The Public Utilities and Regulatory Commission (PURC) has approved tariff increases for natural gas and electricity for the second quarter of 2023 by 18.36%
According to the Commission, it has concluded the quarterly tariffs review for the second quarter of 2023 as part of its regulatory mandate. The review, it noted, has resulted in the Commission approving the rate of tariff increases for natural gas and electricity for the second quarter of 2023.
Contained in a statement dated May 17, 2023, the Commission stated that increase has become necessary to maintain the real value of cost of supply of utility services. That notwithstanding, it indicated that it is mindful of the current economic circumstance.
Justifying its stance, the PURC revealed that the potential for outages is high and this could have strong adverse impact on citizens and businesses which must be avoided.
“The PURC therefore sought to balance the prevention of extended power outages and its adverse implications on jobs and livelihoods, whiles minimizing the impact of rate increase on consumers. The Commission will continue to monitor quality of service to ensure consumers get value for money. The Commission therefore decided, after extensive deliberations and analysis to increase the average end-user tariff for electricity by 18.36% across board for all customer groups.”
Public Utilities and Regulatory Commission
The PURC highlighted that the quarterly tariff review mechanism seeks to track and incorporate changes in key factors used in determining natural gas and electricity tariffs. These factors, it opined, are the Ghana Cedi/US Dollar exchange rate, inflation, electricity generation mix, and the weighted average cost of natural gas (WACOG).
“This review has become necessary to maintain the real value of the cost of supply of the utility services and to ensure the utility companies do not under or over-recover costs. While under-recovery has negative implications for the ability of the company to supply service to consumers, and has the potential of causing outages of electricity, over-recovery, unnecessarily overburdens consumers of electricity. The quarterly tariffs review mechanism is meant to address them.”.
Public Utilities and Regulatory Commission
Rate setting has changed since last increment
The PURC explained that since the announcement of the first quarter tariff decision in January 2023, the key variables underlying the rate setting has changed. It emphasized that the weighted average Ghana cedi/US dollar exchange rate used for the first quarter tariff review was GH10. 5421 to the US dollar.
Since then, the Commission stated that the cedi has depreciated against the dollar.
“The first quarter tariff decision resulted in a 255 under-recovery of the exchange rate. This has to be recovered to ensure that the country does not add to the already mounting debt in the energy sector. The projected exchange rate for the second quarter plus the first quarter under-recovery is GHC12. 7118 to the US dollar.”
Public Utilities and Regulatory Commission
Furthermore, the Commission noted that with respect to the electricity generation mix, the hydro-thermal mix used for the second quarter was 29.01% for hydro and 70.99% for thermal, as against 26.11% for hydro and 73.89% for thermal used for first quarter of 2023. It however indicated that hydro allocation of 29.01% helped to reduce the impact of changes in the macroeconomic variables and the WACOG on the tariff.
The PURC revealed that forex related debts owed to power producers are reported to have increased by some GHC1.2 billion as a result of the non-application of the proposed 44% increase in tariffs in the last adjustment window. It will be recalled that though the utility providers requested a 44% increase in order to clear outstanding debts, the PURC allowed only a 29% increase.
