VRA Justifies Calls for Tariff Increment

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wpid-Volta-River-Authority-VRA.jpgThe Volta River Authority (VRA) has justified its calls for a significant adjustment in current tariffs.

VRA has expressed fears that a continuation of the current tariffs will only lead to its collapse.?Under the current tariffs which were fixed in 2011, the Authority receives 8 pesewas (4 cents) per kilowatt hour of power sold to ECG.?However, other energy producers in the sub-region receive between 13cents per kilowatt hour.

This development according to the Chief Executive Officer of VRA, Kweku Awotwi is restricting the Authority?s ability to generate enough revenue for new projects in order to meet increased demand for power.

He explained that ?in 2011, we spent about 220 million buying crude oil and we expect to spend about 600million and the tariff does not cover those costs so we need to get a tariff that covers the cost of buying all this crude oil to provide electricity for the country.?

In an interview with Citi Business News, Mr. Awotwi said a significant adjustment is in line with covering cost of buying crude oil, which the VRA is currently unable to.

According to him, the VRA is ?running at a very big loss. Infact what has happened is because of the damage to the WAGP; government has been forced to step in and buy crude oil for us; this year alone government has bought 300million dollars of crude oil on VRA?s behalf because the company is unable to pay for it ourselves.?

Meanwhile, Energy Economist, Mohammed Amin Adam has told Citi Business News, the VRA is justified in its calls for a tariff adjustment.
?I think we have not been fair to VRA and even ECG for not giving them adjustments since 2011, because tariffs must reflect cost of producing power and if you look at the operations of VRA, in 2011 when the tariffs were done, they were able to make profits of about $55million and the reason is that they were using natural gas which is cheaper.?

A document cited by Citi FM recently indicated that the VRA is cash-strapped due to inefficiencies at the Electricity Company of Ghana (ECG) and the government?s failure to pay for power used by its agencies.

It said: ?The increase in staff and administrative costs of ECG between 2008 and 2011 (144% and 880%, respectively, are very high but reliability of service is poor and deteriorating. These coupled with the high ATC&C losses undermine the legitimate demand for tariff adjustments to cater for inflationary increases in prices, exchange rate depreciation and their impact on cash requirements for equipment purchases, debt servicing and payment for power purchases billed in foreign currencies.?

The document further noted that due to the ?poor financial situation of ECG, the payment of arrears to the VRA for the purchase of power has been affected.

These arrears, coupled with the high cost of power generation and inability of the Government to pay for power consumed by its Ministries, Departments and Agencies, have made it impossible for the VRA to generate enough funds internally to procure fuel for power generation.

The Authority has therefore been relying on short term credit from commercial banks and Government support to procure LCO for power generation.?

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