Government ponders special power tariffs for some industries

To address the high energy cost industry bears in the country, the government is considering introducing special tariffs for some sectors to help them become competitive, Energy Minister DR. Matthew Opoku Prempeh has revealed.

This comes on the back of several complaints and concerns expressed by the Association of Ghana Industries (AGI) regarding the high cost of power in the country, partly due to industry subsiding residential use of power and tariffs which are way above the regional average.

Currently, the country’s tariff averages 15.5 cents per kilowatt against 10.5 cents per kilowatt in neighbouring Côte d’Ivoire.

For this reason, the minister says his ministry is exploring the prospects of a special industrial tariff for the sale of electricity and natural gas to strategic industries such as iron/steel, bauxite/aluminium, fertiliser and ceramics, among others. These sectors will be key to taking advantage of the African Continental Free Trade Area (AfCFTA).

“End-user electricity and fuel tariffs for the commercial and industrial sectors are relatively expensive when compared with other West African nations.

“It is expected that these tariff reforms would support national development objectives such as increased tax revenue, industrialisation and employment creation in accordance with government’s ‘Ghana Beyond Aid’ agenda,” he said during the Ghana Industrial Summit and Exhibition held in Accra that the AGI organised.

Aside from the high cost of power for domestic and industrial consumers, another problem that has become an albatross around the energy sector’s neck is persistent power losses. Currently, it is estimated that about 25 per cent of electricity generated in the country is lost at the retail end.

These are attributed to dilapidated infrastructure (technical losses), as well as electricity theft or commercial losses. The country’s power losses are more than double the sub-Saharan Africa average of 12 per cent.

And in most cases, it is the consumer that is tasked with the burden of paying for these losses and other inefficiencies in the distribution system – a situation the AGI has consistently fought against.

This, the minister said, requires that urgent steps be taken, as putting an end to the problem will help bring the cost of power down.

“You will all agree with me that our current tariff structure does not favour industrialisation; also, high distribution losses in the power sector cannot lead to the sustainable development of the economy,” Dr Opoku Prempeh said.

He, therefore, assured that the government is pursuing prudent activities and measures in the energy sector, which are focused on stimulating industrial growth and competitiveness.

Among them are included the Energy Sector Recovery Levy, the cash waterfall mechanism, streamlining prudent sector investments, bridging the sector funding gap, and improving efficiencies to reduce operational cost – all of which, he said, will contribute to making the cost of power cheaper in the near future.