‘political electrification schemes’ etc, have made it almost impossible to determine a fair and appropriate tariff that will ensure the company’s commercial viability,” he said.

The Group contended that the current commercial and technical losses components, contributing to the high tariffs could be drastically reduced with efficient management.

The COSECA also called for an “urgent” audit of the “plethora” of energy funds and schemes, including the ESLA, Covid-19 Levy, and Government Stabilisation payments to ECG, arguing that those funds “are not being well managed.”

“It is our contention that, the management of these funds, if properly done will make tariff increments unnecessary or minimal.” Dr Manteaw said.

The COSECA appealed to the government to increase its capital expenditure to the utility companies to ensure retooling, expansion and improved service delivery.

The Group also urged the management of the utility companies to turn around their fortunes, by taking urgent steps to reduce technical and commercial losses.

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