Dr. Ismael Ackah, the executive secretary of the Public Utility Regulatory Commission (PURC), has provided details on how the Commission settled on an 18.6% tariff increment for the next quarter.
He empathized and acknowledged the “current economic challenges”, but cited that although consumer satisfaction is the PURC’s top priority, it is also their duty to ensure that utility providers are financially secure to “continually provide quality service to consumers.”
Speaking at the PURC media fellowship program on May 27, 2023, he explained that the tariff should have been increased to 27.51% to recover an estimated GH¢1.31492 billion but the announced tariff will recoup GH¢877.70 million, leaving electricity debt of GH¢437.22 million to recover.
“With the recent quarterly tariff decision announced, the electricity utilities were to recoup GH¢1.31492 billion. Meaning, that is how much the electricity utilities – from generation, transmission, and distribution, – need to be financially viable and survive during the quarter. To recover this, the tariff should have been 27.51% but only GH¢877.70 million was recovered in the tariff, leaving a balance of GH¢437.22 million,” he said.
The body has been criticized for increasing the tariff while the local currency has appreciated against the US Dollar.
Mr Ackah explained that the exchange rate is not considered the only factor that is considered in setting tariffs, although it contributes 60 percent to the decision-making.
He then named the exchange rate together with the price of natural gas, Hydro-Thermal mix, and inflation as the four variables the body considers in determining their quarterly tariffs.
“We have the monthly plumbic and other external factors. The monthly plumbic and other external factors are factors that the utilities do not have any control over but can affect their performance, especially financial performance. So we have the exchange rate…
“When we are working on the tariffs, what we do is that we have an exchange rate we use. But the exchange rate is not stagnant, it changes over time. It can drop, it can rise, and all those ones. So one of the things we do in the quarter review is to see the changes in the exchange rate every quarter. If it is better we will reduce the tariffs, and if it is worse we will increase the tariffs. And the exchange rate contributes 60% of the tariffs. Exchange rate alone,” he said.
“If the exchange rate drops drastically, let’s say to about GH¢8, inflation is below let’s say 40 percent, (then) the tariffs can actually come down.“
Mr. Ackah concluded by highlighting the purpose of the new 18.36% electricity tariff increase.
“The 2nd quarterly tariff decision of 18.36% for electricity helps to recover 100% of the inflationary effects, 100% of the gas effect, and 50% of the exchange rate effect.”
The new electricity tariff, announced on Wednesday, May 17, 2023, is set to take effect from June 1, 2023.