Business News of Monday, 14 January 2019
Source: www.ghanaweb.live
2019-01-14Tariff review: Utility Service Providers push for upwards review
play videoEnergy Economist at ECG, Eben Baiden presenting their position on tariffs to the stakeholders
Utility Service Providers have made a case for an upward review of the tariff for consideration by the Public Utility Regulatory Commission (PURC) ahead of the announcement for 2019.
The suggestions for increment were made at a stakeholder consultations forum held in Accra in accordance with the legal provisions that guide the sector.
GRIDCo, ECG, Northern
Read full articleElectricity Distribution Company (NEDCo), Power Distribution Company (PDS), Ghana Water Company Limited and Enclave Power Company Limited (EPC) were the Utility Service Providers present to make submit their cases.
The stakeholders' engagement in Accra is the third in the series after two successful encounters held by the PURC in Kumasi and Tamale.
Addressing the gathering prior to the presentations, Commissioner of the PURC and Chairman of the Technical team, Ishmael Agyekumhene noted that "this is mandated by law. It is part of the original tariff setting process where the utility providers are required to present to stakeholders exactly what is contained in their proposals."
GRIDCO
The Ghana Grid Company Limited (GRIDCO) say they have embarked in capital expenditure that will result in an expansion of their operations and improve service delivery to the customer.
They argue that between 2016 and 2018 they have completed expansion works worth about $300 million but have an outstanding $388 to pay for its uncompleted projects.
As such the utility provider request an adjustment from the current 2.5107 GP/kWh to 4.897 Gp/ kWh (exclusive of transmission losses), which is considered cost-reflective to cover Operating and Maintenance Costs, Depreciation, Finance Costs and a reasonable Return on Net Fixed Assets for 2019.
This they believe will ensure reliable and sustainable transmission of power for national economic development.
Electricity Company of Ghana
The Electricity Company of Ghana (ECG) in their submission took time to take stakeholders through the implications of their new status as would take effect from February 1, 2019.
Eben Baiden, Energy Economist at ECG disclosed that in 2018, ECG engaged in network expansion projects, expansion of lines, interconnected substations, new revenue collection methods among others.
However, that aspect of their operations will be taken over by Power Distribution Services Limited, a wholly Ghanaian consortium in fulfilment of the conditions of the Millennium Challenge Compact II signed in 2014.
The Public-Private Partnership arrangement thus means that ECG becomes a Bulk Power Trader and Asset owner.
Their assets will be leased to Power Distribution Services Limited for 20 years, who will then distribute it to the final consumer.
The PDS is from February 1, going to be in charge of billing and revenue collection, servicing and managing the leased assets, expansion works, customer satisfaction whilst ECG scouts for markets both within and outside the confines of the country.
PDS has submitted a tariff of 23p minus the charge of leasing they will pay to ECG. The current tariff charged for electricity is 30p.
The charge has been communicated to PURC pending final approval from the regulatory body.
"ECG will be a bulk trader. ECG is going to sell bulk power to the Power Distribution Services Limited then ECG will also sell power to customers identified across the boundaries of Ghana. PDS will take over ECG assets, ECG will lease its assets to PDS and they will look for capital, invest and expand and also do the maintenance and operations and sell power to ECG's customers and collect revenue on behalf of ECG" Eben Baiden told the press after the event.
NEDCO
Northern Electricity Distribution Company with a mandate to distribute power to the Brong Ahafo, Upper East, Upper West and Northern Regions argued that exchange rate losses, increase in the cost of production and cost of equipment management and servicing have compelled them to request for an upward adjustment.
The organisation stressed their situation is so dire that for the past 4 years they have recorded losses and no significant gains.
Putting forth their proposals, Thompson Agalab, Manager in charge of Billing and Revenue disclosed that in 2015 they made a loss of GHC72 million and in 2018, GHC203 million.
He lamented the high incidence of nonpayment of tariffs by MDAs amounting to the sum of GHC841 million despite lauding government's efforts at settling a quarter of what the Senior High Schools owe.
He bemoaned the delays at properly resourcing them as an independent institution as they constantly rely on VRA for most of their services and administrative works.
To this end, NEDCO proposed an increment from the existing 0.307555 per kWh to 0.43 in 2019.
Ghana Water Company Limited
Communications Manager of Ghana Water Company Limited Stanley Martey mentioned electricity and cost of chemicals take 50% of their expenditure.
He said the Ghana Water Company is choked with loans repayment, currency depreciation challenges, pollution of water sources and maintenance of its infrastructure as the factors affecting its revenue generation and sustenance.
The Communications Manager stressed that despite the challenges, GWCL has embarked on the agenda to increase its visibility and customer service centres from 25 in 2015 to 68 currently.
The GWCL has also begun a process to digitise its operations and introduce e-payment systems to make the revenue generation process more transparent and convenient.
In their proposal, they put forward an increment from 0.0062 Gp per litre to 0.022 Gp per litre to help recover the loan payment and address their current challenges.
However, should the government absorb the loan repayment, they suggest an increment from the current billing to 0.014 Gp per litre.
TUC opposes tariff increment
The TUC has given a strong indication of their unwillingness to tolerate any tariff increment for 2019 citing living conditions of the majority of Ghanaians.
The group was represented by Dr Kwabena Otoo Nyarko, Research and Policy Director of TUC at the event.
He tasked the PURC to consider that workers salaries have only increased by 10%. the inflation rate is lower, the exchange rate is fairly stable among others in coming out with the new adjustment.
Dr Kwabena Otoo Nyarko stated that TUC will welcome a further reduction of 15% as was witnessed in 2018.
"We think that if you take into account the fact that an income increase of 10% which goes for all the other things we will be doing as Ghanaians. We are also envisaging and as stated in the budget fuel prices are going to come down, we are going to use more gas and gas prices will come down, inflation we understand is now below 10% so if you do all this and if the PURC is hard on the utility companies to be able to reduce further their system loses then we do not envisage any increase in tariff prices" he asserted.
The PURC is expected to announce new tariff charges for 2019 before February.
