Hardships in the economy cause of high tariff increments
ECG proposes 148% increase in tariffs
Co-chair of the Ghana Extractive Industry Transparency Initiative, who doubles as a policy analyst has attributed the unprecedented proposals by utility companies for high increments in tariffs to the government’s mismanagement of the macroeconomy.
He blames government for failing to address issues of the cedi’s depreciation among other macroeconomic variables.
Speaking on JoyNews’ Newsfile, he noted that “the demands that the utility companies are making are generally reflective of the challenges within the larger macro-economic sphere, such as inflation, that is spiraling out of control.
A Cedi that cannot stand its ground against major trading currencies. Interest rates have fallen behind inflation. And for these reasons, the government bears part of the responsibility for the unprecedented tariff increases that the companies are asking”, he explained.
He added, “If government were to manage the macroeconomy very well, and if our Cedi were to hold its ground against the major trading currencies, perhaps the extent of the demand wouldn’t be as astronomical as it is now”.
He further noted that other factors such as the “supply chain disruptions arising out of the COVID-19 effects and the general price increases globally’ can also be part of the reasons for the high increments.
The Electricity Company of Ghana is demanding an increment of 148% on electricity tariffs from August 2022.
The company submitted a proposal to the Public Utilities Regulatory Commission (PURC) asking for an adjustment in electricity tariffs to cover the period between 2019 and 2022.
ECG also proposed an average increase of 7.6% in tariff over the next four years to cover Distribution Service Charges (DSC) while attributing the high increase in the Distribution Service Charges 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.
“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”.
Dr. Steve Manteaw