Tarzan's Take On Review Of Utility Tariffs

Tarzan's Take On Review Of Utility Tariffs

Editorial: Dr Charles Wereko-Brobbey is an energy expert and former Chief Executive of the Volta River Authority. He writes about the purported possible increase in tariffs by the utility service providers.

"The announcement of the new tariffs must include specific benchmarks on quality of service and reduction of inefficiencies which the utilities would be held to account on and will be taken into account when tariffs are next reviewed.

"Lifeline tariffs should be done away with in all the metropolitan authorities and regional capitals ad restricted only to customers under the SHEP ELECTRIFICATION and RURAL WATER programmes."

1. Utility Tariffs should go up by 40 percent from the levels approved to take effect from 1 July 2015. This is equivalent to a 78 percent increase in tariffs from those that took effect from 1 October 2013; when the last major review of tariffs took place. The new tariifs should take effect after the expiry of the first full month after Dumsor ends and power supply is available on a sustainable basis

2. Lifeline tariffs should be done away with in all the metropolitan authorities and regional capitals ad restricted only to customers under the SHEP ELECTRIFICATION and RURAL WATER programmes

3. The substantial savings from the removal of lifeline subsidies should be used to wipe off the debts owed to ECG, VRA and all other players in the power sector so that the sector can make a fresh start.

4. The announcement of the new tariffs must include specific benchmarks on quality of service and reduction of inefficiencies which the utilities would be held to account on and will be taken into account when tariffs are next reviewed

5. The ongoing major review of tariffs by the Public Utilities Regulatory Commission (PURC) is premature and should be postponed as its 3- year tenure ends in October 2016. The quarterly review of the Automatic Adjustment Formula should continue until the 2016 major review.

The above constitutes Tarzan’s Take on utility tariffs. Although they are delivered in the characteristic John Mahama ‘action man’ instructions manner,  I can’t vouch for anyone acting on them on account of the fate of previous Presidential fiats and the fact that I failed spectacularly in my “shikeena” bid to become the Omanhene

Breaking the above down for the benefit of every Ghanaian living everywhere, all that I seek to suggest is that for now we adopt the old military stance of “Azorya” ( ‘As You Were) in providing an interim solution to the vexed question  of power tariffs

Adopting the above only means restoring tariffs to their ‘dollars and cents ‘ values as at October 1 2013, the date of  the last major review.  Then VRA’s approved Bulk Supply Tariff (BST) was 11.49 cedis. The cedi was worth 2.18 to the US$. As I pen this piece, one needs to produce 3.87 cedis to get hold of one Uncle Sam dollar.

That is a depreciation of 78 percent in the exchange rate of the cedi. This means we need to raise tariffs by the 78% figure to just to retain their October 2013 forex value,  However, when you adjust for AAF reviews in the interim, you come to the 40% proposed elevation from the July 1 2015 levels

Put another way; let us begin the current exercise by returning the utilities to their 2013 ‘Ground Zero’ tariff levels. This is because they the utilities, and indeed the whole of Ghana, has been let down badly by the incompetent management of our currency and overall macro-economy.

There is a lot we can, and should demand, from the utilities in terms of better quality of service and a more efficient use of our tariffs. However, given that the overwhelming proportions of their costs are in dollars and cents, it is an absolute imperative that the value of the tariff maintains it forex value at all times.

On quality, the restoration of full and sustainable supply is a non-negotiable pre-requisite.  Ghanaians are sick and fed-up to their back teeth with the ‘pay more and we will give you better services line’. Like Felix the cat, this song has died a thousand deaths, never mind the proverbial nine lives.

Banishing Dumsor should be followed by visible improvements in the quality of the service the utilities provide. No longer can we tolerate ECG delivery voltages of around 12oV when we tell the whole world our power system is on 220-240V. We must strive to make our potable water drinkable so having to resort to “nofoo” or bottled water is a matter of personal choice rather than a precaution against water borne diseases

When I came back here 30 years ago, GWSC was unable to account for 50% of the revenues that should have come from the water it produces, Today, GWCL, a limited liability company, is still unable to account for the same 50% of revenue from a much higher volume of water produced.

The power utilities are also riddled with massive losses. ECG is reported to be losing close to 40% of its optimal revenue due to inefficient technical and revenue management failings. NEDCO is also making losses as are VRA and GRIDCO.

Whilst here is enormous room for reducing non technical losses, the PURC has hitherto been less than diligent in its duty to protect consumer interest as well. This is reflected in its tariff announcements, which have been notoriously conspicuous for their failure to indicate benchmark quality standards and targeted reductions in non-technical losses.

A lot has happened in Ghana’s power sector in the last four years of Dumsor. The dehydration of the Volta Lake has underlined the folly of continuing to rely on hydro generation as our base production source, Thermal Power is no longer the complement, and it is fast assuming the dominant role.

Independent Power Producers are playing an increasingly major role in our power generation mix. This has brought on substantial increases in the tariffs we pay them relative to our own home grown plants

The fuel we use for our generating units have also experienced major changes. Light crude oil is rapidly being replaced by cheaper and environmentally friendlier natural gas. The price of oil, and correspondingly natural gas, has declined markedly since the last major review.

In recent years, the institutional structure of Ghana’s power sector has changed markedly without any discernible rhyme or reason, with traditional utility responsibilities changed without much thought or strategic purpose.

The above and many other issues in the power sector, including the planned review of the PURC itself and the tariff methodology, all point to a very full plate that should occupy the powers sector in the next 12 months. This should be a major component of the conversation leading to the next scheduled review in October 2016.

By: Dr. Wereko Brobby| tarzan@eyetarzan.orgha

 

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